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FACTBOX: A week that changed Wall Street and beyond
Fri Sep 19, 2008 7:15pm EDT
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NEW YORK (Reuters) - Wall Street's landscape was transformed in the past
week and the government made an unprecedented intervention to prop up
chaotic financial markets. Here is a chronology of key events in
probably the most tumultuous seven days in U.S. financial history since
the Great Depression.
Friday Sept 12:
- Timothy Geithner, president of the New York Federal Reserve Bank,
convenes an emergency meeting with Treasury Department officials and top
executives at all the major Wall Street banks, including Citigroup, JP
Morgan & Chase, Merrill Lynch, in an attempt to rescue ailing investment
bank Lehman Brothers. A sticking point is the government's reluctance to
provide financial support for a deal.
Saturday, September 13:
- Discussions continue at the New York Fed's Lower Manhattan building,
and British bank Barclays plc emerges as a leading contender to buy
Lehman, even as other major banks drop out of the running;
- A few blocks away, troubled insurer American International Group,
which insured billions of dollars worth of collateralized debt
obligations, begins talks with New York State's insurance superintendent
as it fights for its survival.
Sunday, September 14:
- Lehman finds no buyer, but Bank of America reaches an agreement to buy
Merrill Lynch, which is forced into the deal because of fears that it
might also fail because of a loss of investor confidence. The fears
center on toxic debt remaining on Merrill's balance sheet and its
difficulty in raising new capital.
- A group of 10 global banks and securities firms, including JP Morgan
Chase and Goldman Sachs announce a $70 billion loan program that they
can tap to help ease a credit shortage;
Monday, September 15:
- Shortly after midnight, 158-year-old Lehman files for Chapter 11
bankruptcy;
- The Dow Jones Industrial Average falls more than 500 points in its
biggest drop since Sept 17, 2001, the first day of trading following the
9/11 attacks. Meanwhile the FTSE 100, fell to its lowest level since
June 2005.
Tuesday, September 16:
- AIG is taken over by the federal government -- getting an $85 billion
revolving loan it has two years to pay off in exchange for a 79.9
percent government stake in the company. New York state will lead a task
force to oversee AIG's sale of assets as it pays off that loan;
- Barclays agrees to pay $1.75 billion for some of Lehman's prime
assets, including its Manhattan skyscraper and North American investment
banking and capital markets businesses.
Wednesday, September 17:
- The U.S. stock market plummets, with the Dow Jones industrial average
losing about 4 percent. Shares in the top two investment banks Goldman
Sachs and Morgan Stanley slide by 14 percent and 24 percent,
respectively. Morgan Stanley CEO John Mack blames short-sellers for his
stock's woes.
Thursday Sept 18:
- The United Kingdom's Financial Services Authority bans short-selling
on a number of financial stocks for four months.
- U.S. Treasury Secretary Henry Paulson shops around a plan to Congress
that would create an entity similar to the Resolution Trust Corporation,
which was created in 1989 to absorb bad debt in the Savings and Loan.
The fund would likely acquire hundreds of billions of dollars of toxic
mortgage debt;
The move helps the U.S. stock market to rise 3.9 percent, recover from
three-year lows.
Friday September 19:
- The U.S. Securities and Exchange Commission issues an emergency order
temporarily banning short-selling in shares of about 799 financial
institutions to calm the financial markets. The measure is set to end on
October 2, but can be extended by another 10 days;
The FTSE rises 8.8 percent, its biggest surge ever;
- Market watchdogs in France, Portugal and Ireland take similar steps to
crack down on short-selling.
(Compiled by Phil Wahba)
