Economic and Financial Crisis   Tags: economy  

2009

The American Recovery and Reinvestment Act 2009 (Pub. L.111-5) was signed into law by President Obama on Feb 17, 2009. The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.

On March 1, 2009, the federal government agreed to provide an additional $30 billion to A.I.G. to loosen the terms of its huge loan to the insurer. The intervention would be the fourth time the United States has had to help A.I.G. stay clear of bankruptcy. The government owns nearly 80 percent of the A.I.G.’s holding as a result of earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.

On March 15, A.I.G. became the target of widespread outrage after it was revealed a paid $165 million in bonuses to executives of the trading unit that had caused its collapse. President Obama ordered the Treasury to see if the payments could be blocked or recovered.

On March 18, at a highly charged Congressional hearing, Edward M. Liddy, A.I.G.’s chief executive, agreed asking employees making more than $100,000 a year who had shared in the bonus payout to give half the money back.

On March 19, being urged by overrun public anger, the House of Representatives voted 328 to 93 to get back most of the money by levying a 90 percent tax on bonuses paid by any company accepting more than $5 billion in bailout funds.  Senate action was pending.

On Apr 2, the G-20 (the Group of Twenty Finance Ministers and Central Bank Governors) from 20 countries (19 from the European Union) had a summit in Europe and agreed to plan $1 trillion to fight Global Economic Crisis.

On May 20, the Congress passed the Credit Cardholders' Bill of Rights Act of 2009 to amend the Truth in Lending Act. The bill was then signed by President Obama to become a new law on May 22, bringing changes in early 2010 to restrict unpopular banking practices.

As a stimulus package, a "Car Allowance Rebate System (C.A.R.S.) program, which President Obama signed into law on Jun 25, pays consumers up to $4,500 in credit for trading in their cars or trucks for those that are more fuel efficient. The law allocates $1 billion for the program. This program gained popularity that Cash for Clunkers program burned through its initial $1 billion in funding in its first week. On Aug 7, President Barack Obama signed a bill to approve an additional $2 billion for the extension of this popular program. This program stopped on August 25, 2009.

On October 29, an increase in GDP at a 3.5 percent in the third quarter reported by the government, indicated a sign of ending a string of declines over four quarters since the Recession.

On Nov 5, the government-controlled mortgage enterprise, Fannie Mae announced a program giving borrowers on the verge of foreclosure the option of renting their homes for a year.  A bill extends unemployment benefits by up to 20 weeks was signed into law by President Obama on Nov 6.  Legislation also extended the $8,000 tax credit for new homebuyers to April 2010 and created a $6,500 credit for those who buy a home after living in their current house at least five years.

On Dec 3, President Obama called on business leaders to help the administration kickstart hiring as policymakers contend with rising unemployment that's weighing down the economy. President Obama also urged banks to make 'extraordinary commitment' to help economy in a White House meeting on Dec 14.

2008

On Feb 13, the Economic Stimulus Act of 2008 (Pub. L.110-185, 122 Stat, 613) was signed into law by President Bush on demand of the democratic and independent parties as well as a minority of the republican party for several kinds of economic stimuli intended to boost the economy in 2008 to avert a recession or ameliorate economic conditions. 

In Mar, the collapse of two hedge funds owned by Bear Stearns, which invested heavily in the sub-prime market. Bear Stearns filed bankruptcy and being sold to JP Morgan Chase. 

On July 12, Pasadena-based IndyMac Bank, the second largest bank failure till year 2008 in terms of total assets in U.S. history, was taken control by Federal Government. 

In August, stock prices of government-sponsored entities Fannie Mae and Freddie Mac slid sharply.  On Sep 7, the Treasury Department announced the taking over of them.

On Sept. 12, Lehman Brothers was in financial trouble.  Top government and finance officials set up meetings to fend off bankruptcy for Lehman Brothers. The talks fell apart and the government officials refused to step in and salvage Lehman as it had before for Bear. Lehman’s failure caused significant consequences on the global banking system, as became apparent in the following weeks. In order to avoid a similar fate, Merrill Lynch sold itself to the Bank of America.

On Sept. 16, American International Group, the largest insurance company in the United States collapsed under the weight of bad debts it make insuring mortgage-backed securities known as credit default swaps, was bailed out by the Fed in an $85 billion deal.  Even after that $85 billion infusion, stock price dropped anyway, falling nearly 500 points and losses continued to mount and in November the Treasury announced a new rescue package that brought the total cost to $150 billion.

On Sept. 18, Treasury Secretary Henry M. Paulson Jr. publicly announced a three-page, $700 billion proposal that would allow the government to buy toxic assets from the nation’s biggest banks as to restore consumer confidence within the financial system.

On September 25, the United States government seized Washington Mutual Bank from Washington Mutual, Inc. and placed it under the Federal Deposit Insurance Corporation (FDIC).  The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which reopened the bank's offices as JPMorgan Chase branches.  Washington Mutual Inc. filed for Chapter 11 voluntary bankruptcy in Delaware on September 26.

Congress eventually amended the plan to add limits on executive pay and the option of the government taking a stake in the companies it bails out. Still, many Americans were angered by the idea of a proposal that provided billions of taxpayer dollars to Wall Street banks, which many believed had caused the crisis in the first place. Lawmakers with strong beliefs in free markets also opposed the bill as it amounted to socialism.

On Sept. 29, the House rejected the proposal, 228 to 205, with an insurgent group of Republicans leading the opposition. Stocks plunged, with the Standard & Poor’s 500-stock index losing nearly 9 percent, its worst day since Oct. 19, 1987.

Negotiations started again on Capitol Hill. A series of tax breaks were added to the legislation and the Senate passed a revised version Oct. 1 by a large margin, 74 to 25. The House followed suit, by a vote of 263 to 171.  President Bush signed the Emergency Economic Stabilization Act of 2008, commonly known as a bailout of the U.S. financial system, on Oct 3, 2008. The fundamental component of the Act, the Troubled Assets Relief Program ("TARP"),  gave broad authority to the Secretary of the Treasury to purchase troubled assets. 

Losses from the investments and the effect of the tightening credit spiral being felt on Wall Street began to put a growing number of European institutions in danger. Over the weekend that followed the bailout’s passage, the German government moved to guarantee all private savings accounts in the country, and bailouts were arranged for a large German lender and a major European financial company.

GDP of year 2008

2007

In March, the sub-prime mortgage industry collapsed triggered by a higher-than-expected mortgage dlinquencies and home foreclosures, ended with 25 and more sub-prime lenders declaring bankruptcy. 

The National Bureau of Economic Research declared U.S. has been in a recession since December 2007. 

GDP of the year 2007

2006

The House Market slide further.  The U.S. Economy in Review indicated a slow down in economy in this year. 

GDP of the year 2006

2005

Real Estate cooled down considerably in the 2nd quarter of the year. 

Housing market slowed down has an effect on the economy. 

New Bankruptcy Law was also in effective. 

GDP of the year 2005