Battling the Credit Crunch
For more than a year now, the credit crunch has whipsawed financial markets, reshaped the financial services industry and taken a big bite out of US economic growth. The US government has taken a number of dramatic steps—both conventional and extraordinary—to try to remedy the problem. Take a look at what's been done.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Aug. 17, 2007: Fed's First Strike
Reacting to concerns about the subprime lending crisis, the Federal Reserve cut its discount rate half a percentage point to 5.75 percent. The Fed went on to cut interest rates through the end of 2007 and early 2008, eight more times, taking the federal funds rate down to 2.00 percent.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Jan. 11, 2008: Countrywide Sold
Bank of America buys the rapidly sinking mortgage lender Countrywide Financial for $4 billion in an all-stock deal.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Feb. 17, 2008: Northern Rock Nationalized
British bank Northern Rock is nationalized by the government, as customers make an unprecedented run on deposits.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
March 16/17, 2008: Bear Stearns Sold
In a quickly-arranged deal, Bear Stearns is sold to JPMorgan Chase for about $2 a share, but the price is later revised to $10 a share. The deal is backed by the Fed and the Treasury Dept., raising concerns about the role of the federal government.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
July 11, 2008: IndyMac Seized
After depositors withdraw more than $1.3 billion from IndyMac over an 11-day period, the mortgage lender is taken over by the FDIC. Though just one of the 12 institutions seized by the FDIC in 2008, IndyMac is the largest, with assets of $32 billion.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
July 13, 2008: Fannie, Freddie Rescue
The Treasury and the Federal Reserve nationalize mortgage finance companies Fannie Mae and Freddie Mac in an effort to support the US housing market.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Sept. 15, 2008: Lehman Bros. Bankruptcy
In the absence of a private-sector buyout deal or a government rescue package, Lehman Brothers files for chapter 11 bankruptcy protection. On the same day investment bank Merrill Lynch is taken over by Bank of America.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Sept. 16, 2008: AIG Bailout
The Federal Reserve announces a plan for an $85 billion loan package for insurer AIG in return for an 80 percent stake in the company, which was desperate for a capital infusion.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Sept. 20, 2008: Bailout Plan
Treasury Secretary Henry Paulson outlines details of a $700 billion bailout plan for firms troubled by bad mortgage debt and calls for the swift creation of a legislative package.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Sept. 21, 2008: Wall Street Era Ends
The Fed approves the requests of Goldman Sachs and Morgan Stanley to become bank holding companies, essentially ending Wall Street's investment banking model.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Sept. 23, 2008: Buffett Invests
Warren Buffett’s Berkshire Hathaway invests $5 billion in Goldman Sachs, citing the rescue plan as a contributing factor.
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis
Sept. 25, 2008: WaMu Seized
Washington Mutual is seized by the FDIC, making it the largest US bank failure ever, with $307 billion in assets. Washington Mutual's banking assets are sold to JPMorgan Chase for $1.9 billion.
>Replay Slideshow
>Slideshow: 2008 Bank Failures
>Slideshow: Largest US Bankruptcies
>Special Report: Wall Street in Crisis