2008 changed the global economic landscape. Unexpected events occurring in compressed time destabilized many Wall Street institutions. On Main Street, jobs were lost and small businesses stalled. And across the globe, stock markets retrenched as increasingly interconnected economies braced for a deep recession. As we reflect today on what the future holds, it is instructive to also reflect on the events that brought us to where we are now. The following is a summary of 101 critical market events that have defined the crisis thus far and supplements our prior timeline (located at http://www.mofo.com/docs/pdf/081118CrisisTimeline.pdf). The arc of these events clearly demonstrates how quickly, widely and deeply the credit contagion spread.

2007 – The Clouds Gather

  1. January 5 Ownit Mortgage Solutions, a California based subprime lender, filed for bankruptcy.
  2. February 5 Mortgage Lenders Network USA, another subprime lender in California, filed for bankruptcy. Mortgage Lenders was the fifteenth largest subprime lender.
  3. February 8 HSBC announced it would increase its reserves for loan losses because of its exposure to U.S. mortgages.
  4. February 13 ResMae Mortgage, a large U.S. subprime lender, filed for bankruptcy.
  5. March 4 HSBC announced write downs of $11 billion from U.S. mortgages, marking the beginning of a parade of write downs linked to the valuation of mortgages.
  6. March 20 People's Choice Home Loan, another California subprime lender, filed for bankruptcy.
  7. April 3 New Century Financial, another California subprime lender, declared bankruptcy. New Century was the second largest U.S. subprime lender.
  8. April 12 SouthStar, another subprime lender, filed for bankruptcy.
  9. June 23 Bear Stearns bailed out one of its hedge funds by pledging $3.2 billion in loans, marking the largest bailout of a hedge fund since Long Term Capital Management in 1998. The hedge fund ran into trouble because of exposure to U.S. subprime mortgages.
  10. July 16 Alliance Bancorp declared bankruptcy. Alliance Bancorp specialized in Alt-A mortgages.
  11. July 31 Two Bear Stearns hedge funds filed for bankruptcy.
  12. August 6 American Home Mortgage, reported at one time to be the tenth largest retail mortgage lender in the U.S., filed for bankruptcy, adding concern that the credit crisis had hit non-subprime borrowers.
  13. August 10 Homebanc, another mortgage lender, filed for bankruptcy.
  14. August 14 Goldman Sachs and investors injected $3 billion in the firm's Global Equity Opportunities Fund, about $2 billion of which was provided by Goldman.
  15. August 17 The Fed cut the discount rate by 25 basis points to 5.75% from 6.00%. The discount rate is the rate at which the Fed lends to commercial banks and other depositary institutions for short periods of time in order to provide short-term liquidity.
  16. September 14 The Bank of England extended emergency funding to Northern Rock, a large U.K. mortgage lender. The mortgage crisis had crossed the borders of the United States.
  17. September 18 The Fed cut the discount rate and the federal funds rate by 50 basis points to 5.25% and 4.75%, respectively. The federal funds rate is the interest rate at which depository institutions lend balances at the Fed to other depository institutions overnight.
  18. October 1 UBS announced write downs of $3.4 billion.
  19. October 15 Citigroup announced write downs of $5.9 billion.
  20. October 24 Merrill announced a loss from its loan portfolio (primarily CDOs) of $7.9 billion.
  21. October 31 Deutsche Bank announced write downs of $3 billion.
  22. October 31 The Fed cut the discount rate and the federal funds rate each by 25 basis points to 5.00% and 4.50%, respectively.
  23. November 1 Credit Suisse announced write downs of $1 billion.
  24. November 7 Morgan Stanley announced write downs of $3.7 billion.
  25. November 9 Wachovia announced write downs of $1.1 billion.
  26. November 13 Bank of America announced write downs of $3 billion.
  27. November 27 Citigroup raised capital by issuing mandatory convertible securities to Abu Dhabi Investment Authority. The securities had a yield of 11%.
  28. December 5 Fannie Mae announced it would raise $7 billion in capital and reduce dividends paid to its shareholders.
  29. December 6 The Paulson-Jackson plan was announced, which froze mortgage rates on subprime adjustable rate mortgages for a period of five years for eligible participants. To be eligible, in general, the subprime adjustable rate mortgage must have been originated between January 2005 and July 2007, and the interest rate must be reset at a higher rate. The plan was limited to owner occupied properties. In addition, in general, the borrower must be current in payments, must prove that he/she cannot afford a higher payment, and must have some equity in the home.
  30. December 10 UBS announced write downs of an additional $10 billion.
  31. December 11 The Fed cut the discount rate and the federal funds rate by 25 basis points to 4.75% and 4.25%, respectively.
