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Period: to
1990's
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Subprime Market Grows
The Community Reinvestment Act, a bill originally passed to end housing market discrimination in terms of getting "subprime securities"; This allowed people to find low-income housing. With these new loans and eased credit requirements, more "subprime loans" were taken out and given to people who previously wouldn't have gotten them in the past due to low-credit. -
The Glass-Steagal is Weakened
Then-sitting President Bill Clinton repealed parts of the Glass-Steagal Act. This act prohibited banks from owning and operating financial institutions such as insurance companies. This further continued the economic downturn the U.S. was in at the time. -
Period: to
2000's
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Interest Rates are Cut
The Federal Reserve noticing the recession that was already occurring, lowered interest rates by eleven times. This proved to be unsustainable with easy credit-requirements and increased lending throughout the next decade. -
Wall Streets Riskier Investments
In April, the Securities and Exchange Commission eased the Net Capital Rule. This rule had limited the brokers to only invest if the leverage ratio is 12:1 (debt to equity). Now firms with large sums of money could now leverage themselves a seemingly unlimited amount of times. These major investment firms now making these risky investments, don't survive through this recession. -
The U.S. Housing Bubble Bursts
The housing prices had underwent a boom in 2006 and then crashed in 2007. The build up of all of the subprime mortgages to people with poor credit and other loan lending throughout this economic downturn period. Many subprime lending companies declare bankruptcy and subsequently tanking the DOW Jones Industrial Average with it losing 416 points in one day, the most since 9/11. -
More Subprime Lending Companies Go Bankrupt
New Century Financial Corporation, the United States largest subprime lender, filed for bankruptcy continuing the trend of subprime markets crashing. Other companies in different economic markets also failed. Bear Sterns, a major investment companies, stated that two of their hedge funds has lost nearly all value subsequently causing them to file bankruptcy as well. This signaled great problems for the U.S. economy. -
The Subprime Problems Go Worldwide
These new loaning and subprime mortgages took their problems international with banks all over the world struggling economically. Many countries had to inject liquidity into the credit markets for the first time since 9/11. -
The Federal Reserve Slashes Interest Rates and The Market Peaks
The Federal Reserve cuts interest rates and lowers the benchmark federal funds rate for the first time since 2003 and dropped them 0.5%. A year and a half later, the rate was between 0.25% and 0%. The DOW Jones peaked at 14,000 during this time. By February 2009, the DOW was more than halved at 6,500 points. -
The Collapse of Bear Stearns
A major collapse of one of the most recognizable Wall Street Companies shocked people as it was seemingly erased from the market. Bear Stearns was granted a 28 day emergency loan and later had to sell off their shares, mainly to JPMorgan Chase. The shock value was because Bear Stearns was selling stocks at $172 per share a few weeks before this economic fallout. -
Fannie and Freddie Mac Gets Nationalized
The government announced that it will seize control of and investigate Freddie Mac and Fannie Mac. This is because of their history that is riddled with defaults and the Federal regulators fear that their collapse could spell a terrible future for the U.S. Economy. -
Lehman Brothers' Collapse
Lehman Brothers, another colossal Titan in the banking market, collapsed after more than 150 years on Wall Street and filed for bankruptcy. The government didn't intervene because they believed that a government bailout would be immoral and a hazard to the banking industry. -
The Federal Reserve Bails Out AIG
The American International Group (AIG) was rescued by the Federal Reserve shortly after the Lehman Brothers was allowed to collapse. They were given an $85 billion loan shortly after they were downgraded on their credit rating which decreased investor confidence. A collapse of the AIG would cause major damage to the economy and other global financial systems. -
Henry Paulson Unveils TARP Rescue Plan
Treasury Secretary Henry Paulson unveiled the TARP Plan (Troubled Asset Relief Program); it was estimated to use $700 billion of taxpayer to stabilize the markets. Another part of the plan proposed the buying of assets from struggling firms to attempt to restore confidence in the credit markets. -
The Bank Failures Show the End of An Era
