PARTIAL HISTORY OF THE DECLINE OF THE USA’s FINANCE INDUSTRY
President Carter signs into law CRA (i.e., Community Investment Act). Carter
Mandates banks invest in poor urban areas.
Clinton changes CRA to require banks provide mortgages to their poorer communities.
*04/30"Bush declares that the size of Fannie Mae and Freddie Mac is a potential large financial problem because financial trouble of a large "GSE (i.e., Government Sponsored Enterprise) could cause strong repercussions in financial markets."
*01/22"Freddie Mac announces it must restate financial results for the previous 3 years due to earnings report errors.
*06/11"Freddie Mac is the subject of federal securities and criminal investigations.
*09/11"New York Times says, "Bush recommends the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."
*09/25--Barney Frank responds, "Fannie Mae and Freddie Mac do very good work, and they are not endangering the fiscal health of this country … I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists."
*10/29"Fannie Mae discloses $1.2 billion accounting error.
*06/16"Samuel Bodman, Deputy Secretary of Treasury, repeats Bush Administration call "for a new, first class, regulatory supervisor for three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System.
*10/06"Franklin Raines, Fannie Mae CEO, testifies before the House Financial Services Committee, "assets are so riskless that the capital for holding them should be under two percent. "
*05/25"Senator John McCain calls for GSE regulatory reform legislation, warning: "If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
*11/07"Democrats win majorities in both houses of Congress. The U.S. economy is growing at about 3 percent, unemployment is at 4.5 percent, and inflation under 2 percent.
*08/09" President Bush requests Congress pass a reform package for Fannie Mae and Freddie Mac.
*12/06" President Bush warns Congress of need to pass legislation reforming GSEs.
*03/14"J.P. Morgan and the Federal Reserve recognize extent of Bear’s toxic assets, including sub-prime mortgages, and credit default swaps, and interconnection with other banks.
*03/14"At Economic Club of New York, President Bush requests Congress take action and reform Fannie Mae and Freddie Mac.
*04/14"President Bush issues a plea to Congress to pass legislation reforming Fannie Mae and Freddie Mac.
*05/03"President Bush issues a plea to Congress to pass legislation reforming Fannie Mae and Freddie Mac.
*05/19"President Bush issues a plea to Congress to pass legislation reforming Fannie Mae and Freddie Mac.
*05/31"President Bush issues a plea to Congress to pass legislation reforming Fannie Mae and Freddie Mac.
*06/06"President Bush issues a plea to Congress to pass legislation reforming Fannie Mae and Freddie Mac.
*07/11"Senator Chris Dodd says: "There’s sort of a panic going on today, and that’s not what ought to be. The facts don’t warrant that reaction, in my opinion … Fannie Mae and Freddie Mac were never bottom feeders in the residential mortgage market. People ought to feel comfortable about that. "
*09/15"Lehman Brothers officially collapses, the government does not intervene, and panic occurs, triggering a big Dow decline.
*09/16"Nancy Pelosi is asked if the Democrats bear some responsibility for the current crisis on Wall Street. Pelosi answers, "No. "
*09/17"Harry Reid regarding the economic collapse: "No one knows what to do."
*09/18"About 11:00 AM, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States within two hours, equal to about $550. Treasury puts $105 billion in the system, but quickly realizes it cannot correct the problem.
*09/18"Paulson and Federal Reserve Chairman Ben Bernanke ask Congress for the required funds"and unprecedented authority to bail out the entire financial system. They say failure to act means "we may not have an economy on Monday."
*09/23" Paulson and Federal Reserve Chairman Ben Bernanke in Senate Banking Committee testimony outline the $700 billion asset relief program (TARP).
*09/29"That TARP version doesn’t pass the Democrat-controlled House of Representatives.
*10/03"Three days later TARP is passed after about $112 billion is added.
*11/05"The day after Barack Obama’s election, stocks plunge 500 points.
*11/12"Paulson changes the TARP rules from purchasing "troubled assets" to buying bank stocks to spur lending.
*11/23"Paulson gives Citibank a $308 billion bailout.
*12/06"Both houses of Congress agree to bail out the U.S. auto companies.
*12/18"President-elect Obama hints at an $800 billion to $1 trillion stimulus plan within his first month of office, and the Dow drops another 2.5 percent.