  32. December 20 Congress enacted the Debt Relief Act of 2007, designed to provide relief to borrowers in foreclosure by excluding mortgage debt forgiven by a lender from gross income.

    2008 – The Perfect Storm

  33. January 11 Bank of America announced it would acquire Countrywide, the largest U.S. mortgage lender, for $4 billion. Countrywide was on the verge of bankruptcy.
  34. January 15 Citigroup announced a loss of $9.8 billion and write downs of $18 billion.
  35. January 17 Merrill announced a loss of $7.8 billion and write downs of $14.1 billion.
  36. January 22 The Fed cut the discount rate and the federal funds rate each by an unexpected 75 basis points to 4.00% and 3.50%, respectively.
  37. January 24 A $150 billion U.S. economic stimulus plan was unveiled in which eligible taxpayers would receive tax refunds ranging from $300 to $1,200, subject to a phase-out for high-income earners.
  38. January 30 The Fed cut the discount rate and the federal funds rate by an additional 50 basis points to 3.50% and 3.00%, respectively.
  39. February 12 Auctions of auction rate securities, reported to be a $330 billion market, began to fail, causing liquidity issues and borrowing costs for issuers of ARS to spike.
  40. February 17 The U.K. nationalized Northern Rock.
  41. February 28 AIG announced write downs of approximately $11 billion from its credit default swap portfolio.
  42. March 3 HSBC announced write downs of $17.2 billion from U.S. mortgage exposure.
  43. March 6 Peloton Capital, an asset-backed security fund, failed after it could not make interest payments on borrowings it used to purchase assets.
  44. March 11 The Fed injected $200 billion of liquidity in the capital markets by increasing lending to financial institutions through its new Term Securities Lending Facility. (For more information on this program, consult our prior Client Alert "TARP and the Various Tent Poles: Will it be Enough?" at http://www.mofo.com/news/updates/files/081015TARP.pdf.)
  45. March 16 Bear Stearns, then the fifth largest investment bank, on the verge of bankruptcy, was sold to JPMorgan Chase for $2 per share with Fed assistance of approximately $30 billion.
  46. March 18 The Fed cut the discount rate and the federal funds rate each by an additional 75 basis points to 2.50% and 2.25%, respectively.
  47. March 25 The purchase price of the Bear Stearns acquisition was renegotiated to $10 per share with Fed assistance of approximately $29 billion.
  48. April 1 UBS announced write downs of $19 billion.
  49. April 1 Deutsche Bank announced write downs of $3.9 billion.
  50. April 8 Washington Mutual Inc. raised $7 billion of capital by issuing common shares and convertible preferred shares.
  51. April 8 The FDIC issued its Covered Bond Policy Statement, in which it addressed creditor issues in the event that the issuing insured depository institution fails. (For more information, consult our prior Client Alert "Covered Bonds and U.S. Regulators" at http://www.mofo.com/news/updates/files/CoveredBondsUSregulator.pdf.)
  52. April 14 Wachovia announced it would raise $7 billion in offering of common stock and convertible preferred shares.
  53. April 17 Merrill announced another $4.5 billion in write downs.
  54. April 18 Citigroup announced a loss of $5.11 billion and write downs of $12 billion.
  55. April 30 The Fed cut the discount rate and the federal funds rate each by an additional 25 basis points to 2.25% and 2.00%, respectively.
  56. May 6 Swiss Reinsurance Co., the world's biggest reinsurer, announced write downs of $782 million with respect to its credit default swap portfolio.
  57. May 9 AIG reported a $7.8 billion loss and write downs of $9.11 billion from its credit default swap portfolio.
  58. May 29 JPMorgan Chase completed its acquisition of Bear Stearns.
  59. June 2 S&P cut Merrill's, Lehman's, and Morgan Stanley's ratings by one level to A, A, and A+, respectively.
  60. June 4 Moody's announced it would cut the AAA ratings of Ambac and MBIA, two of the largest bond insurers.
  61. June 19 Two former Bear Stearns hedge fund managers were indicted for fraud, marking the first criminal indictments with respect to the subprime crisis.
  62. July 7 Freddie Mac and Fannie Mae shares plummet on reports that a government bailout would be necessary to keep the institutions afloat.
  63. July 11 IndyMac Bank failed, which then was the second largest thrift failure in U.S. history. It was also the first bank to fail as a result of the subprime crisis. That same day, oil hit a record $147 per barrel, as commodities prices continued to skyrocket.
  64. July 15 The FDIC issued its Final Policy Statement on covered bonds, in which it addressed creditor concerns with respect to a failed financial institution that had issued covered bonds. (For more information, consult our prior Client Alert "FDIC Offers Certainty on Covered Bonds" at http://www.mofo.com/docs/pdf/Client_Alert_FDIC.pd.)
