How they Got Away with it: White Collar Criminals and the Financial Meltdown

Government responses are denoted with italics; international financial meltdowns are denoted with [square brackets] and those in the United States are denoted with boldface.

1637	Tulip mania damages the futures market and Dutch trade in general.
1797	Reserves in the UK fall low, creating a monetary crisis. The Bank of England’s hold on cash payments creates a panic.
1819	The United States’ first major financial crisis
1836	[U.S. real estate speculation causes stock markets to crash in the UK, Europe, and then in the United States.]
1847	[A credit crisis and bank panic occur when railroad stock prices crash in France and the UK.]
1873	Vienna stock exchange collapses, causing the “great stagnation” on a global scale and lasts until 1896.
1882	France’s Union Generale goes bankrupt, causing banking crisis and market crash.
1890	[The UK’s oldest bank, Barings, nearly collapses from its exposure to Argentine debt.]
1907	[U.S. bank panic spreads to France and Italy after a stock market collapse.]
1923	Hyperinflation in Germany starts monetary crisis.
1929	The Great Depression begins, spreading to the UK, Japan, Germany, and Austria.
1933	Implementation of Glass-Steagall Act
1934	Creation of the Securities and Exchange Commission (SEC)
1938	Creation of Fannie Mae
1944	Bretton Woods Meeting of 45 countries. They agree on a framework for international economic cooperation to be established after World War II.
March 1, 1947	International Monetary Fund (IMF) begins operations.
1966	U.S. credit crisis creates deflation and huge economic slump.
1970	*Freddie Mac created under Emergency Home Finance Act of 1970*
1973	[World financial crisis begins after OPEC quadruples the price of oil.]
1980	*Depository Institutions Deregulation and Monetary Control Act*
1982	Global credit crunch prevents developing countries from paying their debt.
	*Garn-St. Germain Depository Institution Act of 1982; Alternative Mortgage Transaction Parity Act*
1984–1990	Savings and loan crisis in the United States
1987	Bond and equity market crashes.
March 31, 1988	*Portions of Glass-Steagall repealed.*
1989	Japanese bubble
	Junk bond crisis
1992	[French Maastricht Treaty sparks crisis in European Monetary System.]
November 1, 1993	The Maastrich Treaty comes into force, formally creating the European Union (EU).
1994	*Home Ownership and the Equity Protection Act*
1995	Mexican financial crisis caused by the peso’s peg to the dollar during excessive inflation.
1997	[Asian financial crisis begins with the collapse of the Thai baht. It caused currency depreciations and declines in stock markets which spread first through most of Southeast Asia and then to the rest of the region.]
1998	Dramatic inflation of the Russian ruble causes widespread shortages in goods. Russia defaults on payment obligations during major financial crisis.
October 1999	Washington Mutual buys Long Beach Bank and uses it as its subprime lender.
November 1999	*The passage of the Gramm-Leach-Bililey Act, in esssence, repealed Glass-Steagall.*
2000	Dot-com bubble pops, creating a massive fall in equity markets from overspeculation in tech stocks.
2001	September 11 attacks create risk by hindering various critical communication hubs necessary for payment on the financial markets.
	Economic crisis in Argentina, resulting in the government defaulting on payment obligations
October 2001	Enron announces $1.2 billion loss, leading to its collapse.
2002	Euro notes and coins replace national currencies in twelve of the member states.
	Bond market crisis in Brazil
July 30, 2002	*Sarbanes-Oxley Act passed*.

The Financial Meltdown 2007–2011

May 5, 2006

Possibly the first casualty of the looming subprime crisis, Kirkland, Washington–based Merit Financial Inc. files for bankruptcy and closes its doors.

