Newsletter - Supplement 2008 / 2009

Panic of 2007 - 2009

Narrative of facts causing the Financial Crisis

2007-09 Housing bubble / Credit Market panic
2000-01 Dot.com crash / September 11 tragedy
1997-98 Asian Financial crisis
Thailand, Indonesia, Hong Kong, Malaysia, Taiwan, South Korea, Vietnam, Laos and the Philippines.
Also: Colombia, Ecuador, El Salvador
1994-95 Mexican Tequila crisis
Mexico, Argentina, Brazil, Bolivia, Ecuador, and Paraguay.
Also: Azerbaijan, Croatia, Cameroon, Lithuania and Swaziland
1990 Oil / Gulf War recession
1989-90 Japanese Bubble Economy crash
7 banks nationalized, 61 financial institutions closed and 28 institutions merged.
Also: Czech Republic, Finland, Greece, Sweden,
as well as: Algeria, Brazil, Egypt, Georgia, Hungary, Poland, Romania and Slovak Republic
1987 Stock Market crash
1982-84 U.S. Savings and Loan crisis
1400 Savings & Loan and 1300 Bank failures between 1984-91
1979-82 Latin American crisis
Argentina, Brazil, and Mexico.
Also: Chile, Colombia, Congo, Ecuador, Egypt, Ghana, the Philippines, Turkey, and Uruguay
1973-74 Arab Oil embargo recession

1929 Stock Market crash
9,100 U.S. banks failed between 1931-34
1907 U.S. Bank panic
1873 German Founding Epoch crisis
1720 British South Sea bubble
1719-20 France / Mississippi Company scheme
1637-1638 Dutch Tulipmania bubble

Average panic equity fall 56%, Average panic housing fall 35%

Sovereign Debt external default: Dec 2006 Belize $242 million, Apr 2005 Dominican Republic $1.622 billion, May 2003 Uruguay $5.744 billion, Jun 2002 Moldova $145 million, Nov 2001 Argentina $82.268 billion (National bank run), Sep 2000 Peru $4.870 billion, Jan 2000 Ukraine $1.064 billion, Aug 1999 Ecuador $6.604 billion, Jul 1999 Pakistan $1.627 billion, Sep 1998 Ukraine $1.271 billion, Aug 1998 Russia $72.709 billion (720 banks), and Jul 1998 Venezuela $270 million

SUBPRIME MORTGAGES and BANKS

1993 - Housing and Community Development Act of 1992 creates the Office of Federal Housing Enterprise Oversight (OFHEO) to supervise Fannie Mae and Freddie Mac and removes regulatory barriers to affordable housing. OFHEO eliminated (September 2008) by creation of Federal Housing Finance Agency (FHFA) when Fannie Mae and Freddie Mac failed and were placed into conservatorship.

1994 - Henry Cisneros, HUD (Department of Housing and Urban Development) Omnibus Budget Reconciliation Act of 1993 "1993 Housing Act", modifications of existing housing programs, loosened FHA mortgage restrictions thereby allowing first-time home buyers to qualify for loans they could not have previously qualified.

1994 Subprime loans below $35 billion in 1994.

1995 - Henry Cisneros HUD, Multifamily Housing Property Disposition Reform Act of 1994, changes loan guarantees, Fannie Mae and Freddie Mac begin receiving affordable housing credit for purchasing FHA mortgage-backed securities (which included loans to low-income borrowers). GSE agencies begin purchasing subprime mortgage securities.

2000-05 Interest rates - Greenspan's Fed Funds rate rose to 6.5% (to offset the Millenium scare) then dropped to 1% (from Jun 25, '03 - Jun 30, '04) to fight the Dot.com crash and 9/11 attack. Nasdaq peaked at 5,132.52 (Mar 10, 2000) then falls to 1,253 (Mar 12, 2003) - a 77% decline.

August 17, 2007 Housing bubble pops - Bernanke's Emergency (inter-meeting) Federal Reserve cuts the 'discount rate' to 5.75% from 6.25%. September 18 - Fed Funds rate lowered 50 basis points to 4.75% from 5.25% and the 'discount rate' to 5.25% from 5.75%.

2007 Subprime loans peak at $1.9 trillion of $12 trillion of U.S. mortgages, 15% of U.S. Mortgages. $35 billion in 1994, $95 billion in 1996, $160 billion in 1999, $600 billion in 2006.

July 2008 failing non-prime U.S. mortgages - the Federal Reserve issues new regulations for mortgage lenders.

September 2008 FHFA (Federal Housing Finance Agency) places Fannie Mae (Herb Allison) and Freddie Mac (David Moffett) into conservatorship. Fannie Mae and Freddie Mac guarantee or hold 10.5 million nonprime loans worth $1.6 trillion (1/3 of all subprime loans and nearly 2/3 Alt-A loans). Non-prime loans make up 1/3 of the total single-family mortgage portfolios at Fannie Mae and Freddie Mac (linking them to 8 million - 16% of future foreclosures), as of 12/08.

1) Countrywide Financial (January 11, 2008) fails and is purchased by Bank of America for $4.1 billion.
2) IndyMac Bancorp (July 11, 2008) fails and is seized from imminent failure by the Office of Thrift Supervision and files for bankruptcy with $33 billion of assets (exceeding Continental Illinois, $9.5 billion in 1984) costing the FDIC $10.7 billion.
3) Fannie Mae and Freddie Mac (FHFA, September 7, 2008) fail and are placed into conservatorship by the Federal Housing Finance Agency. Interest and principal payments will continue to their companies' securitized bonds and subordinated debt. The Treasury through senior preferred stock and warrants now has 79.9% ownership of each agency.
4) Lehman Brothers Holdings (September 15, 2008) files largest U.S. bankruptcy, $639 billion - passing WorldCom which filed for bankruptcy (7/21/02 at $103.9 billion).
5) AIG (September 16, 2008) fails with $1.1 trillion assets (74 million clients in 130 countries) and receives an $85 billion Federal Reserve emergency loan (total authorized assistance of $182.3 billion) in return for relinquishing 79.9% ownership in the company.
6) Washington Mutual (September 26, 2008) seized by Federal regulators and files largest U.S. bank bankruptcy, $327.9 billion - sold to J.P. Morgan Chase for $1.9 billion, 2nd largest bankruptcy in U.S. history.
7) Wachovia (October 12, 2008) fails and is purchased by Wells Fargo (as Citigroup exits) in an $11.7 billion all-stock offering.
8) Hedge funds 1,471 in 2008 close - 15% of the industry, the average hedge fund's performance lost 19.0%.
9) Citigroup (February 27, 2009) agrees to convert $25 billion of preferred stock (debt from Treasury's TARP) into common shares, 33.6% ownership, approved on Sept. 3, 2009.
10) Thornburg Mortgage (May 1, 2009) files for bankruptcy - 8th largest in U.S. history $36.5 billion.
11) GMAC Financial Services (May 21, 2009) receives a total amount of government aid $16.3 billion - U.S. government's ownership is 56%.
12) CIT Group (November 1, 2009) files fifth-largest bankruptcy in U.S. history $71 billion in assets and $64.9 billion in debt, one of the U.S.'s largest small-business lenders.


In 2007, 3 banks fail at a cost to the FDIC fund of $120 million - and 3 Credit Unions.
In 2008, 25 banks fail at a cost to the FDIC fund of $17.6 billion - and 15 Credit Unions.
In 2009, 140 banks fail at a cost to the FDIC fund of over $30 billion - and 31 Credit Unions.
In 2010, 27 banks fail and 1 Credit Unions (costing FDIC less than $1 billion), as of 3/12/10.

Federal Deposit Insurance Corporation (FDIC) directly examines and supervises about 8,160 banks and savings banks for operational safety and soundness, more than half of the institutions in the banking system.

National Credit Union Administration (NCUA) supervises and insures over 7,329 federal credit unions and 4,538 state-chartered credit unions.

Great Depression (1931-34) about 9,100 banks failed - 1/3 of U.S. banks, 1860 U.S. banks failed between Aug 1931 - Jan 1932.
- Savings & Loan crisis (1984-91) 1400 Savings & Loan and 1300 Banks failed - 5% of U.S. banks, 818 banks failed between 1988-92 (peaked at 534 banks in 1989). From 1986-95, 1,043 savings banks with over $500 billion in assets failed, costing taxpayers $75.6 billion. The Resolution Trust Corporation operated from 1989-95 and took over 747 savings institutions with $394 billion of assets.

FDIC insurance will charge the healthiest banks $0.12 for every $100 of insured deposits, up from $0.05. More troubled banks will pay a premiums of $0.50 per $100 of deposits up from $0.43, as of Jan 1, 2009.

Record 20.4 million of 131 million U.S. houses, condos, and co-ops stood empty, as of March 31, 2009, including properties for sale and for rent. 23% of the 93 million single-family homes have loans higher than their properties are worth (negative equity rose to 23% 2Q09) - losing over $3.4 trillion in value.

