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  FISCAL STIMULUS 2008

 

                    FINANCIAL CRISIS CHRONOLOGY

COMMENTS BY:            HENRY PAULSON, TREASURY SECT’Y

BEN BERNANKE, FED RESERVE CHRMN

       2007

March 13th, 2007 – Henry Paulson: “the fallout in subprime mortgages is "going to be painful to some lenders, but it is largely contained."

 

March 28th, 2007 – Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,"

 

April 20th, 2007 – Paulson: "I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained." , "All the signs I look at" show "the housing market is at or near the bottom,"

 

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

 

June 20th, 2007 – Bernanke: (the subprime fallout) ``will not affect the economy overall.''

 

July 12th, 2007 – Paulson: "This is far and away the strongest global economy I've seen in my business lifetime."

 

August 1st, 2007 – Paulson: "I see the underlying economy as being very healthy,"

 

August 17th, 2007 – Customers of Countrywide Bank line up to close their accounts. Bank of America announces that same month of intention to purchase the bank for $4 billion all stock deal.

 

October 15th, 2007 – Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."

 

2008

February 14th, 2008 – Paulson: (the economy) "is fundamentally strong, diverse and resilient."

 

February 28th, 2008 – Paulson: "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street."

 

February 29th, 2008 – Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."

 

March 16th, 2008 – Paulson: "We've got strong financial institutions . . . Our markets are the envy of the world. They're resilient, they're...innovative, they're flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong."

 

Mar 18th, 2008 - Bear Stearns Bailout Announced

 

May 7, 2008 – Paulson: 'The worst is likely to be behind us,”

 

May 16th, 2008 – Paulson: "In my judgment, we are closer to the end of the market turmoil than the beginning," he said.

 

June 9th, 2008 – Bernanke: Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned,

 

July 11, 2008 – FDIC reports the failure of IndyMac Bank, California

 

July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, "… in no danger of failing.","…adequately capitalized"

 

July 20th, 2008 – Paulson: "it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."

 

August 10th, 2008 – Paulson: ``We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)

 

Sept 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.

 

September 15th, 2008 - Venerable Wall Street investment bank Lehman Brothers files for bankruptcy protection after the US government refuses to bail it out.  Paulson was patting himself on the back for refusing to “put taxpayer money on the line” to rescue Lehman Brothers   - Rival Merrill Lynch hastily arranges to be swallowed up by Bank of America for 50 billion dollars.  Dow Jones Industrial Average Losses -504 points closes at 10,917.

 

September 16th, 2008 - The US government rescues AIG with an 85-billion-dollar loan, giving the US government a 79.9 percent stake in the company.   Paulson teamed up with the Fed’s Ben Bernanke to engineer the $85 billion federal bailout of AIG.  The Fed injects another 50 billion dollars into the markets.

 

September 17th, 2008 – Dow Jones Industrial Average Losses -449 points closes at 10,610.

 

September 18th, 2008 - After US markets close, US Treasury Secretary Henry Paulson asks lawmakers for authority to buy the toxic mortgage-related assets of financial institutions - $700 Billion Bailout Plan Tarp” would buy up all the toxic assets from a market now frozen with fear, giving the housing market time to settle and the underlying value of the mortgage-backed securities to rebound. Then in calmer days Tarp would sell them, perhaps even making a profit for the taxpayer

 

September 19th, 2008 – Paulson: "We're talking hundreds of billions of dollars - this needs to be big enough to make a real difference and get at the heart of the problem," he said. "This is the way we stabilize the system."

 

September 19th, 2008 - Bernanke: "most severe financial crisis" in the post-World War II era. Investment banks are seeing "tremendous runs on their cash," Bernanke said. "Without action, they will fail soon."

 

September 21st, 2008 – Paulson: "The credit markets are still very fragile right now and frozen", "We need to deal with this and deal with it quickly.", "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."

 

September 23, 2008 – Warren Buffet acquires $3 billion of Goldman Sachs preferred stock.

 

September 23rd, 2008 – Paulson told the Senate Banking Committee: "We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses, both small and large, and the very health of our economy,"  “There were some that said we should just go and stick capital in the banks, put preferred stocks, stick capital in the banks. And that’s what you do when you have failures. You know, that’s what happened in Japan. That’s what happened in other spots. And we have dealt with some failures. And we’ve dealt with them where there’s capital. But we said, the right way to do this is not going around and using guarantees or injecting capital, and there’s been various proposals to do that, but to use market mechanisms.”

 

September 23rd, 2008 – Bernanke: "My interest is solely for the strength and recovery of the U.S. economy,"

 

September 26th, 2008 –  Washington Mutual (WAMU) collapses in biggest US bank failure to date. JPMorgan Chase purchases parts of WAMU for 1.9 billion dollars

 

September 29, 2008 - Dow Jones Industrial Average Losses -778 points closes at 10,365.

 

October 1, 2008 – Warren Buffett acquires $3 billion of GE preferred stock.

 

October 3, 2008 -  The U.S. House of Representatives passes HR1424 and President George W. Bush signs it into law. It contains also easing of the accounting rules that forced companies to collapse because of the existence of toxic mortgage-related investments

 

October 7, 2008 – Iceland on brink of national bankruptcy approaches Russia for loan of $5.5 billion, as the government shut down the stock market and seized control of its last major independent bank.  Dow Jones Industrial Average Losses -508 points closes at 9,447.

 

October 9, 2008 - Dow Jones Industrial Average Losses -679 points closes at 8,579.

October 11th, 2008-  The G7, a group of central bankers and finance ministers from the Group of Seven leading economies, meet in Washington and agree to urgent and exceptional coordinated action to prevent the credit crisis from throwing the world into depression. The G7 did not agree on the concrete plan that was hoped for

 

October 13, 2008 - Dow Jones Industrial Average Gains +936 points closes at 9,388.

 

October 14, 2008 - “Today I am announcing that the Treasury will purchase equity stakes in a wide array of banks and thrifts. Government owning a stake in any private U.S. company is objectionable to most Americans – me included. … From the $700 billion financial rescue package, Treasury will make $250 billion in capital available to U.S. financial institutions in the form of preferred stock. … Our goal is to see a wide array of healthy institutions sell preferred shares to the Treasury, and raise additional private capital, so that they can make more loans to businesses and consumers across the nation.” Structured as a stock purchase similar to plans in the EU within the last week.

 

October 15, 2008 - Dow Jones Industrial Average Losses -733 points closes at 8,579.

 

October 21, 2008 - The Fed has created a Money Market Investor Funding Facility (MMIFF), "which will support a private-sector initiative designed to provide liquidity to U.S. money market investors," The Fed will make up to $540 billion available for purchases.  Dow Jones Industrial Average closes at 9,033.