Beijing’s fear of a massive financial crisis is driving its sweeping crackdown on big borrowers such as conglomerates Dalian Wanda and LeEco, according to an opinion piece in Communist Party mouthpiece People’s Daily on Monday….
Then Treasury Secretary Henry Paulson looks over at his colleagues including then Fed Chair Ben Bernanke and then NY Fed President Tim Geithner.Eight years ago, the US economy went into recession, the US housing market crashed, and credit markets seized, bringing the banking industry to its knees.
Businesses went down. Workers lost jobs. And Americans were losing hope, which only made things worse.
For many, the critical low moment Lehman Brothers bankruptcy on September 15, 2008. But the memory of critical events before and after that day is slowly fading.
Business Insider 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.
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 US housing market. Regular people begin to pay attention to what subprime is.
Flickr/Michael Fleshman (fleshmanpix)
APRIL 2, 2007: New Century files for bankruptcy. It was the largest subprime lender in the United States.
The side of a building in Detroit, Michigan.Joshua Lott/Reuters
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
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.
People pass the Paris headquarters of France’s biggest listed bank, BNP Paribas, which froze 1.6 billion euros ($2.2 billion) worth of funds citing U.S. subprime mortgage sector problems, August 9, 2007.Regis Duvignau/Reuters
SEPT. 4, 2007: Libor — the interbank interest rate — hits 6.7975%, its highest level since December 1998.
Burse trader Dirk Mueller reacts as he sits in front of the German DAX index board at Frankfurt’s stock exchange, August 17, 2007.Kai Pfaffenbach/Reuters
OCT. 24, 2007: Merrill Lynch announces an $8.4 billion quarterly loss, the largest in its history, thanks to write-downs on subprime mortgages.
OCT. 31, 2007: Meredith Whitney says Citigroup will have to cut its dividend. Later, it does.
OCT to NOV 2007: Numerous 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.
DEC. 11, 2007: The FOMC reduces the federal funds rate to 4.25% and cuts the primary credit rate to 4.75%.
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.
Bill Ackman.AP Photo/Richard Drew
SEPT. 7, 2008: The saga of Fannie Mae and Freddie Mac, guarantor of half of U.S. mortgages, culminates with a takeover by the U.S. government.
Alfredo Ochoa and his one-year-old daughter, Josefina, attend a rally to ask state lawmakers to stop home foreclosures and help modify loans at the State Capitol in Sacramento, California November 25, 2008.Max Whittaker/Reuters
SEPT. 14, 2008: Bank of America buys Merrill Lynch for $50 billion.
Flickr/See-ming Lee (seeminglee)
SEPT. 15, 2008: Meanwhile, Lehman Brothers can’t find a buyer and files for bankruptcy.
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.
Shannon Stapleton /Reuters
SEPT. 17, 2008: The Fed rescues insurance giant AIG from bankruptcy for $85 billion.
Ben Bernanke.REUTERS/Jonathan Ernst
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.
A sign at a Washington Mutual Bank (WaMu) branch is shown in San Francisco, California September 26, 2008.Robert Galbraith/Reuters
SEPT. 29, 2008: The U.S. House of Representatives defeats a proposed $700 billion emergency bailout package, 228-205. Stocks plunge 788 points as the votes are counted live.
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. 8, 2008: The New York Fed bails out AIG for the second time, for $37.8 billion.
Ben Bernanke.Jonathan Ernst/Reuters
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.
Hank Paulson.Lucy Nicholson/Reuters
OCT. 15, 2008: The stock market has another hellish day, plunging 733 points (7.9%).
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.
Warren Buffett.REUTERS/Fred Prouser
“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497,” Buffett wrote in the NYT.
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.”
DEC. 11, 2008: The NBER announces that the economy is officially in a recession.
Chip Somodevilla / Getty Images
FEB. 17, 2009: Obama signs the American Recovery and Reinvestment Act of 2009.
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.
Flickr/Tim Pierce (qwrrty)
Banks would continue to report losses, fight regulation efforts, and eventually stomach higher capital requirements.
Flickr/Cat Branchman (kozemchuk)
Eventually, after extraordinary bailouts from the Fed and Congress, the market bottomed and the economy slowly recovered.
Andy Haldane, who was once heralded as one of the world’s 100 most influential people, described economists’ failure to accurately forecast the global financial crash “a fair cop.”
