U.S. Treasury Secretary Henry Paulson looks over his entourage after announcing that the Treasury Department will take equity stakes in potentially thousands of banks totaling about $250 billion at the Treasury Department Cash Room in Washington, October 14, 2008.REUTERS/Hyungwon Kang
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Six years ago, the financial crisis crippled the American banking industry, and the devastating effects ripple across the world.
2014-09-14
Businesses went down, and people lost their jobs.
But the memory of the key events of the financial crisis is slowly fading. Hearings, lawsuits, bailouts — it all gets muddled together.
Business Insider has outlined the major moments from 2007 to 2009.
From the initial reports of subprime defaults to the collapse of Lehman Brothers to AIG's second bailout, here are the 27 scariest moments of the financial crisis.
Editor's Note: Former Business Insider reporter Steven Perlberg contributed to this feature.
FEB. 8, 2007: HSBC says its bad debt provisions exploded because of a slump in the U.S. housing market. Normal people begin to learn what subprime is.
JUNE 21, 2007: Merrill Lynch sells off assets in two Bear Stearns hedge funds as the funds hemorrhage billions of dollars on bad subprime bets.
Matthew Tannin, former investment bank Bear Stearns hedge fund manager, is escorted by law enforcement officials to a waiting car after being arrested in New York June 19, 2008, after a federal criminal probe into the collapse of funds he and fellow former hedge fund manger Ralph Cioffi oversaw, according to the Federal Bureau of Investigation.REUTERS/Chip East
Source: Reuters
AUG. 9, 2007: France's largest bank, BNP Paribas, freezes withdrawals from three investment funds after U.S. subprime mortgage losses crush markets. "The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating," BNP said in the release.
OCT to NOV 2007: Many CEOs would not make it through the financial crisis. Stan O'Neal at Merrill and Chuck Prince at Citigroup both exit, taking monster severance packages with them. O'Neal, for one, walked out with $161.5 million.
MARCH 16, 2008: JPMorgan Chase buys Bear Stearns for $2 a share in a fire sale (later it would be $10 a share). The Federal Reserve finances the deal, providing $30 billion so Bear doesn't go bankrupt.
2008: Insurers like MBIA, who have written against the failure of CDOs, get downgraded and collapse. Hedge funder Bill Ackman would reportedly make his investors over $1 billion on a short position.
SEPT. 16, 2008: For only the second time in history, a money market fund "breaks the buck" and reports share value below $1. Americans run on money market funds, long considered safe havens, en masse. $140 billion has been withdrawn year-to-date.
FALL 2008: Longstanding banking giants like Wachovia and Washington Mutual begin to disappear as they are bought by other banks for pennies on the dollar.
OCT. 3, 2008: TARP is passed. Congress approves a $700 billion bank bailout, but stocks continue to fall following investor worries that the bailout won't be enough.
OCT. 13, 2008: Treasury Secretary Hank Paulson sits down with nine major bank CEOs. When they leave the room hours later, the federal government has taken a huge equity position in Wall Street. The total bailout package looks more like $2.25 trillion, well more than the original $700 billion available.
OCT. 16, 2008: Warren Buffett authors a New York Times op-ed called "Buy American. I Am." He gets absolutely crushed by critics when markets crash further. Rising stock prices in the post-crisis years would later vindicate him.
OCT 2008: Commentators wonder if this is the end of life as we know it. "The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism," wrote The Washington Post's Anthony Faiola. Simon Jenkins at The Guardian called this line of thinking "journalistic wish-fulfillment and glee."
NOV 2008 — SPRING 2009: The Financial Crisis continues, crippling employment. Eventually the Dow Jones plunged to 6,547.05 on March 9, 2009. It was at its lowest since April 1997.
Elena Holodny was a reporter at Business Insider, primarily covering economics, foreign policy, and markets.Previously she had reported for CNBC, NBC News, and WNYC, and worked at the International Criminal Tribunal for the former Yugoslavia. She also coauthored a scientific article on CT perfusion and brain metastases.She graduated from Columbia University in 2014 with a concentration in economics.
