In the months leading to September 2008, the government plugged several major leaks in the financial system. But in that month alone, Lehman Brothers Holdings Inc. filed for bankruptcy protection, the government took over Fannie Mae and Freddie Mac, and the Federal Reserve injected the American International Group with a major cash infusion to keep it from failing.
Still, the Great Recession of 2008 didn’t just happen in one month. It took years to correct the easy-money policies and lax standards of Wall Street. This timeline gives a blow-by-blow account of how the Great Recession unfolded and how the government and the banking industry responded.
Click on a headline to see more information about the event.
- Freddie tightens standards
Feb. 27, 2007
After a surge in subprime mortgage delinquencies, Freddie Mac says it will stop buying risky home loans.
- Dow hits all-time high
Oct. 9, 2007
The Dow Jones industrial average hits 14,164.53, the all-time high at the time.
- Bush signs tax stimulus
Feb. 13, 2008
President George W. Bush signs into law the Economic Stimulus Act of 2008, which authorized sending tax rebate checks worth $300 to $600 to single people, and $600 to $1,200 to married couples. The act also temporarily increases Fannie Mae's and Freddie Mac's mortgage loan limits from a maximum of $417,000 to $729,750 in some cities.
- Fed bails out Bear Stearns
March 24, 2008
The Federal Reserve agrees to lend $29 billion to JPMorgan Chase to buy Bear Stearns.
- Countrywide sold to BofA
June 5, 2008
The Fed approves a deal for Bank of America to buy Countrywide Financial Corp.
- Fed backstops Fannie, Freddie
July 13, 2008
The Federal Reserve Board allows the Federal Reserve Bank of New York to lend money to Fannie Mae and Freddie Mac "should such lending prove necessary."
- Bush signs homeowner aid bill
July 30, 2008
Bush signs into law the Housing and Economic Recovery Act of 2008. The program lets the Federal Housing Administration refinance the loans of mortgage holders whose payments are at least 31 percent of their monthly income.
- FHFA takes over GSEs
Sept. 7, 2008
The Federal Housing Finance Agency takes over Fannie Mae and Freddie Mac.
- BofA buys Merrill, Lehman folds
Sept. 15, 2008
Bank of America buys Merrill Lynch for $50 billion. Lehman Brothers files for Chapter 11 bankruptcy protection.
- Fed bails out AIG
Sept. 16, 2008
The Federal Reserve Board authorizes its New York branch to lend up to $85 billion to American International Group, or AIG.
- SEC suspends short selling
Sept. 17, 2008
The Securities and Exchange Commission announces a temporary ban on the short selling of stocks of all financial sector companies.
- Partial sale of Morgan Stanley
Sept. 22, 2008
Morgan Stanley announces it agreed to sell 21 percent of the company to Mitsubishi UFJ Financial Group for $9 billion.
- Regulators close WaMu
Sept. 25, 2008
Federal regulators close Washington Mutual, and JPMorgan Chase buys the bank's deposits and branches for $1.9 billion.
- Congress loans Big 3 $25 billion
Sept. 27, 2008
Congress approves a $25 billion loan to General Motors, Ford and Chrysler.
- Wells buys Wachovia
Oct. 3, 2008
Wells Fargo announces it will buy Wachovia for $15.1 billion.
- Bush signs TARP into law
Oct. 3, 2008
Bush signs into law the Emergency Economic Stabilization Act of 2008, which sets up the $700 billion Troubled Asset Relief Program, or TARP. The money will be used to buy stakes in financial institutions and U.S. automakers -- what many people know as the financial and auto sector bailouts.
- Treasury puts $125 billion into banks
Oct. 14, 2008
The Treasury uses TARP to invest up to $250 billion in preferred stock in nine financial institutions. The banks agree to $125 billion in investments.
- PNC buys National City
Oct. 24, 2008
PNC Financial Services Group buys National City Corp. for $5.2 billion, making it the fifth biggest bank at the time.
- Treasury buys into AIG
Nov. 10, 2008
The Treasury announces it will buy $40 billion in AIG preferred stocks via TARP. Separately, the Fed authorizes its New York branch to create two lending facilities to lend up to $52.5 billion to newly formed LLCs that, in turn, will buy mortgage-backed securities and collateralized debt obligations from AIG.
- Insurance firms seek TARP help
Nov. 17, 2008
Life insurance companies Lincoln National, Hartford Financial Services Group, and Genworth Financial say they intend to ask for TARP money.
- Fannie, Freddie halt foreclosures
Nov. 20, 2008
Fannie Mae and Freddie Mac say they will suspend mortgage foreclosures until January 2009.
- Citigroup bailed out
Nov. 23, 2008
The Treasury, the Fed and the Federal Deposit Insurance Corp., or FDIC, agree to provide Citigroup with a package of capital and access to liquidity to protect the bank from losses on a pool of $306 billion in commercial and residential securities. Citigroup also receives $20 billion in TARP money.
- Fed begins QE1
Nov. 25, 2008
The Fed starts buying $500 billion in mortgage-backed securities and $100 billion in debt obligations from Fannie Mae, Freddie Mac and other government-sponsored enterprises. This round of debt-buying comes to be known as quantitative easing, or QE1. By the time QE1 ends in 2010, the Fed has $1.25 trillion in mortgage-backed securities and $175 billion in debts.