Re-default rates according to the Office of the Comptroller of the Currency and the Office of Thrift Supervision - 50% mortgage modifications fail within 6 months. Of 950,000 loan modifications for 2008 about 2.2 million foreclosures will have been prevented in 2008 - 3 million prevented since the program began in 2007, as of 12/08. Underwater borrowers / negative equity in Michigan (39%), Arizona (29.2%), Florida (29.2%) and California (27.4%), as of 9/08 - 3.2 million foreclosures in 2008.

2009 foreclosure filings (default notices, auction sale notices and bank repossessions) reach a record 2.82 million, up from 2.3 million in 2008 - while 2.21% of all U.S. housing units (received at least 1 foreclosure filing during the year) in 2008 1.84%, in 2007 1.03% and 0.58% in 2006. Median price of an existing single-family house fell 15.6% to $174,100, the most on record (back to 1979).

Real estate prices fall - S&P/Case-Shiller 20 cities high of 206.52 (July 2006) falls to 139.21 (April 2009) - down 37.4%.

Commercial real estate, 2009 - $1.8 trillion of outstanding commercial mortgages faces higher vacancies and financing rates.

FBI mortgage related fraud reports/pending cases 17,127/534 (2004), 21,994/721 (2005), 35,617/881 (2006), 46,717/1,204 (2007), 63,713/1,644 (2008) and 70,000/2,346 (2009). FBI opened more than 2,100 securities fraud investigations in 2009, up from 1,750 in 2008.

U.S. 2009 gdp - US economy contracts -2.4% (worst since 1946) - though grows by 2.2% in the 3Q09 and 5.9% in the 4Q09. Following U.S. gdp of 3Q08 -2.7%, 4Q08 -5.4%, 1Q09 -6.4%, 2Q09 -0.7% (first time since the 1930's that the US has suffered 4 consecutive quarters of declining gdp). From 1929-2008, the average annual gdp was 3.4% and from 1997-2008, the average annual gdp was 2.8%.

U.S. Household wealth falls from $65 trillion (3rd quarter of 2007) to $53 trillion (1st quarter of 2009)



CREDIT DEFAULT SWAPS and OTC DERIVATIVES

February 6, 1994, Procter & Gamble sues Bankers Trust for $195 million in damages claiming that BT's unregulated OTC derivatives deals cost P&G millions in bad investments.

December 1998, Congress dissuaded by Clinton administration advisers (Robert Rubin, Larry Summers, Alan Greenspan and Arthur Levitt) rejects Brooksley Born's Commodity Futures Trading Commission's recommendation to regulate OTC derivatives.

January 19, 1999, Chairperson Brooksley Born of the CFTC resigns forced out by Clinton administration advisers Robert Rubin, Larry Summers, Alan Greenspan and Arthur Levitt after her attempts since May 1998 to regulate OTC derivative markets.

December 21, 2000, Clinton signs the Commodity Futures Modernization Act of 2000 - deregulating credit default swaps, the "Enron loophole".

$62 trillion (notional value/gross exposure, through tear-ups $33 trillion) credit-default swaps. N.Y. Fed takes the lead in organizing this market defining them in September 2008 as an insurance product and organizes clearing. The Bank for International Settlements cites the total outstanding notional amount of OTC derivatives at $596 trillion (December 2007) - $458 trillion are interest rate derivatives.

Sub-prime linked assets, CDS/CMO and OTC derivatives cause losses and failures:

1) Long Term Capital Management seized (September 23, 1998) by the Federal Reserve Bank of New York and bailed out by major banks which injected $3.625 billion. LTCM lost $4.6 billion as their equity fell from $4.7 billion to $600 million - assets (including notional derivative positions) exceeded $1.25 trillion (leverage exceed 250:1).
2) Enron files bankruptcy (December 2, 2001) assets of $63.4 billion the largest U.S. Bankruptcy - the "Enron loophole". Enron's energy trading activities forced Pacific Gas & Electric into bankruptcy. Arthur Andersen's firm was closed because of the scandal. Enron's accounting practices resulted in the Sarbanes-Oxley Act of 2002.
3) Bear Stearns fails, the 5th largest U.S. investment bank (March 17, 2008) is purchased by JP Morgan Chase for $10 (down from $172, 2007) the Fed intervenes (non-recourse loan of $29 billion).
4) Lehman Brothers fails, the 4th largest U.S. investment bank (September 15, 2008) files for the largest U.S. Bankruptcy, listed total debts of $639 billion.
5 - Merrill Lynch fails, the 3rd largest U.S. investment bank (September 14, 2008) is purchased by Bank of America for $50 billion.
6) AIG fails (September 16, 2008) with $1.1 trillion assets and 74 million clients in 130 countries subsequently receiving an $85 billion emergency U.S. Federal Reserve loan (total authorized assistance of $182.3 billion) - consequently relinquishes 79.9% percent ownership in the company.

International Derivatives Clearing Group, LLC (IDCG), subsidiary of NASDAQ OMX Group, started clearing over-the-counter interest-rate swap contracts on December 29, 2008 - $458 trillion (notional value/gross exposure) of interest rate derivatives.

ICE US Trust LLC, Intercontinental Exchange's entity, started clearing contracts on March 9, 2009 - before the CME Group (NYSE Euronext), Eurex AG and LCH.Clearnet Group Limited - $27 trillion (notional value/gross exposure) of credit-default swaps.



AUTOMOTIVE RESCUES

Chrysler Group, LLC files Chapter 11 bankruptcy, April 30, 2009, $39 billion, 7th largest bankruptcy in U.S. history - Cerberus Capital Management, Daimler, U.S. Treasury, UAW and other creditors will reorganize. Chrysler Group exits bankruptcy in 42 days, closing 8 factories and 789 dealerships, with $6.6 billion in exit financing from the US government (in addition to $4.5 billion). Chrysler is owned by the UAW union trust 55%, Fiat SpA 20% (rising to 35% and 51%), the U.S. government 23% (falling to 8%) and the Canada government 2% - secured bondholders get about $0.29 while the Indiana pension funds get up to $0.72.

General Motors Company files Chapter 11 bankruptcy, June 1, 2009, $91 billion, 4th largest bankruptcy in U.S. history - U.S. Treasury, Canadian government, UAW, old GM bondholders and other creditors will reorganize. General Motors exits bankruptcy in 40 days, closing 13 factories and 2,300 dealerships with $30 billion in exit financing from the US government (in addition to $19.4 billion). General Motors Co. is owned by the U.S. government 60.8%, the Canada and Ontario governments 11.7%, the UAW retiree medical benefits trusts 17.5% and the remaining 10% owned by Motors Liquidation (the old GM) to pay off creditors and unsecured bondholders. Pontiac division, first produced in 1926 - closed. General Motors sells Saab to Spyker (not Koenigsegg) for $74 million in cash and $326 million in preferred shares. Opel and Vauxhall brands, European GM, will be purchased by Magna International (Canadian parts supplier with €1.5bn in credit guarantees from the German government) - not sold. Penske Automotive Group to buy Saturn - canceled. Sichuan Tengzhong Heavy Industrial Machinery Co. to buy Hummer - canceled.



PRICE INFLATION caused by CHEAP MONEY (low interest rates)

Commodity bubble pops:

> Gold $255 (Apr '01) - $1033.90 (Mar 17 '08) - and $681 (Oct 23 '08) a 34.1% decline.
> Silver $4.54 (Jan '03) - $21.44 (Mar 17 '08) - and $9.09 (Oct 24 '08) a 57.6% decline.
> Platinum $406 (Oct '01) - $2308.80 (Mar 4 '08) - and $752.10 (Oct 27 '08) a 67.4% decline.
> Copper $0.60 (Nov '01) - $4.26 lbs. (May 5 '08) - and $1.25 (Dec 26 '08) a 70.6% decline.

> Oil $10 (Dec '98) - $147.27 (July 11 '08) - and $32.40 (Dec 19 '08) a 78% decline.
> CRB $184 (Nov '01) - $618 (July 2 '08) - and $327.50 (Dec 5 '08), Reuters Commodity Research Bureau Index of 17 commodities (1967=100, 9/74=226.80, 2/75=175.90, 11/80=334.80, 2/99=182.95), a 47% decline.

> Wheat from $4.12 (Apr '07) to $13.49 (Feb 17 '08) - and $4.71 (Dec 5 '08) a 65% decline.
> Corn from $2.22 (Sep '06) to $7.79 (Jun 27 '08) - and $3.05 (Dec 5 '08) a 60.8% decline.
> Rice from $6.18 (Jul '05) to $24.35 (Apr 18 '08) - and $11.19 (Mar 16 '09) a 54% decline.
> Soybeans from $6.00 (Oct '06) to $16.60 (Jun 27 '08) - and $7.76 (Dec 5 '08) a 53.2% decline.

- U.S. Dollar, eur:usd $0.8228 (Oct 26, 2000) depreciates to $1.6038 (July 15 '08) a 95% decline. Rallies to $1.2326 (Oct 27 '08) up 22% in 3 month.