Washington Mutual got seized by the FDIC and was then declared bankrupt. A few days later, Wachovia, yet another major U.S. Bank, was purchased by Wells Fargo. The biggest news from this time was when two colossal investment banks, Goldman Sachs and Morgan Stanley, converted to bank holding companies. This exposes them to government regulation but also gives them greater loan access from the Federal Reserve. This showed the end of independent investment banks. -
The Worst Dow Week as the Federal Reserve Intervenes
The DOW Jones had its' worst week in history by dropping more than 20%. During this same week, the Federal Reserve moved another $900 billion of short-term loans to banks. 240,000 job losses also occurred during October. -
The Federal Reserve Announces Quantitative Reasoning
The Federal Reserve bought large-scale to slash interest rates and increase economic activity. The program wrapped up in 2014 and they expanded the balance sheet to over $4 trillion instead of the $1 trillion they started with. -
George W. Bush Gave Out Auto Bailouts
George W. Bush announced plans to give support to the "Big Three" automakers. GM and Chrysler received emergency funds from the government while Ford avoided the bailout. The two companies both declared bankruptcy and the Treasury sold off all remaining stocks. -
Barack Obama's Early-Term Moves
Obama signed a $787 billion stimulus package that intended to use Federal Reserve lending facilities in an attempt to free up credit for consumers and various small businesses; also attempted to create a public-private partnership to remove troubled assets from the businesses' balance sheets. -
The G20 Summit Presses On For Financial Regulation
They pushed on and stated they would triple the funding for the International Monetary Fund and increase trade. While they didn't mention about increasing global stimulus spending, a major point of the U.S.'s, other countries did give out plans to increase international financial regulation. -
U.S. Banks Are Stress Tested
U.S. Federal Reserve Workers released the results of the very first banking stress test. This sought to access the health of America's largest financial institutions. About half of these companies were required to raise additional capital, totaling about $75 billion. Now the Dodd-Frank financial overhaul now makes this stress test process yearly processes for U.S. financial institutions with various levels of assets. -
The Dodd-Frank Financial Overhaul Is Signed
Obama signed this bill into law which gave the government control over parts of Wall Street in an attempt to prevent financial crises. Over the next several years, several financial groups to monitor the market's stability. The FDIC also gained power to seize and dismantle troubled financial institutions. The FDIC also banned banks investing for their own profit and also limits the range of bank's different investment types. -
Protests Begin and Show Their Anger
Protesters begin occupying the area around Wall Street and planned to stay until they got kicked out. They were protesting the wealth gap, corruption, and favoritism with the Bailouts, and inspired similar protests around the world. A year before, the "Tea Party" movement gained progress with their complaints towards the TARP program, the many Bank bailouts, and also just the waste less spending including Obama's stimulus package. -
The Volcker Rule is Approved by Regulators
Allowed because of the Dodd-Frank bill, the Volcker Rule is finalized by Regulators. The intent of the bill is to reduce risk, it does this by prohibiting commercial banks from using customer money to make risky market bets. The Banks opposed this bill stating that it is "too hard to comply with". -
The TARP bill ends
The Treasury sells their remaining shares of Ally Financial and offloading the treasury's last major investment from TARP. Obama's Administration claims TARP resulted in a $15 billion profit. This increased anger because people claimed this made politics only more polarized than they already were. -
Dodd-Frank Is Repealed By the House
Republicans proposed a repeal to the Dodd-Frank reforms by passing the Financial CHOICE Act. This also included many banks being exempted from many of the regulations passed recently. This bill failed to advance to the Senate however. -
Mick Mulvaney Takes Over the CFPB
President Trump appointed Mulvaney to the director of the CFPB, one of the watchdog agencies that were created by Dodd-Frank. He rolled back a lot of regulations, favoring some private lenders, and slowing some enforcement measures. This angered many due to his past negative comments towards the CFPB. In August of 2018, the agency's top student-loan official resigned in protest. -
Donald Trump Signs the Dodd-Frank Reform Bill
Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act, this is the first bill that has major economic effects since Dodd-Frank. It passed with bipartisan support from Congress. This would keep the Dodd-Frank framework and ideas, but would exempt some smaller banks from being held up to the regulation of larger banks. The bill does allow the Federal Reserve to have discretion to regulate smaller banks if necessary.