Three amazing weeks

Sept. 7: The Treasury Department takes control of troubled mortgage giants Freddie Mac and Fannie Mae, with assets of $794 billion and $883 billion respectively.

Sept. 15: Lehman Brothers Holdings Inc., declares bankruptcy, with $639 billion in assets the largest bankruptcy filing in U.S. history.

Sept. 15: Bank of America takes over Merrill Lynch & Co., with $1 trillion in assets, in another shotgun wedding “encouraged” by federal regulators. The Dow Jones Industrial Average drops 504 points.

Sept. 16: Taxpayers become proud owners of 80 percent of American International Group, bailed out by the Federal Reserve with a loan pledge of up to $85 billion, eventually raised to $180 billion. Unimaginably, the U.S. central bank has taken control of an insurance company.

Sept. 16: Shares in the money market fund Reserve Primary Money Fund fall to 97 cents for each $1 put in by investors, mainly because of losses on Lehman’s unsecured commercial paper, which the fund held. This is only the second time since money market funds began in 1970 that such funds — thought by many Americans to be as safe a place to put their money as a bank deposit – have exposed customers to possible loss of their principal. Depositors begin to withdraw hundreds of millions of dollars from money market funds. 

Sept. 16: Big institutions stop lending, because they don’t trust they will be paid back. A slowdown in lending has been building for months. On this day, credit appears to be frozen. 

Sept. 17: The Dow drops 449 points.

Sept. 21: Investment banks Goldman Sachs and Morgan Stanley jump ship to become commercial banks and get access to the Federal Reserve’s discount window.

Sept. 25: Federal regulators close Seattle-based Washington Mutual Bank, with $310 billion in assets the largest failure of an FDIC-insured bank in history,  and sell its banking operations to JP Morgan Chase & Co.


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