“It’s not the first time it has happened,” Haldane said during a discussion at the Institute for Government.
“It happened back in the 1930s and the Great Depression. But out of that something good spread. It brought us [John Maynard] Keynes and the birth of modern macroeconomics.
“Out of this crisis, there could be a rebirth of economics. I’m not someone who would say that all that’s been done in the past is terrible. It’s just that the models we had were rather narrow and fragile. The problem came when the world was tipped upside down and those models were ill-equipped to making sense of behaviours that were deeply irrational.”
Andy Haldane, Chief Economist admits economic forecasting at the Bank of England is in crisis! Yep, we have mentioned this many times #JKA
— John Ashcroft (@jkaonline) January 6, 2017
The BoE has come under attack from politicians and commentators for its warnings on the effects of Brexit. Its governor, Mark Carney, was lambasted by Tory heavyweights such as Michael Gove, Boris Johnson, and former Foreign Secretary William Hague for predicting a slowdown in Britain’s economy after a Leave vote, which failed to materialize.
UK Prime Minister Theresa May, too, criticized the BoE for cutting interest rates and boosting stimulus packages with a further £60 billion ($74 billion) – amounting to a total of £435 billion.
Although former UK Government Economic Service head Vicky Pryce does not agree that the economist profession is in crisis, she did say that forecasters often “really have no idea” how governments will react and impact the markets.
Speaking on BBC Radio 4 Today program on Friday, she said: “The Leave vote, there was definitely a shock. The Bank of England and everyone else expected there was going to be a shock if there was a vote to leave the [European Union], and of course we saw that immediately on the financial market, straight after it was realised that indeed the UK was voting to leave the EU. We saw the pound come down very very significantly, and of course share prices came down significantly.
“What the forecasts did not of course incorporate in them is what the policy response might be to such a shock. And the policy response was the Bank of England’s response really. The governor came online straight away and calmed the markets, cut interest rates very quickly, and then of course put huge amounts of liquidity in the system, which stabilised the situation very significantly. You can’t have that in any forecast that you do.
“It’s very difficult when you are a policy forecaster to have all sorts of policy reactions in your expectations. You don’t know how that policy act will play in the markets so you don’t know what it will do to competence, you have no idea whether it’s going to be in any way effective. What happened in the financial crisis back in 2008, I was working in the government then, we threw everything into the pot that we possibly could to see what would stick. Some things worked, some things didn’t. You really have no idea.”
What nonsense from #AndyHaldane. He might think ahead only 3 months but I bet there isn’t a single #Remainer who doesn’t worry *long-term*.
— Elizabeth Bangs (@ElizabethBangs) January 6, 2017
Last week, Gove openly attacked economics experts, arguing they must be challenged.
“Sometimes we’re invited to take experts as though they were prophets, as though their words were carved in tablets of stone and that we had to simply meekly bow down before them and accept their verdict,” Gove said in a debate with former BBC economics editor Stephanie Flanders.
“I think the right response in a democracy, to assertions made by experts, is to say ‘show us the evidence, show us the facts’. And then, if experts or indeed anyone in the debate can make a strong case, draw on evidence and let us think again – then of course they deserve respect.”
Economists failed to predict the 2008 financial crash and completely misjudged Brexit’s impact, the executive director of monetary analysis at the Bank of England (BoE) has admitted.
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IMF’s Lagarde doesn’t rule out another global financial crisis
FILE PHOTO: A worker is seen carrying a box out of the U.S. investment bank Lehman Brothers offices, in the Canary Wharf district of London © Reuters
Another financial crisis is still possible, according to International Monetary Chief Christine Lagarde. She was commenting on a statement by US Federal Reserve Chair Janet Yellen, who predicted she would not see another financial crisis in her lifetime.
“There may, one day, be another crisis. I plan on having a long life, and I hope she (Yellen) does, too, so I wouldn’t absolutely bet on that because there are cycles that we have seen over the past decade and I wouldn’t exclude that,” Lagarde told CNBC on Tuesday.
She said that crises are usually unpredictable and come unexpectedly.
“Where it will come from, what form it takes, how international and broad-based it will be is to be seen, and typically the crisis never comes from where we expect it,” Lagarde said.
