The credit crunch didn’t happen overnight. Here is a timeline of how trouble spilled out from the United States and around the world, and from the financial industry to many other sectors of the international economy:
2006: The U.S. mortgage market shows signs of trouble, with rates of loan delinquencies and foreclosures rising.
April 2007: The New Century Financial Corp., one of America’s biggest subprime mortgage lenders, collapses.
June 2007: Bear Stearns, one of the largest underwriters of mortgage bonds in the U.S., announces the collapse of its two internal hedge funds.
July 2007: Credit-rating agencies Moody’s and Standard & Poor’s announce the downgrades or upcoming downgrades of subprime mortgage-backed securities; U.S. Federal Reserve Board Chairman Ben Bernanke tells the Senate Banking Committee that subprime mortgage- related losses could top $100 billion.
August 2007: American Home Mortgage Investment Corp., another major housing lender in the U.S., fails; BNP Paribas, the largest bank in France, freezes three investment funds, saying it cannot calculate their value.
September 2007: Customers rush to branches of the U.K.’s Northern Rock Bank to withdraw money.
March 2008: The U.S. Federal Reserve approves a $30-billion credit line to assist JPMorgan Chase buy Bear Stearns. JPMorgan agrees to pay a paltry $2 a share.
September 2008: Lehman Brothers goes under; Merrill Lynch is sold to Bank of America Corp.; U.S. mortgage-buyers Fannie Mae and Freddie Mac are taken over by the government; the American Insurance Group (AIG) faces crisis due to insurances it sold to cover mortgage- backed securities. It subsequently received an $85-billion government bailout.
October 2008: Iceland nationalizes the country’s largest bank and suspends all trading on its stock market.
January 2009: The government of Iceland is thrown into turmoil as the prime minister steps down.
February 2009: U.S. President Barack Obama signs the $787-billion American Recovery and Reinvestment Act of 2009 into law.
March 2009: The U.K. government takes a controlling interest in Lloyds Banking Group.
April 2009: Chrysler LLC, America’s third-largest automaker, files for bankruptcy.
May 2009: A bankruptcy filing looms for General Motors Corp., the world’s largest automaker until 2008.