  65. July 17 Merrill announced write downs of $9.4 billion.
  66. July 28 The Treasury announced the Best Practices Guide for covered bonds, marking a push for alternative sources of mortgage financing as the securitization market remained frozen. Treasury Secretary Paulson stated that "covered bonds have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions by providing a new funding source that will diversify their overall portfolio." (For more information, consult our prior Client Alert "Treasury Announces Best Practices for Covered Bonds" at http://www.mofo.com/news/updates/files/080729TreasuryAnnounces.pdf.)
  67. July 30 Congress enacted the Housing and Economic Recovery Act, aimed at reforming the mortgage market and granting to the Treasury the ability to bailout Fannie Mae and Freddie Mac, if necessary.
  68. August 8 Citigroup, UBS and Merrill agreed to buy back $36 billion of auction-rate securities, after New York Attorney General Andrew Cuomo threatened litigation. Other firms soon entered into settlement agreements for ARS repurchases.
  69. August 27 Bloomberg released a summary of write downs (since the beginning of 2007) and capital raises (since July 2007) at more than 100 of the largest financial institutions. Bloomberg reported $506.1 billion in write downs by financial institutions and a corresponding $352.6 billion in capital raises.
  70. September 7 The U.S. placed Fannie and Freddie into conservatorship, wiping out the value of the stock of its shareholders, including those who only months prior had made significant investments in preferred stock.
  71. September 15 Lehman filed for bankruptcy, which was the largest bankruptcy in U.S. history, after the Fed refused to step in. That same day, Bank of America announced it would acquire Merrill, then the third largest investment bank.
  72. September 16 AIG, the largest insurance company in the world, on the brink of bankruptcy, was bailed out by the Fed, with the full support of the Treasury. The Fed provided a two-year $85 billion loan to AIG and received in return an equity stake representing 79.9% ownership.
  73. September 17 Shares of Goldman Sachs and Morgan Stanley plunged as the market lost confidence in investment banks. Credit default swap spreads on financial institutions spiked to unprecedented levels. For example, spreads on Washington Mutual reached approximately 4800 basis points. Two years earlier, such spreads were at approximately 20 basis points. LIBOR spreads over the federal funds rate also widened to unprecedented levels, meaning that banks were afraid to lend to one another for fear that the borrower bank would fail overnight.
  74. September 19 The Treasury announced a temporary guarantee program for money market funds in danger of "breaking the buck" pursuant to which it will insure the holdings of any publicly offered eligible money market mutual fund that pays a fee to participate in the program. (For more information, consult our prior Client Alert "First Look at Treasury Plan; Money Market Fund Bailout" at http://www.mofo.com/news/updates/files/080921FirstLook.pdf.)
  75. September 22 Goldman Sachs, the largest investment bank, and Morgan Stanley, the second largest investment bank, elected to become banks, marking an end to the large investment banking era.
  76. September 25 Washington Mutual, a thrift, failed (the largest banking failure in U.S. history), and its assets were sold to JPMorgan Chase for $1.88 billion. JPMorgan assumed the deposit liabilities and covered bonds of Washington Mutual.
  77. September 29 Citigroup announced it would acquire Wachovia, which was on the verge of failure, for approximately $2 billion with FDIC help. Under the agreement, Citigroup would have absorbed up to the first $42 billion of losses on a $312 billion pool of loans. The FDIC would have absorbed losses beyond that. Citigroup would have granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.
  78. October 2 As the commercial paper market froze, General Electric announced its plan to raise $15 billion in capital by issuing common stock.
  79. October 3 Wells Fargo announced it would acquire Wachovia for $15 billion without FDIC help. That same day, Congress passed the Emergency Economic Stabilization Act, providing $700 billion to the Treasury to purchase troubled assets from eligible financial institutions under the Troubled Asset Relief Program ("TARP").
  80. October 7 The Fed announced a temporary Commercial Paper Funding Facility ("CPFF"), aimed at unfreezing the commercial paper market. The CPFF provides a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle ("SPV") that will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers. The SPV will cease purchasing commercial paper on April 30, 2009, unless the Fed extends the facility. (For more information, consult our prior Client Alert "TARP and the Various Tent Poles: Will it be Enough?" at http://www.mofo.com/news/updates/files/081015TARP.pdf.)
  81. October 8 As failures (and near failures) hit Europe, the Fed and the European Central Bank announced a coordinated interest rate cut. The Fed cut the discount rate and the federal funds rate each by an additional 50 basis points to 1.75% and 1.50%, respectively.
  82. October 13 The United Kingdom announced it would inject £37 billion in three of the country's largest banks, including RBS, Lloyds TSB and HBOS.