- Official recession declared
Dec. 11, 2008
The National Bureau of Economic Research announces that the U.S. has officially been in the Great Recession since December 2007.
- Fed cuts key rate to near zero
Dec. 16, 2008
The Federal Open Market Committee sets the federal funds rate -- the rate at which banks borrow money from the Fed -- at the lowest recorded rate since 1954.
- Bush signs loans for Big 3
Dec. 19, 2008
Bush approves a $13.4 billion loan for General Motors and Chrysler. General Motors gets $9.4 billion, while Chrysler gets $4 billion.
- GMAC bank bailed out
Dec. 29, 2008
The Treasury says it will lend up to $1 billion to General Motors to help reorganize GMAC into a bank holding company.
- 25 bank failures in 2008
Dec. 31, 2008
During 2008, 25 commercial banks fail.
- Fed begins buying agency MBS
Jan. 5, 2009
The Fed begins buying mortgage-backed securities insured by Fannie Mae, Freddie Mac and Ginnie Mae.
- Chrysler gets Treasury bailout
Jan. 16, 2009
The Treasury Department says it will lend $1.5 billion to Chrysler Financial to finance the extension of new auto loans.
- Obama signs stimulus bill
Feb. 17, 2009
President Barack Obama signs the American Recovery and Reinvestment Act of 2009, which includes hundreds of billions of dollars in tax cuts and government spending. According to a Congressional Budget Office report, the estimated cost of the stimulus will be about $831 billion between 2009 and 2019.
- Obama unveils borrower relief
Feb. 18, 2009
Obama announces the Homeowner Affordability and Stability Plan, which allows mortgages owned or backed by Fannie Mae and Freddie Mac to be refinanced if they exceed 80 percent of the home's value. The plan also creates the Homeowner Stability Initiative, a $75 billion program which changes some home loans' terms to reduce monthly payments. In addition, the Treasury increases its stake in Fannie and Freddie to $200 billion.
- Fed intros bank stress tests
Feb. 25, 2009
The Fed, FDIC, Office of the Comptroller of the Currency and the Office of Thrift Supervision say they'll conduct "stress tests" on U.S. bank holding companies with assets of more than $100 billion.
- Fannie reports $58.7 billion loss
Jan. 26, 2009
Fannie Mae reports a $58.7 billion loss for 2008.
- AIG gets more bailout cash
March 2, 2009
The Treasury and the Fed announce another restructuring of the government's financial assistance of AIG, which will receive an additional $30 billion. AIG also reports a $99.3 billion loss for 2008.
- Dow hits 12-year low
March 9, 2009
The Dow Jones industrial average sinks to 6,547.05, the lowest since Nov. 25, 1996.
- Freddie reports $50 billion loss
March 11, 2009
Freddie Mac reports a $50.1 billion loss for 2008.
- Fed keeps rate zero, buys MBS
March 18, 2009
The FOMC votes to maintain the target range for the effective federal funds at zero percent to 0.25 percent. It also votes to buy $750 billion in mortgage-backed securities, bringing its total purchases up to $1.25 trillion so far in 2009. The FOMC also votes to buy up to $300 billion in Treasury securities over the next six months to try to improve credit market conditions.
- US bails out auto suppliers
March 19, 2009
The Treasury announces an Auto Supplier Support Program to provide up to $5 billion in financing for the automotive industry.
- 10 banks fail stress tests
May 7, 2009
The Fed releases its "stress test" results of the 19 largest U.S. bank holding companies. Their result: 19 firms could lose $600 billion in 2009 and 2010 in a bad-case economic scenario. Ten of those companies would need $185 billion in additional capital funding to buffer them from bad economic conditions.
- FDIC limits raised to $250K
May 20, 2009
Obama signs into law the Helping Families Save Their Homes Act of 2009, which raises the FDIC's deposit insurance coverage from $100,000 to $250,000 per depositor until Jan. 1, 2014.
- GM enters managed bankruptcy
June 1, 2009
GM files for Chapter 11 bankruptcy protection. The Treasury announces it will buy a 60 percent stake in GM for $30 billion.
- 140 bank failures in 2009
Dec. 31, 2007
During 2009, 140 commercial banks fail.
- End of QE1
March 31, 2010
- Dodd-Frank becomes law
July 21, 2010
Obama signs into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping reform of U.S. financial regulation.
- Fed announces QE2
Nov. 3, 2010
The Fed says it will buy $600 billion in long-term Treasury bonds over the next eight months.
- End of QE2
June 30, 2011
- CFPB comes online
July 21, 2011
The Consumer Financial Protection Bureau is launched. The CFPB says its role is to educate people about financial markets, take consumer complaints, and enforce laws against discriminatory or fraudulent financial practices.
- Fed announces QE3
Sept. 13, 2012
The Fed votes to spend $45 billion per month buying mortgage-backed securities and $40 billion per month on longer-term Treasury bonds. The Fed also votes to keep target interest rates between zero percent and 0.25 percent until mid-2015 at the earliest. This round of buying is known as QE3.
- 51 bank failures in 2012
Dec. 31, 2012
During 2012, 51 commercial banks fail.
Sources: Federal Reserve, Congressional Budget Office, Consumer Financial Protection Bureau, Internal Revenue Service, Federal Housing Finance Agency, Federal Department of Housing and Urban Development, Bank of America, Federal Deposit Insurance Corp., PNC Bank, Wells Fargo, Consumer Reports, The New York Times, CNN.