(Reuters) - U.S. authorities have accused a group of former Credit Suisse Group AG CSGN.VX traders of falsely inflating the value of mortgage-backed securities on the investment bank’s books as the financial crisis began to take shape.
The traders were able to artificially manipulate pricing on a mortgage-backed bond portfolio for six months, from August 2007 through February 2008, despite clear signs that the value of those securities had deteriorated significantly, according to criminal charges filed by the Justice Department and a civil lawsuit from the Securities and Exchange.
Their actions contributed to Credit Suisse taking an unexpected writedown of $2.65 billion on subprime mortgage trades.
Here is a timeline of key events in the subprime mortgage market around the time of the alleged pricing manipulation at Credit Suisse:
December, 2006 - Ownit Mortgage Solutions files for bankruptcy protection.
Feb 27, 2007 - Freddie Mac announces it will no longer buy the most risky subprime mortgages.
March 2007 - Goldman Sachs has begun hedging its exposure to the subprime market. In a March 10 email, mortgage traders prepare to tell directors they have reversed a $6 billion bet on subprime mortgages to make a $10 billion bet against them.
April 2, 2007 - Mortgage firm New Century files for bankruptcy.
June 17, 2007 - Two Bear Stearns subprime hedge funds collapse.
July 10 and 12, 2007 - Credit rating agencies issue wave of downgrades on hundreds of mortgage securities.
August 2007 - Key index of subprime mortgage securities hits record low. Credit Suisse trader David Higgs values his portfolio above falling market, according to SEC and Justice Department complaints. More subprime mortgage loan companies fail.
October 1, 2007 - Citigroup says it will report big losses related to subprime mortgages.
October 5, 2007 - Merrill Lynch says it will write down mortgage securities by $5.5 billion.
November, 2007 - Subprime securities prices hit new lows, according to data vendor Markit.
January 2008 - Subprime securities market has dried up to the point that Markit suspends new indexes.
February 19, 2008 - Credit Suisse discovers mismarking of securities and announces $2.65 billion write-down, $540 million of which pertained to collateralized debt obligations.
Sources: Reuters reporting; documents outlining federal charges against former Credit Suisse trader; and 2010 report from the U.S. Senate Permanent Subcommittee on Investigations called “Wall Street and the Financial Crisis: The Role of Investment Banks.”
Reporting by Lauren Tara LaCapra and David Henry in New York; Editing by Tim Dobbyn