“Our duty … is to make sure that your financial sector is under good supervision, that it’s well regulated, that the institutions are rock-solid, and anticipate at home with enough buffers so that you can resist the potential crisis,” she added.
The previous global financial crisis took place in 2007-2008 and is considered the biggest economic downturn since the Great Depression.
It happened after the crash in the US housing market, and massive amounts of mortgage-backed securities and derivatives lost significant value. In the US alone, more than 7.5 million people lost their jobs. According to estimates, American households lost roughly $16 trillion in net worth as a result of the stock market plunge.
Only one bank faced criminal charges after the 2008 financial crisis. It’s not a big one like JP Morgan Chase or Citibank, it’s a small family owned bank in Chinatown in New York, with a branch in…
The White House is setting a high bar for growth, even as one indicator shows a U.S. economy on edge.
The Trump administration will project that United States economic growth will rise to 3% by 2021 when it unveils its full budget proposal next week, a senior official told the Wall Street Journal. The figure is well above what Congressional budget experts and most mainstream economists believe is realistic. It also arrives at a time when economic uncertainty is higher than it’s been in years.
President Trump and his team have long insisted that through tax cuts and deregulation they can get the economy buzzing. Trump on the campaign trail often cited 3.5%, even 4% growth, though since taking office the administration has focused its rhetoric on 3%.
“I believe that a goal of 3% GDP, or higher economic growth, is achievable if we make historic reforms to both taxes and regulation,” Treasury Secretary Steven Mnuchin said in a Senate Banking Committee hearing on Thursday.
The figure is well above the 1.9% forecast under current policy by the Congressional Budget Office. It also exceeds what economists say is realistic.
“I know of no independent economist who thinks that is possible,” Steven Rattner, the chairman of Willett Advisors LLC who steered the Obama administration through the auto crisis, said in a hearing on tax reform before the House Ways and Means Committee Thursday.
“The only way to go from 2% from 3% is a combination of deficit-neutral tax cuts, more infrastructure spending, and most importantly of all, more immigration,” Moody’s Analytics economist Mark Zandi said in a recent interview with TheStreet. “His policy mix isn’t the right one to get to sustained higher growth, although it might juice things up temporarily.”
The U.S. hasn’t seen annualized GDP growth of more than 3% since 2004, and it hasn’t surpassed 4% since 2000, according to the U.S. Bureau of Economic Analysis.
Even Commerce Secretary Wilbur Ross has acknowledged Trump’s growth plans are aggressive, telling Reuters in an interview last week that the White House GDP target is “certainly not achievable this year.”
A parallel narrative to Trump’s economic growth promise is the rise of economic uncertainty, which according to one measure is at near-historic levels.
Unease about the state of the U.S. economy is currently at higher levels than during the 1987 stock market crash and the 2008 financial crisis, according to the Economic Policy Uncertainty Index, cited by CNBC. Devised by economists from Stanford, the University of Chicago and Northwestern, the index uses factors such as newspaper headlines, economic forecasts and tax laws to gauge uncertainty. It has accurately indicated moments of major economic turmoil over the past 30 years.
The index spiked after Trump’s election and has come back down since, though it remains significantly above its long-term average. The only time it has been higher than election levels over the past three decades was after the September 11 terrorist attack and the battle over the fiscal cliff in 2011.
While jumps in the index have not necessarily precipitated recessions, increases in policy uncertainty “foreshadow declines in investment, output, and employment in the United States,” the index creators wrote in a 2016 paper.
And a generation of citizens must suffer the consecquences of a politicians actions or inactions that cause suffering to its people? LOL. The thought that you can doom a nation to servitude due to the votes of a few officials is laughable.
fair suck of the sauce bottle Edna;-)
so he fessed up ..now what about the other two pisspots?
curious no one mentioned them?
as for this its a LOT of years late to be dragging it out
and frankly everyone would have voted to bail banks anyway
just another one of KRudds get in debt and make yourself a hero stunts.
you reckon malcs any better an option then TA?
maggot and the termite backstabbing bitch he runs with
waiting for the day she does maggot malc the same favour.
regardless of the leader all the libs ass kiss the banks
for that so do labor for different reasons, gotta pay the union echelons fuck the workers.
were looking as fucked over as ussa frankly
and will be dragged into afghan shit again as well as NK and fuck knows what else
doesnt matter what pile of shit we vote in they both run the same brand of stupid!