- 1 month Treasury trades -0.091% (12/4/08) and trades below 0% (December 5, 8-11, 15, 16, 24, 26 2008 and 3/26/09).
- 3 month Treasury trades -0.041% (12/4/08) and trades below 0% (December 8-11, 15, 16, 24 & 26 2008 and 11/19/09) first time since the U.S. began selling them in 1929.
- 6 month Treasury trades 0.11% (11/19/09) lowest since 1958.
- 10yr Treasury trades 2.035% (12/18/08) rallying from 4.32% (Jun 13 '08) yield down 52.8% in 6 months, the lowest yield in its 46-year history. Yields rise from 2.035% (12/18/08) to 4.00% (6/11/09). 10yr Treasury has its biggest 1 day rally (3/18/09) since 1962 rallying from 3.01% to 2.46%, yield down 18.2%.
- 2yr-10yr Treasury spread widens to a record 2.88% (12/22/09) and 2.93% (2/18/10) steepening the U.S. Treasury yield curve - spread was a record 2.74%, Aug. 13, 2003.

3 month LIBOR-OIS spread trades below 7.6 bps 12/15/09.
TED spread trades below 16 bps 9/10/09.
LIBOR trades below 25 bps 12/21/09.
VIX trades below 20, 12/22/09.




SEC and OVERSIGHT

April 28, 2004, SEC's William H. Donaldson - 'net capital rule' for the 5 big independent investment firms is loosened (allowing Bear Stearns leverage rise to 35.5 to 1) though oversight and risk audits are mandated.

March 2007, SEC's Christopher Cox - evicerates the oversight office for the 5 big independent investment firms (under April 28, 2004, SEC ruling 'net capital rule') leaving their risk management office with no director and dismantled.

July 6, 2007, SEC's Christopher Cox - "short sale price test" under the Securities Exchange Act of 1934, the 'tick test rule' is repealed.

November 15, 2007 - FASB 157 Fair Value Measurements, mark-to-market, Financial Accounting Standards Board interpretation of July 30, 2002 - Sarbanes-Oxley Act enforced.

July 21, 2008 - SEC issues an emergency rule (July 21 - August 12) to limit naked-short selling in 19 major financial firms.

Sep 19, 2008 - SEC halts short selling of Financial stocks (Sep 19, effective immediately) protecting 799 financial companies - through Oct 2. SEC extends short selling ban of Financial stocks protecting 950 financial companies - through Oct 8.

Sep 19, 2008 - SEC's failure of U.S. Money market mutual funds (covered under the Securities Exchange Act of 1934) $3.5 trillion 'uninsured'. Paulson's Treasury uses his authority to protect Money market mutual funds with insurance (using a $50 billion Treasury fund) - as they 'broke the buck'.

Sep 19, 2008 - SEC lack of oversight of Hedge funds (covered under the Investment Company Act of 1940) $2-3 trillion engage in naked-shorting - 'voluntary regulation'. Short selling by Hedge funds of $100 million must now report positions to the SEC.

Dec 11, 2008 - SEC charges Bernard L. Madoff with securities fraud for a $65 billion dollar Ponzi scheme.

February 17, 2009 - SEC charges Robert A. Stanford for a fraudulent $7 billion CD / Ponzi scheme.

March 23, 2009 - U.S. Treasury and Federal Reserve agree on the Fed's responsibilities as the US exits the recession and removes liquidity from the system: 1). Treasury-Federal Reserve cooperation in improving the functioning of credit markets and fostering financial stability, 2). The Federal Reserve to avoid credit risk and credit allocation, 3). Need to preserve monetary stability, and 4). Need for a comprehensive resolution regime for systemically critical financial institutions.

April 2, 2009 - FASB (Financial Accounting Standards Board) loosens fair value rules (from mark-to-market) to cash flows and other factors for "distressed assets".

May 18, 2009 - FASB requires off-balance-sheet loans (qualifying "special purpose entities") to be reported - which may result in the nation's 19 largest banks reporting $900 billion in previously unrecognized assets and liabilities (requiring an increase of capital reserves).

September 17, 2009 - SEC rules 'Naked' Short-Selling ends - requiring that brokers must promptly buy or borrow securities to deliver on a short sale.

February 24, 2010 - SEC restricts short sales once a stock falls 10% from the previous day's closing price - then one can only execute a short sale at a price above the market's best bid (an uptick). The curb stays in place through the following day.



CAPITAL MARKET LOSES

Global Markets fall from $62.6 trillion [10/31/07] to $25.5 trillion [Mar 9 '09] losing $37.1 trillion or 59.2%:

DJIA falls 54.6% from 14,279 to 6,469.95 [10/11/07 - Mar 6 '09]
S&P 500 falls 57.7% from 1,576 to 666.79 [10/11/07 - Mar 6 '09]
NASDAQ falls 55.7% from 2,861 to 1,265.52 [10/31/07 - Mar 9 '09].

MSCI Europe Index falls 61.8% from 1,388 to 529 [7/13/07 - Mar 9 '09]
MSCI Pacific Index falls 59.5% from 173.1 to 70.13 [11/1/07 - Mar 10 '09]
S&P Latin America 40 falls 68.2% from 5,862 to 1,862.84 [5/20/08 - Nov 20, 2008]
S&P Emerging Middle East & Africa falls 52% from 307.73 to 146.30 [11/7/07 - Mar 9, 2009]
S&P BRIC falls 71% from 466.90 to 135.25 [10/31/07 - Oct 27, 2008]

Japan's NIKKEI Index falls from 18,297 [6/20/07] to 6,994.90 Oct 28, 2008 - a 61.7% fall.
Germany's DAX Index falls from 8,131 [6/20/07] to 3,588.89 Mar 9 '09 - a 55.8% fall.
Britain's FTSE Index falls from 6,754 [7/13/07] to 3,460.71 Mar 9 '09 - a 48.7% fall.
France's CAC Index falls from 6,168 [6/1/07] to 2,465.46 Mar 9 '09 - a 60.0% fall.
Canada's TSX Index falls from 15,154 [6/6/08] to 7,479.96 Mar 6 '09 - a 50.6% fall.

Brazil's BOVESPA Index falls from 73,920 [5/29/08] to 29,435 Oct 27, 2008 - a 60.1% fall.
Russia's RTS Index falls from 2,498 [5/19/08] to 492.59 Jan 23 '09 - a 80.3% fall.
India's Bombay SENSEX Index falls from 21,113 [1/9/08] to 7,697.39 Oct 27, 2008 - a 63.5% fall.
Shanghai Composite falls 72.8% from 6,124 (Oct 16 '07) to 1,664 Oct 28, 2008 in 1 year - last year the Shanghai Composite was the best performer up 161%.

> US dollar - up 27.5% in 1 year:
70.80 on March 17, 2008 to 90.30 on Mar 4 '09.
> Japanese yen, jpy:usd - up 30.0% in 19 months:
$0.008059/124.09 on June 22, 2007 to $0.01149/87.0 on Jan 21, 2009.
*Yen fell 20.6% from 3/17/08 to 8/15/08 and 14.7% from 1/21/09 to 4/7/09
> Chinese yuan/renminbi, cny:usd - up 18.0% in 3 years:
$0.121/8.27 on July 21, 2005 to $0.147/6.78 on Aug 26, 2008.

> Euro, eur:usd - down 23.1% in 3 months:
$1.60/.625 on Jul 15, 2008 to $1.23/.813 on Oct 27, 2008.
> British Pound, gbp:usd - down 35.6% in 14 months:
$2.11/.474 on Nov 8, 2007 to $1.36/.736 on Jan 23 '09.
> Canadian Dollar, cad:usd - down 30.4% in 16 months:
$1.10/.909 on Nov 7, 2007 to $0.766/1.304 on Mar 9 '09.
> Indian Rupee, inr:usd - down 34.0% in 11 months:
$0.025/39.1 on Feb 1, 2008 to $0.019/52.4 on Mar 3 '09.
> Russian Ruble, rub:usd - down 56.9% in 7 months:
$0.043/23.2 on Jul 11, 2008 to $0.027/36.4 on Feb 18 '09.



U.S. and GLOBAL FIXES

Aug '07 - Emergency FOMC inter-meeting cut 8/17 - the 'discount rate' to 5.75% from 6.25% citing tighter credit and shaken financial markets. Central banks in the U.S., Europe and Asia had injected more then $400 billion (Aug 9-16) into the banking system providing liquidity to global credit markets. By the October 29th meeting - Fed Funds rate cut to 1.00% and the Discount rate is cut to 1.25%.

Dec '07 - U.S. Mortgage lenders have agreed to freeze the interest rates on adjustable-rate (subprime) mortgages for 5 years for mortgages written between January 2005 and July 2007 - FHASecure also offers relief to borrowers.