2007
	U.S. real estate crisis causes the collapse of many international banks and financial institutions. Equity markets take a dive.
	Long Beach Bank closed by WaMu.
	GreenPoint Savings Bank shut down by Capitol One.
	NovaStar Financial Inc. stops making mortgage loans.
January 3	Ownit Mortgage Solutions Inc. files for Chapter 11. It owed Merrill Lynch around $93 million at the time of filing.
February 5	Mortgage Lenders Network USA Inc. files for Chapter 11. It is the fifteenth largest subprime lender, with $3.3 billion in loans funded in third quarter 2006.
February 10	The Group of Seven Finance Ministers meet in Essen, Germany, to discuss worldwide financial problems. Germany believes the lack of hedge fund regulation could be a source of systematic risk for the financial system, but the United States believes market discipline is the best way to address the issue.
February 27	*The Federal Home Loan Mortgage Corporation (Freddie Mac) announces that it will no longer buy the riskiest sub-prime mortgages and mortgage-related securities.*
April 2	New Century Financial Corporation, a leading subprime mortgage lender, files for Chapter 11 bankruptcy protection. Largest U.S. subprime lender in defaults on $8.4 billion in loan repayments. New Century made $51.6 billion in subprime loans in 2006, making it second in subprime lending. It is delisted from the NYSE.
July	Wells Fargo stops originating loans with 2-year teaser rates.
July 11	Standard & Poor’s places 612 securities backed by sub-prime residential mortgages on a credit watch.
August	Lehman Brothers closes BNC Mortgage but continues to make loans via its subsidiary Aurora Loan Services LLC, which is not part of the company’s September 15, 2008, bankruptcy filing.
	Aegis Mortgage Corp. and American Home Mortgage Investment Corp. file for bankruptcy.
August 6	American Home Mortgage Investment Corporation files for Chapter 11.
August 9	BNP Paribas, France’s largest bank, halts redemptions on three investment funds.
August 16	Fitch Ratings downgrades Countrywide Financial Corporation to BBB+, its third lowest investment-grade rating. Countrywide borrows the entire $11.5 billion available in its credit lines with other banks.
August 31	Argent Mortgage Co., Town & Country Credit Corp., and Ameriquest Mortgage Co., all subsidiaries of ACC Capital Holdings Corp. (the parent company), are sold to Citigroup Inc.
September 14	The Chancellor of the Exchequer authorizes the Bank of England to provide liquidity support for Northern Rock, the United Kingdom’s fifth largest mortgage lender.
October	Encore Credit Corp. is folded into Bear Stearns Residential Mortgage in October 2007 and stops making loans out of the office in December.
	The Treasury Department and the Department of Housing and Urban Development encourage the formation of the HOPE NOW initiative by an alliance of investors, servicers, mortgage market participants, and credit and homeowners’ counselors to help distressed homeowners stay in their homes.
October 15	Citigroup, Bank of America, and JPMorgan Chase announce plans for an $80 billion Master Liquidity Enhancement Conduit to purchase highly rated assets from existing special-purpose vehicles.
2008
February	First Franklin Financial Corp. and NationPoint close all wholesale and retail loan operations.
February 13	*President George W. Bush signs the Economic Stimulus Act of 2008 (Public Law 110-185) into law.*
June	Wilmington Finance Inc. (AIG subsidiary) shuts down its wholesale lending operation.
June 18	Fremont General Corp. (Fremont Investment & Loan) files for bankruptcy and the following month sells the bank branches and deposits of Fremont Investment & Loan to CapitalSource Inc.
July	Countrywide Financial Corp. is bought by Bank of America for $4 billion.
	Martinsa Fadesa, a large Spanish construction company, declares bankruptcy, leaving banks exposed to ₠1 billion of debt. Spain refuses to bail out Martinsa Fadesa.
July 11	*IndyMac seized by the Federal Office of Thrift Supervision.*
September	*Washington Mutual seized by Office of Thrift Supervision. FDIC “facilitates” the bank’s sale to JPMorgan Chase for $1.9 billion.*
September 15	Lehman Brothers declares bankruptcy.
October 3	Congress passes the Emergency Economic Stabilization Act of 2008, Public Law 110-343. The law authorizes the creation of the Troubled Asset Relief Program and provides $700 billion to purchase “troubled assets” and equity from financial institutions to strengthen the financial sector.
October 7	Iceland’s government takes control of the country’s second and third largest banks, Landsbanki and Glitnir.
October 8	Iceland’s government takes control of its largest bank, Kaupthing.
November	[The IMF loans Iceland $2.1 billion, and Nordic countries provide an additional $2.1 billion loan.]
December 11	*Bernard Madoff arrested.*
December 31	Wells Fargo & Co. buys Wachovia.