Hahahahahahha. He’s admitting to lying to the public whilst standing as a member of parliament. He’s as straight as a dog’s hind leg. He’s a career politician not your representative. He’s part of the political aristocracy who won’t consider you worthy of a conceding to you a bill of rights. He’s as honest as you are sceptical? Two fools met.
Yes, after that IMP the MH17 was brought down by Oligarchs thus when voting came up I payed the fine and didn’t vote. I still think it’s communista to make people vote, but hey this (ossie) Cuntry is non lubed F*cked
Absolutely nobody needs to pay those fines for not voting! When you get the please explain letter from the Electoral Office give them a call and give any stupid excuse you want and you’ll be crossed from the list and you will not hear from them again.
I refused to vote in one election because the choice of candidates was so appalling, and it is so undemocratic to force people to vote. I just refused.
I was fined with no option of recourse. I still didn’t pay, so the police suspended my driver’s licence and the banks stopped my credit card until I paid the stupid $200 fine. Democracy in action. I just refused to vote for Abbot, a lightweight with a power complex, but some in the left were even worse. In NSW State govt, corruption on a mind boggling scale… http://www.abc.net.au/news/2016-12-15/eddie-obeid-why-everyone-is-talkin…
Anyway Australia is now massively buggered thanks to the current property bubble in Sydney and Melbourne which is far worse than the US at its peak – in fact on a price-income ratio, higher than any place on the planet – ever! When you can buy a *private jet* for the price of a barely liveable house, 30 miles from the CBD, it’s all over.
Thanks to a government put on housing prices, many Aussies are in severe mortgage stress already, and yet our central bank, the RBA has gone from 7.5% at the GFC to 1.5% today. The four banks have 60% of their loan book in residential property, and foolish 20 somethings leveraging up massively into investment stock, all based on the ‘but property has never gone down here’ nonsense and price-to-fantasy levels. This is government policy and it’s not like Australia’s short of any land. We’re screwed.
Former Australian PM Admits He Was Passed Out Drunk During Crucial Financial Crisis Vote
My response: Based on the behavior of our US LEGISLATORS and LEADERS within the last year, many are probably walking around under the influence of something. Their statements are so delusional at times, that it stupifies the mind. As an example, go back listen to the ramblings of WATERS, PELOSI and McCAIN to name just a few.
No one wants to face the TRUTH of a MATTER, so they anesthetize themselves so they can pretend a situation is NOT REALLY THAT BAD.
Here is a warning for such people ….
Be alert and of sober mind. Your enemy the devil prowls around like a roaring lion looking for someone to devour.
Probably the only sober people in the government are the POTUS and his VP.
>Getting pass out drunk on wine
I would normally say that the hangover was punishment enough, but since he’s a cucked politician…
in that case it only means that he has more sense than the rest of them.
this bailout is ugly and i’m drunk, but at least i’ll be sober in the morning.
Watch the Aussie TV series, Rake, to see how the Aussies govern themselves. Abbott’s behavior is standard fare in every episode. /s
a whole generation and ongoing got “americanised” ideas
the bright shiny and lotsa debt meme
gotta spend lots get big and go bankrupt
except we dont have sect 11 here
and we cant just hand keys in n walk if the mortgage breaks us
the banks take the home flog it cheap and you still pay a lifetime of debt for what you dont have!
older ones like me who dont fall for “look squirrels” and call it as it is are now pariahs
were not pc we “upset” the gullible abc and upperclass twats
and a HUGE amount of us will be voting NO! on the queer marriage vote
I don’t know I got pretty hammered during that shit as well when it first hit company I was working for went chapter 7 and it was over in a week. Ballgame. Cunt CEO got almost $100K from the bankruptcy court.
Sobered up in time to make a couple bucks off a couple foreclosures and go full time self employed.
Apparently you missed the part of the article that pointed out that Abbott has been hypocritically lying about this for the past four years, not to mention cynically slandering anyone who dared to disclose the truth about his misconduct.
It’s against the Australian constitution to be a dual citizen and be in parliament, Abbott is a British dual citizen who was PRIME MINISTER. This story is a pure fucking distraction for the dumb shit average Aussie. Abbott is obviously connected or he would be exposed. We have a former ‘human rights’ commissioner calling for sharia law to be introduced here, things can’t continue like this. Something needs to be done.