> Federal Reserve announces an agreement with the European Central Bank, Bank of England, Bank of Canada and the Swiss National Bank creating a (temporary) auction facility (establishing temporary swap arrangements) providing reserves for up to 6 months - to "help promote the efficient dissemination of liquidity" when other lines of credit are "under stress."

> European Central Bank (ECB, Dec 17) injects a record €348.6b Euro ($501.5 billion) lending (unlimited) to all banks submiting bids of at least 4.21% for 2-week funds at its weekly refinancing auction.

Jan '08 - Countrywide Financial is purchased by Bank of America for $4.1 billion.

Feb '08 - $168 billion Stimulus plan signed into law - Tax rebates (to over 130 million Americans), Business tax breaks and Housing provisions (Fannie Mae and Freddie Mac may temporarily purchase mortgages up to $793,000 up from $417,000 while the FHA can insure loans for up to $729,000).

Mar '08 - Bear Stearns is purchased by JP Morgan Chase for $10 (down from $172, 2007) - the Fed intervenes (non-recourse loan of $29 billion) in the protection of investment banking for the first time since the 1930s.

Apr '08 - Bank of England (BOE) follows Fed's lead with $100 billion swap of mortgage securities for BOE government bonds - the move is to encourage credit markets and bank lending.

Jul '08 - Housing bill signed into law: creating the FHFA (Federal Housing Finance Agency, GSE's regulator) for Fannie Mae and Freddie Mac (increasing limits to $625,500 from $417,000), modernizes/authorizes the FHA to insure up to $300 billion in refinanced mortgages, creates an affordable housing trust fund and $15 billion of home buyer's tax credits (States can offer an additional $11 billion to refinance subprime loans while increasing down payments to 3.5% from 3%) and grants $3.9 billion to buy and rehabilitate foreclosed homes.

> The Fed allows GSEs (government sponsored enterprises) Fannie Mae and Freddie Mac access to their discount window - they guarantee $5.4 of $12 trillion of U.S. mortgages.

> SEC issues an emergency rule (July 21 - August 12) to limit naked short selling in 19 major financial firms - the 'tick test rule' was repealed on July 6, 2007.

> Federal Reserve's new regulations for mortgage lenders: banning repayment penalties, prohibiting lenders from issuing loans to borrowers that cannot repay while requiring the verification of their incomes and assets, and requiring escrow accounts for property taxes and homeowner's insurance, as well as: actual appraisal of a home's value and good faith lending practices.

> IndyMac Bancorp (July 11, 2008) is seized from imminent failure by the Office of Thrift Supervision and files for bankruptcy with $33 billion of assets (exceeding Continental Illinois, $9.5 billion in 1984) costing the FDIC $10.7 billion.

Aug '08 - UBS agrees to buy back $18.6 billion in failed auction-rate securities, Merrill Lynch agrees to $12 billion, Wachovia $9 billion, Citigroup $7.3 billion, Morgan Stanley $4.5 billion, Bank of America $4.5 billion, JPMorgan Chase $3 billion and Royal Bank of Canada $850 million - about $330 billion of auction-rate securities are outstanding.

Sep '08 - FHFA (Federal Housing Finance Agency) places Fannie Mae (with Herb Allison of TIAA-CREF) and Freddie Mac (with David Moffett of U.S. Bancorp) into conservatorship - dividends on both the common and preferred shares will be eliminated. Interest and principal payments will continue to their companies' securitized bonds and subordinated debt. The Treasury will 'backstop' both agencies with up to $100 billion (each) of a special class of stock - the Treasury through senior preferred stock and warrants will own 79.9% of each agency. Their portfolios "shall not exceed $850 billion as of 12/31/09, and shall decline by 10% per year until they reach $250 billion" - Fannie's is $758 billion and Freddie's is $798 billion.

> Short selling by Hedge funds of $100 million must now report positions to the SEC. SEC halts short selling of Financial stocks (Sep 19, effective immediately) protecting 799 financial companies - through Oct 2. SEC issues rules for short sales requiring delivery of securities by the settlement date, effective Sep 18. Britain's Financial Services Authority (& other Global exchanges) banned short-selling of financial stocks from Sep 18 - Jan 16, 2009.

> Federal Reserve approves Goldman Sachs and Morgan Stanley to become bank holding companies - ending independent investment banks. Paulson's Treasury Dept. protects US money market mutual funds with insurance (using a $50 billion fund, through April 30, 2009) - as some of the $3.6 trillion of funds 'broke the buck'. Federal Reserve broadens eligible collateral - previously, only Treasury securities, Agency securities, and AAA-rated mortgage-backed and asset-backed securities could be pledged.

> Lehman Brothers, the fourth-largest U.S. investment bank, files for the largest U.S. bankruptcy - listed total debts of $639bn.

> Merrill Lynch, the third-largest U.S. investment bank, is purchased by Bank of America for $50 billion.

> AIG ($1.1 trillion assets and 74 million clients in 130 countries) receives an $85 billion Federal Reserve loan in return for relinquishing 79.9% percent ownership in the company.

> Washington Mutual is seized by federal regulators and sold to J.P. Morgan Chase for $1.9 billion - the largest bank failure in U.S. history, $307 billion in assets.

> Bradford and Bingley nationalized (joins Northern Rock as U.K.'s 2nd mortgage lender) and rescues for European lenders Fortis (Benelux's banking and insurance group), Hypo Real Estate (Germany's real estate firm), Glitnir (Iceland's third-largest lender) and Dexia (Franco-Belgian's bank, world's biggest lender to European local governments).

Oct '08 - Emergency Economic Stabilization Act of 2008 (EESA) a $700 billion rescue of financial institutions by purchasing devalued mortgage-linked assets (Paulson's Treasury Dept. will administer the Troubled Asset Relief Program, or TARP) - protection and tax beaks for taxpayers (equity positions in the financial institutions participating), limits on executive's compensation, independent oversight and transparency, help to prevent home foreclosures (modifying troubled loans), raises FDIC to $250k from $100k and an insurance option into which banks would pay. Federal Reserve receives authority to pay interest on reserves, the SEC receives the power to change mark-to-market accounting rules and the FDIC supports interbank lending.

> EESA/TARP invests $125 billion in 9 large banks (10/26): $25 billion in each Citigroup, J.P. Morgan, Wells Fargo and Bank of America/Merrill Lynch, $10 billion in each Goldman Sachs and Morgan Stanley, $3 billion in Bank of New York Mellon and $2 billion in State Street. - with preferred stock (5% dividend for the first 5% years and then convert to 9%), warrants (right to buy common stock equal to 15% of the total investment in the firm) and compensation limitations.

> Federal Reserve increases currency swaps with foreign central banks to unlimited amounts (up from $620 billion) and increased the Term Auction Facility, the Fed's emergency loan program, to $900 billion - to easy liquidity problems. Federal Reserve begins to purchase U.S. commercial paper from U.S. companies and Money market funds - a $1.8 trillion market (90-day unsecured at 1.88% plus a 1% credit surcharge and 90-day secured asset-backed rate at 3.88%, 10/27).

> Federal Housing Finance Agency orders Fannie Mae and Freddie Mac (FHFA is their new regulator) to purchase $40 billion a month of underperforming mortgage bonds - to promote greater stability and liquidity in the U.S. mortgage market.

> Bank of America modifies (cuts interest rates and/or principal) 265,000 mortgages and 400,000 of acquired Countrywide's mortgages - the largest predatory lending settlement, $8.6 billion. J.P. Morgan Chase will modify 400,000 borrower's mortgages from their acquisition of Washington Mutual.

> G7 (United States, Japan, Germany, France, Italy, the United Kingdom and Canada) agrees to recapitalizing banks with public and private funds, insure depositors and unfreezing credit markets. G20 (G7 plus China, Brazil, Russia, India, Mexico, South Korea, Saudi Arabia, Argentina, Australia, Indonesia, South Africa and Turkey) commits to "using all the economic and financial tools to assure the stability and well functioning of financial markets" - they account for about 90% of global gross domestic product. IMF's 185 member nations endorse a commitment to "use all available tools" to prevent systemic failure. World Bank agrees to help developing countries strengthen their economies, bolster their financial systems and protect the poor against the financial turmoil in international markets.

> IMF provides loans to Iceland, Ukraine, and Hungary - Britain was the last European country to receive an IMF loan in 1976.

> 15 leading European nations commit $2.3 trillion and agree to a 14pt plan to aid troubled banks by adding capital through investment and by guaranteeing inter-bank lending. European governments (Germany, Ireland, Sweden, Austria, Denmark, Iceland and Greece) guarantee all private savings accounts. European Union countries raised minimum guarantees for bank deposits to €50,000 while the ECB raised overnight lending to $250 billion. The United Kingdom (£50 billion and £450 billion in loan guarantees), Spain (€100 billion), Russia ($36 billion), Portugal (€20 billion), Norway ($55.4 billion), Sweden ($205 billion), German (€500 billion), Netherlands (€200 billion), Austria (€85 billion), Switzerland ($60 billion) and France (€360 billion) establish plans to support their domestic banking systems. Japan's package includes government guarantees for loans to businesses is $270 billion.

