FACTBOX: A week that changed Wall Street and beyond
NEW YORK (Reuters) - Wall Street's landscape was transformed in the past week and the government made an unprecedented intervention to prop up chaotic financial markets. Here is a chronology of key events in probably the most tumultuous seven days in U.S. financial history since the Great Depression.
Friday Sept 12:
- Timothy Geithner, president of the New York Federal Reserve Bank, convenes an emergency meeting with Treasury Department officials and top executives at all the major Wall Street banks, including Citigroup, JP Morgan & Chase, Merrill Lynch, in an attempt to rescue ailing investment bank Lehman Brothers. A sticking point is the government's reluctance to provide financial support for a deal.
Saturday, September 13:
- Discussions continue at the New York Fed's Lower Manhattan building, and British bank Barclays plc emerges as a leading contender to buy Lehman, even as other major banks drop out of the running;
- A few blocks away, troubled insurer American International Group, which insured billions of dollars worth of collateralized debt obligations, begins talks with New York State's insurance superintendent as it fights for its survival.
Sunday, September 14:
- Lehman finds no buyer, but Bank of America reaches an agreement to buy Merrill Lynch, which is forced into the deal because of fears that it might also fail because of a loss of investor confidence. The fears center on toxic debt remaining on Merrill's balance sheet and its difficulty in raising new capital.
- A group of 10 global banks and securities firms, including JP Morgan Chase and Goldman Sachs announce a $70 billion loan program that they can tap to help ease a credit shortage;
Monday, September 15:
- Shortly after midnight, 158-year-old Lehman files for Chapter 11 bankruptcy;
- The Dow Jones Industrial Average falls more than 500 points in its biggest drop since Sept 17, 2001, the first day of trading following the 9/11 attacks. Meanwhile the FTSE 100, fell to its lowest level since June 2005.
Tuesday, September 16:
- AIG is taken over by the federal government -- getting an $85 billion revolving loan it has two years to pay off in exchange for a 79.9 percent government stake in the company. New York state will lead a task force to oversee AIG's sale of assets as it pays off that loan;
- Barclays agrees to pay $1.75 billion for some of Lehman's prime assets, including its Manhattan skyscraper and North American investment banking and capital markets businesses.
Wednesday, September 17:
- The U.S. stock market plummets, with the Dow Jones industrial average losing about 4 percent. Shares in the top two investment banks Goldman Sachs and Morgan Stanley slide by 14 percent and 24 percent, respectively. Morgan Stanley CEO John Mack blames short-sellers for his stock's woes.
Thursday Sept 18:
- The United Kingdom's Financial Services Authority bans short-selling on a number of financial stocks for four months.
- U.S. Treasury Secretary Henry Paulson shops around a plan to Congress that would create an entity similar to the Resolution Trust Corporation, which was created in 1989 to absorb bad debt in the Savings and Loan. The fund would likely acquire hundreds of billions of dollars of toxic mortgage debt;
The move helps the U.S. stock market to rise 3.9 percent, recover from three-year lows.
Friday September 19:
- The U.S. Securities and Exchange Commission issues an emergency order temporarily banning short-selling in shares of about 799 financial institutions to calm the financial markets. The measure is set to end on October 2, but can be extended by another 10 days;
The FTSE rises 8.8 percent, its biggest surge ever;
- Market watchdogs in France, Portugal and Ireland take similar steps to crack down on short-selling.
(Compiled by Phil Wahba)
