Washington - The crisis in world financial markets has its roots in declining home values in the US real estate market which began in late 2006 and led to a wave of foreclosures and defaults on home loans. The loans, many to borrowers with poor credit, were bundled into assets that began to way heavily on banks' balance sheets around the world.
Earlier efforts to assist homeowners, and the sale of several major financial institutions did little to stem the flood, and the international crisis rapidly expanded after the fall of financial giant Lehman Brothers in September.
Banks worldwide may be forced to writedown a total of 1.4 trillion dollars in assets by the end of the year, according to the International Monetary Fund.
Here is a chronology of major events this year:
- January 2008: Bank of America acquires Countrywide Financial, the biggest US mortgage lender. US Federal Reserve slashes interest rates twice.
- March 2008: On the verge of collapse and under pressure by the Fed, Bear Stearns is forced to accept a buyout by US investment bank JP Morgan Chase. The deal is backed by Fed loans of 30 billion dollars.
In Germany, Deutsche Bank reports a loss of 141 million euros for the first quarter of 2008, its first quarterly loss in five years. Fed spearheads coordinated push by world central banks to bolster global economic confidence by announcing moves to pump 200-billion- dollar liquidity into markets.
US frees up another 200 billion dollars to back troubled Fannie Mae and Freddie Mac.
- April 2008: G7 ministers agree to new wave of financial regulation to combat protracted financial crisis.
- July 2008: California mortgage lender IndyMac collapses. US Treasury, Fed move to guarantee debts of Fannie, Freddie. US Congress gives final passage to multi-billion-dollar programme to address mortgage and foreclosure crisis.
Spain's largest property developer, Martinsa-Fadesa, declares insolvency.
- September 7: US government seizes control of Fannie, Freddie in 200-billion-dollar bail-out.
- September 15: Lehman Brothers investment bank declares 600- billion-dollar bankruptcy. Merrill Lynch acquired by Bank of America.
- September 17: US bails out AIG insurance giant for 85 billion dollars.
- September 19: White House requests 700-billion-dollar bail-out plan from Congress for all financial firms with bad mortgage securities to free up tightening credit flow.
- September 22: Last two standing investment banks, Morgan Stanley and Goldman Sachs, convert to bank holding companies.
- September 26: Feds seize Washington Mutual in largest-ever US bank failure.
- September 29: US House of Representatives rejects mammoth 700- billion-dollar bail-out plan.
- September 29: Governmental bail-outs announced for key banks in Britain, the Benelux and Germany as well as a state takeover of a bank in Iceland.
- October 1, 2008: US Senate adopts massive bail-out plan, adding sweeteners to get House acceptance.
- October 3: Wells Fargo bank and the fourth-largest US bank Wachovia Corp announce merger.
- October 3: The largest government intervention in capital markets in US history clears the US House of Representatives, becoming law with signature by President Bush.
- October 11: G7 finance ministers gather for talks in Washington, agree to use all available tools to address crisis.
- October 15: European Union leaders guarantee inter-bank lending.
- October 29: US Federal Reserve slashes interest rates by 0.5 percentage points to 1 per cent, the lowest level since June 2004.
- October 30: Japan announces 26.9-trillion-yen (276.33-billion- dollar) stimulus package, including 2 trillion yen in financial assistance for all households to jump-start consumption and up to 6 million yen in tax breaks for housing loans for 10 years.
International Monetary Fund approves a new programme to provide emergency loans to countries facing serious cash shortages.
- November 3: Eurozone finance ministers meet, rule out stimulus package.
- November 4: Economic woes help propel Democrat Barack Obama to presidency in US elections.
- November 6: The European Central Bank and Bank of England announce coordinated rate cut. IMF predicts global recession for 2009.
- November 8: G20 finance ministers meeting in Sao Paulo.
- November 9: China announces 4-trillion-yuan (588-billion-dollar) economic stimulus package.
- November 10: US government invest an additional 40 billion dollars in AIG in exchange for preferred stock in the insurer.
- November 15: Leaders of G-20 nations to gather in Washington to discuss world financial situation.