> SEC extends short selling ban of Financial stocks protecting 950 financial companies - through Oct 8.

> Wachovia will be purchased by Wells Fargo (as Citigroup exits) in an $11.7 billion all-stock offering.

Nov '08 - World leaders summit (G20) in Washington DC (November 15) "to discuss the financial markets and the global economy" and "agree on a common set of principles" to reform global regulation of the markets: United States (George W. Bush, gdp $45,800), Canada (Stephen Harper, gdp $38,600), Australia (Kevin Rudd, gdp $37,300), United Kingdom (Gordon Brown, gdp $35,000), Germany (Angela Merkel, gdp $34,100), Japan (Tara Aso, gdp $33,500), France (Nicolas Sarkozy, gdp $32,600), Italy (Silvio Berlusconi, gdp $30,900), South Korea (Lee Myung-Bak, gdp $25,000), Saudi Arabia (Abdullah Bin Abdul Aziz, gdp $19,800), Russia (Dmitry Medvedev, gdp $14,800), Argentina (Cristina Fernandez de Kirchner, gdp $13,100), Mexico (Felipe Calderon, gdp $12,400), Turkey (Recep Tayyip Erdogan, gdp $12,000), South Africa (Kgalema Motlanthe, gdp $9,700), Brazil (Luis Inacio Lula, gdp $9,500), China (Hu Jintao, gdp $5,400), Indonesia (Susilo Bambang Yudhoyono, gdp $3,600), India (Manmohan Singh, gdp $2,600) and an European Union representative. G20 Declaration on Nov 15, 2008

> Federal Reserve announces $200 billion of support for debt backed by consumer and small-business debt (credit-card, auto, student and SBA loans) and the Fed will purchase up to $100 billion of debt from Fannie Mae and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Freddie Mac, Fannie and Ginnie Mae - the Treasury will initially provide $20 billion of "credit protection" to these Federal Reserve GSE lending programs from TARP.

> FDIC guarantees $1.4-1.8 trillion of bank-to-bank lending for more than 3 years (Dec. 31, 2013) as part of the EESA. FDIC proposes a program applied to 4.4 million non-GSE mortgage loans using $24 billion from the EESA to save 1.5 million modified loans from foreclosure.

> Fannie Mae and Freddie Mac (own or back 31 million U.S. mortgages) modify mortgages: resident homeowners 90 days or more late, owe at least 90% of current value, have not filed for bankruptcy - payments would not exceed 38% of their monthly household income through interest rate adjustments and/or longer repayment schedules. Citigroup will modify 500,000 borrower's mortgages.

> European Central Bank cuts rates to 3.25% from 3.75%, Bank of England cuts to 3% from 4.5% (lowest level since 1955) and the Swiss National Bank cuts to 2% from 2.5%.

> Britain announces a £25.6 billion ($38.8 billion) stimulus package spent in 2009-10 - tax cuts and spending increases to avert the U.K.'s first recession since 1991.

> China announced a $586 billion (4 trillion yuan) economic stimulus package (almost 20% of China's 2008 gdp) - the plan bolsters low-rent housing, infrastructure in rural areas, roads, railways, airports, subsidies for farmers will be raised and tax deductions for purchases of fixed assets (machinery) to stimulate investment.

> Japan promises $100 billion in loans to IMF raising their funding capacity to $250 billion - IMF provide a loan to Pakistan.

> American Express (and AmEx Travel Related Services) becomes a bank-holding company.

> Citigroup receives $20 billion (in addition to the initial $25 billion) from TARP to protect $306 billion of troubled mortgages and assets - Citigroup assumes losses on the first $29 billion the Treasury will absorb 90% of the remaining losses and $27 billion of preferred with an 8% dividend.

> EESA/TARP invests $125 billion in smaller regional banks: AIG ($40 billion and $60 billion credit facility, 52.5 billion MBS & CDO purchased), Federal Home Loan Mortgage Corp. ($13.8 billion), PNC ($7.7 billion), U.S. Bancorp ($6.6 billion), Capital One ($3.55 billion), SunTrust ($3.5 billion), Regions Financial ($3.5 billion), Fifth Third Bancorp ($3.4 billion), BB&T Corp. ($3.1 billion), KeyCorp ($2.5 billion), Comerica Inc. ($2.25 billion), Marshall & Ilsley ($1.7 billion), Northern Trust Corp. ($1.5 billion), Huntington Bancshares Inc. ($1.4 billion), Zions Bancorporation ($1.4 billion), Synovus Financial ($973 million), Popular Inc. ($935 million), First Horizon National Corp. ($866 million), ETrade Financial ($800 million), Colonial BancGroup ($550 million), Associated Banc-Corp ($530 million), Webster Financial ($400 million), City National Corp. ($395 million), Fulton Financial ($375 million), TCF Financial ($361 million), South Financial Group ($347 million), Wilmington Trust ($330 million), East West Bancorp ($306 million), Sterling Financia ($303 million), Whitney Holding Corp. ($301 million), Susquehanna Bancshare ($300 million), Valley National Bancorp ($300 million), Citizens Republic Bancorp ($300 million), UCBH Holdings Inc. ($298 million), Cathay General Bancorp ($258 million), Wintrust Financial ($250 million), First Merit Corp. ($248 million), SVB Financial Group ($235 million), Trustmark ($215 million), Umpqua Holdings Corp. ($214 million) and Washington Federal ($200 million) - and 88 banks borrowing less than $200 million.

Dec '08 - FOMC easing stance - December 16 - Fed Funds rate cut of 0.75%-1% to 0%-0.25% from 1.00% the Discount rate is cut to 0.50% from 1.25%. "The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity."

> President Bush and the Treasury intercede extending $13.4 billion in loans to GM and Chrysler (another $4 billion in February - Ford did not seeking government assistance) - Paulson is the "president's designee". Wages to auto workers must match the compensation of foreign auto company plants in the U.S.. Paulson's Treasury requests the remaining $350 billion TARP funds from Congress. GM and Chrysler also receive $3.3 billion in government loans from Canada and the province of Ontario.

> European Central Bank cut interest rates 75 bps to 2.5%. Bank of England cuts rates 100 bps to 2% - lowest since 1951. The Swedish, Danish and New Zealand central banks also lowered their rates. Bank of Japan lowers interest rate to 0.1%, increases purchases of government debt and announces plans to buy commercial paper for the first time as Japan's recession starves worsens.

> Credit Union Homeowner Affordability Relief Program (Treasury) a $41 billion lending facility where retail credit unions could borrow up to $2 billion at favorable rates - about 8,400 U.S. credit unions with $775 billion in assets.

> Federal Reserve increases its balance sheet to $2.31 trillion from $924 billion (9/10) in 2 months. The Federal Reserve, CFTC and SEC announce that a central clearinghouse for the $33 trillion credit-default swap market will be running by December 31.

> Japan expands $270 billion package to $385 billion - ¥10 trillion of stimulatory spending to save job cuts and ¥13 trillion to protect the banking system.

> EESA begins assigning second $350 billion in other financial institutions awaiting Congressional approval: GMAC, American Express, CIT, Discover Financial Services, GM and Chrysler.

> 19.7% is a record spread on yields between high-yield, high-risk corporate bonds and Treasuries.

> Banks and securities firms (Citigroup, UBS, Merrill, etc.) report over $1.1 trillion of mortgage-related writedowns from subprime securities - while raising over $750 billion of new capital in 2008.

Jan '09 - U.S. unemployment rate rises to 7.2% - 741,000 jobs lost, 2.6 million jobs losts in 2008 - most since 1945.

> European Central Bank cut interest rates 50 bps to 2%. Bank of England cuts interest rates to 1.5% - lowest ever, founded in 1694.

> Morgan Stanley agrees to buy 51% of Citigroup's Smith Barney for $2.7 billion. Citigroup to split between - Citicorp: retail, corporate, investment and private banking, credit card businesses and Citi Holdings: brokerage, asset management, CitiFinancial and CitiMortgage. FDIC sells IndyMac Bank to IMB Management Holdings LP (J.C. Flowers & Co., Paulson & Co., MSD Capital LP and Stone Point Capital) for $13.9 billion - FDIC's bank insurance fund losses are expected to be approximately $9 billion.

> International Derivatives Clearing Group, LLC (IDCG), subsidiary of NASDAQ OMX Group, started clearing over-the-counter interest-rate swap contracts on December 29, 2008 - $458 trillion (notional value/gross exposure) of interest rate derivatives.

Feb '09 - Financial Stability Plan (Timothy Geithner ): 1. Financial Stability Trust (a Comprehensive Stress Test for Major Banks, Increased Balance Sheet Transparency and Disclosure and Capital Assistance Program), 2. Public-Private Investment Fund ($500 Billion - $1 Trillion), 3. Consumer and Business Lending Initiative (Up to $1 trillion), 4. Transparency and Accountability Agenda, Including Dividend Limitation, 5. Affordable Housing Support and Foreclosure Prevention Plan and 6. A Small Business and Community Lending Initiative.