2009
February 17	EquiFirst, a subsidiary of Barclays Bank stops making loans.
March	HSBC Finance Corp.’s consumer lending business discontinues loan origination of all products.
March 19	OneWest Bank Group purchases IndyMac from FDIC.
April	Ireland proposes a National Asset Management Agency to take over large loans from banks to allow the banks to return to normal liquidity.
October	The Greek government announces that the 2009 budget deficit will be 12.7 percent, more than double the previously an nounced figure.
December	Fitch Ratings reduces Greek debt rating from A− to BBB+.

2010
Aril	Portugal’s debt rating is reduced from A+ to A− by Standard & Poor’s.
May	The EU approves a $146 billion bailout for Greece.
July 21	*Dodd-Frank Wall Street Reform and Consumer Protection Act is signed into law*.
September 18	In the United States, Elizabeth Warren is appointed “assistant to the president” to help set up Consumer Financial Protection Board (she later resigns/withdraws).
November	[Ireland agrees to a ₠85 billion bailout from the EU and the IMF. Ireland outlines ₠15 billion ($20.55 billion) in spending cuts and tax hikes over 4 years, which is intended to reduce the budget deficit to 9.1 percent of GDP in 2011.
	Portugal announces austerity measures to reduce debt, denies need for bailout.]

2011
January 27	*Financial Crisis Inquiry Commission Report released.*
February–March	*Wisconsin moves to dissolve collective bargaining rights for its public workers.*
March	[Standard & Poor’s cuts its debt rating for Portugal from BBB to BBB− (its lowest investment grade rating) and Greece from BB+ (junk) to BB−. Ireland’s rating is BBB+. All three countries are dependent on short-term financing from the European Central Bank for their survival.]
April 6	[Portugal asks the EU for a bailout.]
June	*Government operations in the state of Minnesota are shut down when the governor and state legislators fail to agree on a package of spending reductions and tax increases.*
July	*President Barack Obama and Republican leaders begin tense discussions about lifting the U.S. debt ceiling.*
July 21	[European community approves a $157 billion bailout for Greece and reduced interest rates on the aid it has given to Ireland and Portugal.]
August 5	Standard & Poor’s downgrade the United States long-term sovereign credit rating from AAA to AA+.
September 17	Occupy Wall Street movement begins in New York City and spreads throughout the United States and to many large cities in the world to protest social and economic inequality, high unemployment, greed, corruption, and corporate influence on government. The protestors highlighted the economic and political disparity in the United States with their slogan, “We are the 99%.”
October 31	MF Global, as a result of reported quarterly losses of $191.6 million on trades of European government bonds, files for Chapter 11 bankruptcy making it the largest Wall Street collapse since Lehman Brothers in September 2008. Subsequently, the bankruptcy trustee discovers that approximately $1.2 billion is missing from clients’ accounts.
November 15	The Occupy Wall Street encampment in Zuccotti Park in New York City is shut down by police.
November 28	Judge Jeb. S. Rakoff of Federal District Court in Manhattan rejects the SEC’s $285 million settlement with Citigroup in which the bank did not have to acknowledge or deny the veracity of the SEC’s allegations.

2012
January 4	President Obama uses a recess appointment to make Richard Cordray director of the Bureau of Consumer Financial Protection, watchdog agency created by the Dodd-Frank financial reform legislation in 2010.
January 24	President Obama announces creation of a Financial Crimes Unit headed by New York State Attorney General Eric Schneiderman to investigate frauds, including false statements, mail and wire fraud, and failure to comply with the Financial Institutions Reform, Recovery and Enforcement Act of 1989. This unit is distinct from the Financial Fraud Task Force, which the administration created three years ago and has concentrated on small-time fraud and generally settled for civil fines.
February	[Moody’s downgrades Italy and Malta from A₃ from A₂, Slovakia and Slovenia to A₂ from A₁, Spain to A₃ from A₁, and Portugal to B_a3 from B_a2.]
February 9	A $26 billion negotiated settlement between federal and states authorities and five mortgage servicers—Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial is designed to provide relief to nearly two million current and former American homeowners harmed by the housing crisis. The states retained the right to pursue allegations of criminal wrongdoing against the banks.
February 12	The Greek Parliament passed an austerity measure that, among other things, will cut 5,000 public-sector jobs and lower the minimum wage by 20 percent, from ₠752 a month to ₠600, in hopes of receiving a $172 billion bailout. This action was followed by violent protests.
May 10	J.P. Morgan announced its London offices lost $2 billion trading highly leveraged, risky derivative.