  83. October 14 The Treasury announced the TARP Capital Purchase Program, a plan to directly inject capital into eligible financial institutions. Originally, nine banks received $125 billion. These banks included Citigroup ($25 billion), JPMorgan Chase ($25 billion), Wells Fargo ($25 billion), Bank of America ($12.5 billion), Merrill ($12.5 billion), Goldman Sachs ($10 billion), Morgan Stanley ($10 billion), Bank of New York Mellon ($3 billion), and State Street ($2 billion). (For more information, consult our prior Client Alert "New Liquidity and Capital Alternatives for Financial Institutions: Treasury's TARP Capital Purchase Program; FDIC's Temporary Liquidity Guarantee Program" at http://www.mofo.com/news/updates/files/081016NewLiquidity.pdf.)
  84. October 14 The FDIC announced the Temporary Liquidity Guarantee Program, a plan to guarantee newly issued bank debt for three years in return for a fee. (For more information, consult our prior Client Alert "New Liquidity and Capital Alternatives for Financial Institutions: Treasury's TARP Capital Purchase Program; FDIC's Temporary Liquidity Guarantee Program" at . http://www.mofo.com/news/updates/files/081016NewLiquidity.pdf)
  85. October 21 The Fed announced the creation of the Money Market Investor Funding Facility ("MMIFF"), which is designed to provide additional liquidity to U.S. money market investors. (For more information, consult our prior Client Alert "Federal Reserve Announces Creation of Money Market Investor Funding Facility" at http://www.mofo.com/news/updates/files/081021FederalReserve.pdf.)
  86. October 24 PNC announced it would acquire National City for $5.2 billion in PNC stock, after it received approval for a $7.7 billion capital injection under the TARP Capital Purchase Program. This deal caused controversy as critics thought the funds provided under the program should be used for lending, not acquisitions.
  87. October 29 The Fed cut the discount rate and the federal funds rate each by an additional 50 basis points to 1.25% and 1.00%, respectively.
  88. November 4 Brazilian banks Itau and Unibanco merged to create Itau-Unibanco, Brazil's largest bank, in an effort to weather the financial crisis. Brazil's financial system was battered by steep currency declines and tightening credit.
  89. November 10 American Express elected to become a bank.
  90. November 10 Circuit City declared bankruptcy, as the credit crisis took its toll on Main Street.
  91. November 10 The terms of the AIG bailout were revised, as the U.S. government announced it would provide in the aggregate $150 billion to AIG. AIG reported a loss of $24.5 billion for the third quarter, a significant amount of which was from its credit default swap portfolio.
  92. November 12 Treasury Secretary Paulson announced that remaining TARP funds would not be used to purchase troubled assets, but rather would be used to relieve pressure on consumers, as the banking system stabilized (including a significant decrease in credit default swap and LIBOR spreads). The market was spooked and shares of all major financial institutions plunged on the news.
  93. November 17 Congress scheduled a debate on whether to bail out the U.S. big-three automakers (GM, Ford and Chrysler) by providing $25 billion in emergency aid. The big-three had seen car sales significantly decline over the prior two years due to a weakening economy, tightening credit, and previous skyrocketing oil and commodities prices.
  94. November 21 Goldman Sachs and Citigroup announced they would issue debt under the FDIC temporary guarantee liquidity program. Other big banks, including JPMorgan Chase and Bank of America, would also announce their intent to issue notes through such program.
  95. November 24 The U.S. bailed out Citigroup by providing an additional $20 billion in capital and a $306 billion guarantee on its risky assets.
  96. November 25 The Fed announced the Term Asset-Backed Securities Loan Facility ("TALF"), a facility aimed at relieving stress on the student loan, auto loan, credit card loan, and small business loan market. Under the TALF, the Fed would lend up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. (For more information, consult our prior Client Alert "TARP's Term Asset-Backed Securities Loan Facility: Can Wall Street Help Main Street?" at http://www.mofo.com/news/updates/files/081126TermAsset.pdf.)
  97. December 4 It was reported that Harvard University's endowment lost 22% in value (approximately $8 billion).
  98. December 4 Capital One agreed to acquire Chevy Chase Bank for $520 billion in cash and stock.
  99. December 4 The European Central Bank cut interest rates by 75 basis points to 2.50%, the Bank of England cut interest rates by 100 basis points to 2.00%, and Sweden's central bank cut interest rates by 175 basis points to 2.00%.
  100. December 5 The U.S. nonfarm payroll jobs report indicated a loss of 533,000 jobs in the month of November, indicating that the United States was in a deep recession. The market had expected job losses of approximately 350,000. U.S. companies cut jobs at the fastest pace since the 1970s.
  101. December 16 The Fed cut the discount rate by 75 basis points to 0.50% and established a target range for the federal funds rate of 0.00% to 0.25%.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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