> American Recovery and Reinvestment Act of 2009 (Obama signs) - a $787.2 billion Stimulus bill. Spending (& Aid), $575.2 billion (incl. $267 billion of Aid): health care ($141.3 billion), infrastructure ($89.7 billion), education ($87.3 billion), energy ($86.2 billion), aid to poor and unemployed ($67 billion), direct cash payments to entitlement recipients ($14.2 billion), state block grants ($8.8 billion), housing ($9.5 billion), science ($5.6 billion), law enforcement ($4 billion) and homeland security ($3.8 billion). Taxes, $212 billion: 2009-10 tax credit ($400 per-worker, $800 per-couple) AMT, college, child, homebuyer ($8,000), low-income earned income tax credits; renewable energy, depreciation and auto sales incentives.

> Housing plan that may help 3-4 million homeowners (Obama / Geithner) - the $75 billion plan ($50 billion from TARP and $25 billion from Fannie Mae and Freddie Mac): 1) Loan modifications owned or guaranteed by Fannie Mae and Freddie Mac and 2) A separate modification program through a participating lender. Loans originated before Jan. 1, 2009 are eligible for modification through 2012, mortgages up to $729,750 and rates as low as 2%.

> Japan, China, South Korea, Thailand, Indonesia, Malaysia, Singapore, Philippines and 5 Southeast Asian nations agree to form a $120 billion pool of foreign-exchange reserves to defend their currencies.

> Citigroup to convert $25 billion of preferred stock (debt from Treasury's TARP) into common shares, 33.6% of outstanding shares.

Mar '09 - Global Markets fall from $62.6 trillion [10/31/07] to $25.5 trillion [Mar 9 '09] losing $37.1 trillion or 59.2%
- DJIA trades 6,469.95 (Mar 6) lowest since November 1996 - 54.6% lower than 14,279 (10/11/07)
- S&P 500 trades 666.79 (Mar 6) lowest since May 1996 - 57.7% lower than 1,576 (10/11/07) - NASDAQ trades 1,265.52 (Mar 9) lowest since October 1996 - 55.7% lower than 2,861 (10/11/07)
- MSCI Europe Index trades 529 (Mar 9) lowest since December 1996 - 61.8% lower than 1,388 (7/13/07)

> U.S. unemployment rate rises to 8.1%.

> Federal Reserve begins TALF (Term Asset-Backed Securities Loan Facility, up to $1 trillion) lending $84 to $95 for every $100 in ABS posted as collateral - initial interest rates for 3-year loans from 1%-3%.

> ICE US Trust LLC, Intercontinental Exchange's entity, started clearing contracts on March 9, 2009 - before the CME Group (NYSE Euronext), Eurex AG and LCH.Clearnet Group Limited - $27 trillion (notional value/gross exposure) of credit-default swaps.

> FOMC neutral stance - March 18 - Fed Funds rate 0%-0.25% and the Discount rate of 0.50%. "Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments."

> European Union pledges $100 billion (€75bn) to the IMF and doubles funds for non-Eurozone countries to $68 billion (€50bn).

> U.S. Treasuries (March 18) post their biggest 1 day rally since 1962 rallying from 3.01% to 2.46% following the Fed's announcement - Federal Reserve begins purchases of $300 billion of 2-10 year Treasuries hoping to reduce consumer borrowing costs.

> EESA/TARP invests second $350 billion in other financial institutions: Citigroup ($25 billion), Bank of America ($20 billion, Federal Reserve will backstop $118 billion of acquired Merrill assets), GM ($15.4 billion), GMAC ($5.0 billion), Chrysler ($4.5 billion), Chrysler Financial ($1.5 billion), American Express ($3.4 billion), CIT ($2.3 billion), Discover Financial Services ($1.2 billion), GM ($1 billion), M&T Bank Corp ($600 million) and New York Private Bank & Trust ($267 million) - 555 institutions participating as of 3/09.

> NCUA (National Credit Union Administration Board) placed U.S. Central Federal Credit Union ($34 billion) and Western Corporate unions ($23 billion) into conservatorship.

> European Central Bank cut interest rates 50 bps to 1.5% - a record low. Bank of England cut interest rates 100 bps to 0.5% - lowest ever, founded in 1694.

> AIG receives up to $30 billion of new loans from TARP funds after reporting a $61.7 billion loss in 4Q08 - the largest in corporate history, total authorized assistance of $182.3 billion.

> Public-Private Investment Program (Treasury Secretary Timothy Geithner, March 23, 2009) using $75 to $100 billion from TARP: 1) creating the Legacy Loans Program (backed by FDIC, guaranteeing financing for up to 6 times the capital) to purchase and hold loans, 2) the Federal Reserve's TALF will expand to include asset-backed securities, and 3) establish Legacy Securities Program, 5 public-private investment funds, to purchase asset-backed securities - managed privately with up to 100% financial matching with profits or losses shared with the Federal Reserve.

> US Treasury and the Federal Reserve (March 23) agree on the Fed's responsibilities as the US exits the recession and removes liquidity from the system: 1. Treasury-Federal Reserve cooperation in improving the functioning of credit markets and fostering financial stability, 2. The Federal Reserve to avoid credit risk and credit allocation, 3. Need to preserve monetary stability, and 4. Need for a comprehensive resolution regime for systemically critical financial institutions.

> Switzerland, Liechtenstein, Andorra and Monaco banking authorities all pledged to comply with OECD (Organization for Economic Cooperation and Development) standards for banking transparency and information exchange. UBS paid (Feb. 18) $780 million to avoid prosecution for helping wealthy Americans evade taxes - disclosing information on more than 250 secret accounts, the U.S. continues to seek the identities of 52,000 American account holders suspected of tax evasion on $20 billion in assets.

> U.S. dollar's share of global currency reserves rises to 65% the euro's share rose to 25.9% - flight to quality.

Apr '09 - G20 agrees to provide the IMF with $1 trillion of lending power - by selling 403 tons of gold.

> 30-year fixed mortgage falls to 4.78%.

> FASB (Financial Accounting Standards Board) loosens fair value rules from mark-to-market to cash flows and other factors for distressed assets.

> European Central Bank cut interest rates 25 bps to 1.25% - a record low.

> Chrysler files Chapter 11 bankruptcy ($39 billion, 7th largest in U.S. history) - Cerberus Capital Management, Daimler, Fiat SpA, U.S. government, UAW and other creditors will reorganize.

May '09 - Federal Reserve releases that 10 of the 19 major U.S. banks need to raise a total of $74.6 billion in capital - BofA ($33.9 billion), Wells ($13.7 billion), GMAC ($11.5 billion), Citi ($5.5 billion), Regions ($2.5 billion), SunTrust ($2.2 billion), Morgan Stanley ($1.8 billion), KeyCorp ($1.8 billion), FifthThird ($1.1 billion), PNC ($0.6 billion) - while AmEx, BB&T, BNYM, CapOne, Goldman, JPMC, MetLife, State St and USB do not need additional funds.

> U.S. unemployment rate rises to 8.9%.

> Thornburg Mortgage (5/01/09) files for bankruptcy - 8th largest in U.S. history $36.5 billion.

> GM receives an additional $4 billion and GMAC an additional $7.5 billion ($19.4 billion and $12.5 billion, respectively) of TARP funds. Treasury offers $22 billion of TARP funds to Insurers: Prudential, Hartford, Allstate, Lincoln National, Principal and Ameriprise.

> FASB requires off-balance-sheet loans (qualifying special purpose entities) to be reported, which may result in the nation's 19 largest banks reporting $900 billion in previously unrecognized assets and liabilities - requiring an increase of capital reserves.

> European Central Bank cut interest rates 25 bps to 1.00% - a record low.

June '09 - U.S. unemployment rate rises to 9.4%.

> GM files Chapter 11 bankruptcy ($91 billion, removed from the DOW index having received $19.4 billion) 4th largest in U.S. history. Opel and Vauxhall brands, European GM, will be purchased by Magna International (Canadian parts supplier with €1.5bn in credit guarantees from the German government). Sichuan Tengzhong Heavy Industrial Machinery Co. to buy Hummer. Penske Automotive Group to buy Saturn. Koenigsegg to buy Saab.

> Chrysler Group exits bankruptcy in 42 days, closing 8 factories and 789 dealerships, with $6.6 billion in exit financing from the US government. Chrysler is owned by a United Auto Workers union trust 55%, Fiat 20% (rising to 35%), the United States government 23% (falling to 8%) and 2% the Canada government - secured bondholders get about $0.29 while the Indiana pension funds get up to $0.72.

> European governments have approved $5.3 trillion of committed aid: United Kingdom €781.2, Denmark €593.9, Germany €554.2, Ireland €384.5, France €350.1, Belgium €264.5, Austria €165, Sweden €142, Spain €130 and the Netherlands €46.1.

