In July, hinting at more chaos to come, Treasury Secretary Henry Paulson asked Congress for the power to takeover mortgage giants Fannie Mae and Freddie Mac. Less than two months later, that’s exactly what happened. On September 9, the federal government seized control of Fannie and Freddie and ousted the CEOs of both firms.
» Future Of Fannie & Freddie Called Into Question
» Government Takes Fannie, Freddie
» Senators Work to Bailout Fannie & Freddie
» Paulson Requests Temporary Authority Over Fannie & Freddie
» Mortgage Giants Bailed Out At Paulson’s Request
» Paulson Comments On Fannie & Freddie
» Lockhart Addresses Senate Banking Committee

The seizure of Fannie and Freddie began what would turn out to be one of the most dramatic, traumatic, and historic periods in Wall Street history. One week later, just days away from the seventh anniversary of the 9/11 attacks, Lehman Brothers collapsed into bankruptcy. Once again, risky mortgage assets were the culprit. But this time, unlike the Bear Stearns collapse six months earlier, there was no rescue, no buyer, no white knight. Behind the scenes, the feds had pushed other banks to buy Lehman.  Once again, the firm proved too toxic. Nobody made a bid without assurance of government support. The Treasury Department and Federal Reserve watched Lehman implode, unable to predict the scope of the global financial damage that would follow.
» How Risky Real Estate Deals Doomed Lehman
» Financials Face Trouble  After Lehman’s Collapse
» What's Next For Thousands Of Lehman Employees
» Lehman Files Bankruptcy

Merrill’s CEO Stan O’Neal was so fixated on the revenue generated by the mortgage business, he didn’t just want to securitize them, he wanted to originate them, too. So, in 2007, Merrill bought mortgage lender First Franklin. O’Neal’s goal of vertical integration was complete. But it would soon create chaos inside the firm, as borrowers began to default on subprime loans and the market for mortgage backed products began to stall.
» First Franklin Mortgage Braces For Profit Cuts
» Merrill Ousts CEO O'Neal After Record Losses

Although Bank of America’s purchase of Merrill ultimately saved the company, the transaction later came under intense scrutiny because of larger-than-expected losses and controversial year-end bonuses paid to Merrill executives. CEO Stan O’Neal resigned in disgrace. His replacement, former New York Stock Exchange CEO John Thain, lasted only 13 months in the job. He later came under fire for extravagant spending on office redecoration while Merrill was bleeding cash. And, Bank of America CEO Ken Lewis was called before Congress to explain his claims that the Federal Reserve and Treasury Department pressured BofA to close the Merrill deal. The Feds denied any pressure, but revealing email chains and Lewis’ testimony shed new light on the behind-the-scenes efforts to keep Merrill afloat.
» Merrill Lynch CEO Leaves, Denies Blame
» Fed Accused Of 'Cover Up' In BofA, Merrill Deal

Two days after Lehman’s bankruptcy, the crisis spread to insurance giant AIG. It was now on the verge of failing, too. AIG bet big on Credit Default Swaps, selling insurance policies on Collateralized Debt Obligations made from subprime mortgage securitizations. When the subprime mortgages defaulted, making all those CDOs worth much less, AIG was stuck with billions in liabilities. All those policy-holders wanted their insurance payments for the failed CDOs. In order to prevent an international financial calamity, the U.S. government took an 80-percent stake in AIG. Many experts called the company “too big to fail”--- with tentacles stretched around the world, deeply embedded in the global economy.
» AIG Hires JPMorgan To Advise On Raising Capital
» Fears Of AIG Collapse Cause Dow’s Worst Drop Since 9/11
» AIG Encounters Problems With Credit Default Swaps
» Bailout Of AIG Fails To Calm Wall Street Fears
» Government Bails Out AIG
» Former AIG CEO Testifies Before House Oversight Committee

As the week progressed, the domino effect continued. The Primary Reserve Fund, a popular money market fund, broke the buck, meaning each dollar invested was now worth only 97 cents.
» Reserve Primary Fund Loses Money
» Oldest U.S. Money Market Fund “Breaks the Buck”

In the days ahead, Paulson requested $700 Billion from Congress for a program intended to buy toxic assets from banks and infuse financial institutions with capital.  The initial request was only three pages long and contained no rules and standards for oversight. Infuriated politicians greeted the proposal with skepticism, despite a historic meeting at the White House among President Bush and the two men battling to succeed him, Senators Barack Obama and John McCain.
» President Endorses Bailout
» Republicans Continue To Contest Bailout Bill
» Plan Proposed, Paulson Optimistic About Bailout
» Paulson Before Senate Banking Committee
» Bernanke Urges Congress To Take Urgent Action

At the same time as the White House gathering, another bank went bust. Washington Mutual, weighed down by mortgage-related losses, was seized by federal regulators and sold to JPMorgan Chase. It was the largest bank failure in U.S. history, caused by an old fashioned, Depression-like run on WaMu’s deposits, following rumors about the bank’s ability to survive.  Worried account-holders flooded branches to withdraw their cash. The company that once bragged it would become “the WalMart of banking” ended up more like Woolworth’s--- out of luck, out of time, and out of business.
» WaMu Crumbles After Building Bank On Risky Loans

The following week, on September 29, Congress rejected the stimulus plan. Stunned investors watched the vote second-by-second, reacted to the failed vote, and sent the stock market on a wild ride. The Dow Jones Industrial Average plunged a record 778 points, its biggest drop in history.
» House Rejects Bailout, Dow Falls Almost 800 Points

The following week, Congress acted again. This time, lawmakers  approved the package, known as the Troubled Asset Relief Program. It included significantly greater oversight of the $700 Billion and more specific details on how it would be used to bolster the U.S. banking system. Treasury Secretary Paulson later forced the chief executives of the nine largest American banks to accept money from the fund, known as TARP (Troubled Asset Relief Program). Paulson’s “tough love” was a bitter pill for some bank bosses to swallow. But they all took the cash, some comparing it to an act of patriotism. In the following weeks and months, it would take much more than an act of patriotism to pull the country, and the world, from the grips of recession.
» The Revised Bailout Bill
» Fear Still Looms On Wall Street

CNBC anchors and reporters explain how the U.S. economic downturn had a massive ripple effect on world markets.