Lots of Australian politicians were born in other countries, NSW even had an American Premier for a while.
Abbott owes his success to the fact that his party was decimated at an election, and he was almost the last man standing.
He became PM, because the other party who defeated him were traitors, and allowed foreign troops to be stationed in Australia.
He was so hopeless, his own party dumped him.
He is Australia’s John McCain.
“He became PM, because the other party who defeated him were traitors, and allowed foreign troops to be stationed in Australia.”
If he was defeated by this “other party” how could he become PM? You are referring to?
Yes it makes no sense thank you.
Abbotts party was defeated and very few of the senior people in his party remained in Parliament. Abbott became leader of his party in opposition.
His party defeated the Government at another election because the party in power were more interested in serving the USA than Australia, and allowed nuclear armed foreign troops to be stationed in Australia. There were also other issues, corruption and incompetence which allowed Abbott to lead his party to victory, more in protest at the outgoing Government than support for Abbott.
Once in Government his incompetence became obvious, and his party removed him.
in the words of the famous Kylie
he was smart enough to make sure he was NOT a uk cit he took aus citizenship way before
unlike a lot of others;-)
and TA doesnt exactly like trigg either
hes NOT for sharia anything
have a go at the useless cunt now IN whos doing fuckall to boot illegals out and IS supporting gay marriage
and mandatory vaccination
and removal of cash and privacy rights
up americas ass like dag on a sheep
will have our guys back in OS wars
sold us out to OS mainlky Yank healkth funds and other scams
thinks we need to go hitech when we dont have resources to make the shit anyway
knowledge economy???FFS! when hes supporting NAPLAN crap, its as bad as murrican scam ruining kids brains
5 days before the Financial Collapse Here is the scenario. âGovernment agencies are having difficulty making their payments. State governments are issuing vouchers to pay their bills. US Social Security is late in issuing its payments to retirees…
The Federal Reserve raised its benchmark rate on Wednesday for the fourth time since 2008. The central bank says it is targeting a range between 1 percent and 1.25 percent for overnight borrowing between banks.
“Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined,” the Fed said in its analysis of current economic conditions. It noted that inflation has recently declined.
The Fed’s expectations for future rates suggest that there will be one more hike this year, in line with what the market had been expecting. Neel Kashkari, the head of the Minneapolis Fed, dissented from the Fed’s decision. He would have refrained from raising rates.
The Fed also announced detailed plans for how it will unwind the large balance sheet it built up by buying bonds during the financial crisis and in the years that followed. Questions over how and when the Fed would shrink its balance sheet have been foremost in the minds of investors and monetary policy mavens for some time. The Fed said it would reduce its holdings later this year by not reinvesting some of the funds received when bonds it holds mature. Currently, the Fed reinvests all of the proceeds from maturing bonds.
It was the Fed’s third consecutive rate increase, signaling a definitive end to the Fed’s nine-year old economic stimulus scheme. The move indicates the Fed’s confidence in the stability of the economy, although it does not necessarily indicate that the Fed is attempting to slow economic growth. Monetary policy makers believe that low rates support economic growth by lowering the cost of borrowing for businesses, homebuyers and consumers; raising rates is believed to reduce central bank support for the economy.
The Fed’s move came after several disappointing data points appeared to indicate that the economy may be softening and hoped for tax cuts may be delayed longer than expected. Job creation in May came in lower than expected, at just 138.000 jobs. Retail sales in May fell 1.6 percent from the prior month, the biggest decline in 16 months. Economists had expected sales to increase in May, following a 0.4 percent increase in April.
Prior to the Fed announcement on Wednesday, consumer price data revealed that inflation unexpectedly fell in May. Core CPI, an economic indicator closely watched by the Fed because it excludes volatile food and energy costs, rose 1.7 percent year-on-year. That was lower than expected and short of the Fed’s announced long-term target.
The dollar was weaker prior to the Fed’s announcement but following the release of the soft economic data. Yields on long-term Treasuries, which are thought to reflect investor’s expectations of the path of future short-term rates, fell. Falling long-term yields indicate that investors are lowering their expectations for future short-term rates. The yield on 10-year Treasuries was down 10 basis points to 2.11 percent earlier Wednesday.