> Dow Jones Industrial Average, June 8 - Travelers replaces Citigroup and Cisco replaces General Motors.

July '09 - U.S. unemployment rate rises to 9.5% - a record total of 9.35 million people have received unemployment compensation.

> General Motors exits bankruptcy in 40 days, closing 2,400 dealerships with $30 billion in exit financing from the US government. General Motors Co. is 60.8% owned by U.S. taxpayers, with 11.7% by the Canada and Ontario governments and 17.5% by the United Auto Workers' retiree medical benefits trusts (with 2.5% of preferred stock and $9 billion in notes) and the remaining 10% owned by Motors Liquidation (the old GM) to pay off creditors and unsecured bondholders (with 15% of preferred stock).

> SEC, 'Naked' Short-Selling ends - rules require that brokers must promptly buy or borrow securities to deliver on a short sale.

August '09 - U.S. unemployment rate rises to 9.7%.

> Colonial BancGroup fails with assets of $25 billion, biggest U.S. bank failure in 2009, taken over by BB&T Corp.

> Swedish Riksbank (world's oldest central bank, 1668), August 7, 2009 - is the first central bank to post a negative interest rates - their repo rate was cut to 0.25% and their deposit rate 50 bps lower at to -0.25%, a penalty on banks that refuse to lend. U.S. Treasury repo rates are generally 5 to 10 bps below the Fed funds rate.

> UBS AG discloses details on 4,450 accounts to the Internal Revenue Service.

> IMF offers $250 billion of SDRs (Special Drawing Rights) on Aug. 28 comprised of 4 major freely convertible currencies: US dollars: 44%; Euros: 34%; Yen: 11%; and British pound 11% - distributed to member countries in line with their shareholder stakes, secondary market restricted to participating governments or central banks. SDR 21.4 billion to SDR 204.1 billion (about $317 billion).

September '09 - U.S. unemployment rate rises to 9.8% - highest in 26 years.

> Group of 20 nations to replace G-8 (G-7 from 1975 until 1997) as primary organization coordinating global economic policy. Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

> TED spread trades below 16 bps. on 9/10. 3-month LIBOR - OIS spread trades below 10 bps. on 9/18. LIBOR closes below 29 bps. on 9/18.

> IMF offers an additional $33 billion of SDRs (Special Drawing Rights) on September 9.

October '09 - U.S. unemployment rate rises to 10.1% (highest in 26 years) though 4,000 jobs created. 8.4 million jobs lost since December 2007, ending 22 consecutive monthly declines in payrolls.

> Reserve Bank of Australia (Oct 6) becomes first major central bank to raise its policy rate 25 bps. to 3.25% rate - following a 49-year low.

> China sells an inaugural 6 billion yuan ($878.7 million) of sovereign bonds in Hong Kong, issued Oct. 27 - representing 0.013% of $7 trillion of total foreign exchange reserves.

> Capmark Financial Group (formerly commercial lending at GMAC) filed for bankruptcy (Oct 25) debt of $21 billion and consolidated assets of $20.1 billion, a top servicer of U.S. commercial real estate loans and the largest servicer of loans in the rest of the world.

> SIPC releases $534.25 million to 1,558 Madoff's vicitms - exceeding the $520 million (from all 321 prior SIPC liquidations) since the program began in 1970.

November '09 - CIT Group files Chapter 11 bankruptcy, $71 billion in assets and $64.9 billion in debt, one of the U.S.'s largest small-business lenders - the fifth-largest bankruptcy in U.S. history.

> British government (Nov 3) bails out: RBS £25.5 billion (total £45.5 billion, U.K.'s government stake increases to 84.4% from 70%), the world's most expensive bank bailout. Lloyds Banking Group (acquired HBOS Plc on Jan 16) to recieve £5.6 billion pounds (government's rights to buy stock, in addition to earlier £17 billion) and plans to raise £21 billion (£13.5 billion pounds in a rights offering and £7.5 billion in a bond exchange) denying the government majority control which owns 43.5%.

> President Obama signs $24 billion Worker, Homeownership, and Business Assistance Act of 2009. Extending unemployment benefits (up to 20 weeks) and extending the $8,000 homebuyer tax credit (signed by April 30 and closed by June 30), the credit will have been used by 1.8 million homebuyers in 2009.

> Internet Gambling Enforcement Act in 2006 signed October 13, 2006 compliance is not required until Jun 1, 2010 to comply with the rules intended to limit the use of payment systems for Internet gambling.

> Japanese yen rallies to ¥84.83, Nov 27. 1949 Bretton Woods, fixed rate of ¥360 until January of 1971 (Smithsonian Agreement). March 14, 1973 yen appreciates to ¥254.45 (free float), December 8, 1975 yen depreciates to ¥306.84 (1973 oil crisis), October 30, 1978 yen appreciates to ¥177.05 (trade surpluses), November 4, 1982 yen depreciates to ¥277.65 (differential in interest rates), April 19, 1995 yen appreciates to a dollar low of ¥81.07 (Plaza Accord) and August 11, 1998 yen depreciates to ¥147.11 (Japanese asset bubble).

December '09 - Gold trades at a new all-time high $1226, Dec 2. Official U.S. government Gold price from 1792-1833 $19.39, from 1833-1934 $20.67, from 1934-1971 $35 (low $31.69 in 1949 and high $41.28 in 1969), August 15, 1971 the U.S. stopped the direct conversion of U.S. dollars to gold (a two-tiered market begins in 1968 - officially set at $38 in 1972 and $42.22 in 1973) ending the existing Bretton Woods system of international financial exchange, January 21, 1980 a high of $850 and Aug. 18, 1999 a low of $251.70 (Washington Agreement, September, 26 1999 - limiting central banks gold sales each year following Britain's controversial plan to reduce its gold holdings by 58% to 300 tons from 715 tons, July 1999).

> 30-year fixed-rate mortgage averaged 4.71% for the week ended Dec. 3 -- the lowest in the history of Freddie Mac's rate survey.

> U.S. Commodity Futures Trading Commission (CFTC) raises capital standards requiring the inclusion of over-the-counter derivatives positions into their risk-based capital calculations and raises margin requirements from 4% to 8%.

> GMAC Financial Services gets $3.8 billion in capital (total amount of government aid $16.3 billion) U.S. government's ownership is 56%.

> China's foreign-exchange reserves exceed $2.4 trillion. China purchase more cars 13.6 million (up 46%, 2008) then the U.S. 10.4 million (down -21%, 2008) first time since 1908. China passes Germany as largest exporter $1.2 trillion compared to $1.17 trillion. China approaches second largest economy, Japan's total GDP $5.085 trillion while China's was $4.909 trillion

> LIBOR trades below 0.25%, Dec 21. 3-month LIBOR - OIS spread trades 7 bps Dec 28. VIX trades below 20, Dec 22. U.S. Treasury yield curve steepens to record as 2-10-year Treasury spread increases to 288 bps, Dec 22.

> Federal Reserve returns $46.1 billion (total net income $52.1 billion, 2008) to the Treasury up from $27.5 billion ($35.5 billion, 2008).

> U.S. Banks and securities firms (Citigroup, B of A, Wells Fargo, etc.) write off losses of $1.1 trillion. Worldwide reported losses over $1.7 trillion of mortgage-related writedowns from asset-backed securities while Banks have raised over $1.5 trillion of new capital.

January '10 - US economy contracts -2.4% (worst since 1946) - though grows by 2.2% in the 3Q09 and 5.9% in the 4Q09. Following U.S. gdp of 3Q08 -2.7%, 4Q08 -5.4%, 1Q09 -6.4%, 2Q09 -0.7% (first time since the 1930's that the US has suffered 4 consecutive quarters of declining gdp).

> General Motors sells Saab to Spyker for $74 million in cash and $326 million in preferred shares.

February '10 - Federal Reserve increases the Discount rate 25 bps to 0.75% (February 19) - first increase (since Jun 29, 2006) when the Fed increased from 5.00% to 5.25% Then the Emergency FOMC inter-meeting cut (August 17, 2007) to 5.75% from 6.25% at outset of credit crisis and the Fed Funds rate cut to 4.75% from 5.25% and the 'discount rate' to 5.25% from 5.75% (September 18).

> SEC restricts short sales (February 24) once a stock falls 10% from the previous day's closing price - then one can only execute a short sale at a price above the market's best bid (an uptick). The curb stays in place through the following day.



US GOVERNMENT PROGRAMS


Federal Reserve programs:

1. Term Auction Facility (TAF, 12/17/07) - provides a negotiated rate for banks to borrow from the Fed.
Commitment: $900 billion (peak $493.1 billion as of 3/31/09)

2. Discount window - lends directly to commercial banks.
Commitment: $200 billion ($120 billion as of 3/31/09)

3. Discount window 2 - lends directly to all financial firms, including securities firms.
Commitment: $200 billion ($61 billion as of 3/31/09)

4. Overnight loans - makes one-day loans to banks based on collateral.
Commitment: $11 billion ($9.3 billion as of 9/30/09)

5. Secondary credit - lends at higher interest rates when collateral is weaker.
Commitment: $20 billion ($1 billion as of 3/31/09)

6. Term Security Lending Facility (TSLF, 3/11/08) - auctions loans of Treasury securities to bond dealers in exchange for collateral such as mortgage-backed securities.
Commitment: $250 billion (peak $233.6 billion as of 10/31/08)

7. Primary Dealer Credit Facility (PDCF, 3/11/08) - provides funding to primary dealers in exchange for a specified range of eligible collateral.
Commitment: $200 billion ($193 billion as of 3/31/09)

8. Asset backed commercial paper Money market mutual fund Liquidity Facility (AMLF, 9/19/08) - lends to banks so they can buy commercial paper from mutual funds.
Commitment: $155 billion ($7 billion as of 3/31/09)

9. Commercial Paper Funding Facility (CPFF, 10/7/08) - buys short-term notes from companies, which use the proceeds to pay bills.
Commitment: $1.8 trillion ($241 billion as of 3/31/09)

10. Money Market Investor Funding Facility (MMIFF, 10/21/08 to expire 10/31/09) - buys assets from financial companies to bolster money-market mutual funds, at its peak it covered over $3 trillion of combined fund assets and earned more than $1 billion in income.
Commitment: $540 billion (never used ends Oct' 09)

11. Dollar Liquidity Swap Lines (12/12/07-10/29/08) - currency swaps with 14 foreign central banks to unlimited amounts (up from $606 billion): Reserve Bank of Australia, the Bank of Canada, Danmarks Nationalbank, the Bank of England, the European Central Bank, the Bank of Japan, the Reserve Bank of New Zealand, the Norges Bank, the Sveriges Riksbank, Swiss National Bank, Banco Central do Brasil, the Banco de Mexico, the Bank of Korea, and the Monetary Authority of Singapore.
Commitment: $606 billion (peak $580 billion as of 12/31/08)

12. Term Asset-Backed Securities Loan Facility (TALF, 11/25/08) - initially lends money to owners of securities that are backed by education, car and credit-card loans, and borrowing guaranteed by the Small Business Administration loans. Also, added under the Legacy Securities Program lends for the purchase of asset-backed securities.
Commitment: up to $1 trillion ($62 billion as of 8/31/09)

13. GSE Mortgage-Backed Securities and GSE Debt Purchases (11/25/08) - purchase up to $1.25 trillion in MBS (by asset managers: BlackRock, Goldman Sachs, Pacific Investment Management Co. and Wellington Management) in an effort to reduce GSEs debt costs and thereby lower mortgage rates. Purchase up to $200 billion in GSE direct obligations.
Commitment: $1.45 trillion ($823 billion as of 9/30/09, Treasury's purchase of $220 billion ends 12/31/2009)

14. U.S. Treasury purchases (3/31/09) - purchase up to $300 billion of 2yr to 10yr Treasuries.
Commitment: $300 billion ($300 billion ended 10/29/09)

15. Bear Stearns bailout (3/17/08)
Maiden Lane LLC created by JPMorgan Chase to hold Bear Stearns assets.
Commitment: $29.5 billion ($29 billion as of 3/31/09)

16. AIG and other AIG credit extensions (9/16/08)
Commitment: $52.5 billion and $60 billion ($85 billion as of 3/31/09)

17. Citigroup bailout (11/23/08)
Commitment: $220 billion ($0 billion as of 3/31/09)

18. Bank of America bailout (11/23/08)
Commitment: $87.2 billion ($0 billion as of 9/30/09)

* Federal Reserve programs totals:
Maximum commitment: over $7 trillion - Peak accessed as of 3/31/09: $2.31 trillion - Earned $12 billion as of 9/30/09.



FDIC programs:

1. Temporary Liquidity Guarantee Program (TLGP, November 21, 2008) - takes the risk out of bank-to bank lending. Earned more than $9 billion in income.
Commitment: $1.4-1.8 trillion ($316 billion as of 3/31/09)

2. Public-Private Investment Program (PPIP, March 23, 2009) - guaranteeing financing (up to 6 times the capital) to purchase and hold loans of asset-backed securities.
Commitment: initially $1 trillion, adjusted $20 - $50 billion ($0 billion as of 3/31/09)

3. GE Capital guarantees
Commitment: $65 billion ($55 billion as of 3/31/09)

4. Citigroup bailout
Commitment: $10 billion ($0 billion as of 3/31/09)

5. Bank of America bailout
Commitment: $2.5 billion ($0 billion as of 3/31/09)

* FDIC Program totals:
Maximum commitment: $2.5 trillion - Accessed as of 9/30/09: $357 billion - Earned $9 billion as of 9/30/09.



Treasury Department programs:

1. Economic Stimulus Act of 2008 - February 13, 2008
Commitment: $168 billion ($168 billion as of 3/31/09)

2. Emergency Economic Stabilization Act of 2008 (EESA / TARP) - Oct 3, 2008. - Capital Purchase Program ($205 billion), General Motors, Chrysler ($80 billion), American International Group ($70 billion), Making Home Affordable Program ($23.4 billion), Targeted Investment Bank of America ($20 billion), Targeted Investment Citigroup ($20 billion), Term Asset-Backed Loan (TALF) ($20 billion), Citigroup Bailout ($5 billion), AIG ($3.5 billion, commitment of up $30 billion) and Auto Suppliers ($5 billion). Making Home Affordable plan , February 18, 2009 - may help 3-4 million homeowners - the $75 billion plan ($50 billion from TARP and $25 billion from Fannie Mae and Freddie Mac): 1) Loan modifications owned or guaranteed by Fannie Mae and Freddie Mac and 2) A separate modification program through a participating lender. Loans originated before Jan. 1, 2009 are eligible for modification through 2012, mortgages up to $729,750 and rates as low as 2%. Covers more than 85% of loans in the country.
Commitment: $700 billion ($448 billion as of 9/30/09)

3. AIG bailout - Treasury Department's investments in AIG preferred stock through the TARP program, U.S. governments 79.9% ownership.
Commitment: $44.8 billion ($44.8 billion as of 9/30/08)

4. American Recovery and Reinvestment Act of 2009 - February 17, 2009
Commitment: $787 billion ($304 billion as of 9/30/09, incl. $8,000 homebuyer's tax credit for 314,000 Americans)

5. Treasury Exchange Stabilization fund - buys and sells short-term notes to moderate fluctuations in foreign currency exchange rates.
Commitment: $50 billion ($50 billion as of 3/31/09)

6. Credit Union Homeowner Affordability Relief Program - lending facility where retail credit unions could borrow up to $2 billion at favorable rates.
Commitment: $41 billion ($0 billion as of 3/31/09)

7. Treasury support of Fed's purchase of Student loan - lending facility to purchase Student loans
Commitment: $60 billion ($0 billion as of 9/30/09)

8. Treasury support of Fannie Mae & Freddie Mac - lending facility to support Fannie Mae & Freddie Mac lending activities.
Commitment: no cap on commitment thru 12/31/2012, updated from $400 billion ($200 billion as of 9/30/09)

9. Line of credit to FDIC - lending facility to support FDIC.
Commitment: $500 billion ($0 billion as of 3/31/09)

10. Treasury commitment to TALF - Term Asset-Backed Securities Loan Facility.
Commitment: $100 billion ($0 billion as of 9/30/09)

11. Treasury commitment to PPIP - Public-Private Investment Program.
Commitment: $100 billion ($0 billion as of 9/30/09)

12. Tax breaks for banks
Commitment: $29 billion ($29 billion as of 3/31/09)

13. Line of credit to Bank of America
Commitment: $7.5 billion ($0 billion as of 9/30/09)

14. Cash for Clunkers
Commitment: $3 billion ($2.88 billion as of 9/1/09)

* Treasury Department Program totals:
Maximum commitment: $3 trillion - Accessed as of 9/30/09: $1.1 trillion



Federal Housing Administration (FHA) programs:

1. Hope for Homeowners - provides loan guarantees for struggling mortgage borrowers.
Commitment: $300 billion ($300 billion as of 9/30/09)

2. Neighborhood Stabilization (FHA) - provides loan guarantees for mortgage borrowers.
Commitment: $6 billion ($6 billion as of 9/30/09)

* Federal Housing Administration Program totals:
Maximum commitment: $306 billion - Accessed as of 9/30/09: $306 billion



** US Government program totals: Maximum U.S. commitment: $12.8 trillion
U.S. support peaked March 2009: $4.1 trillion

(Globally, Governments and Central banks provided over $11 trillion of support for Financial institutions: $1.56 trillion in capital injections, $5.21 trillion for asset purchases and guarantees and $4.64 trillion in debt guarantees. )

Is it time to take advantage of Opportunities?