Lehman Brothers was the first major bank to collapse in the credit crisis.
The full story...
Two years ago, few people had heard of the term credit crunch, but the phrase has now entered dictionaries.
Defined as "a severe shortage of money or credit", the start of the phenomenon has been pinpointed as 9 August 2007 when bad news from French bank BNP Paribas triggered sharp rise in the cost of credit, and made the financial world realise how serious the situation was.
The roots of the credit crunch, however, started earlier.
A quick guide to the origins of the global financial crisis.
FINANCIAL CRISIS: HOW IT HAPPENED
Most analysts link the current credit crisis to the sub-prime mortgage business, in which US banks give high-risk loans to people with poor credit histories. These and other loans, bonds or assets are bundled into portfolios - or Collateralised Debt Obligations (CDOs) - and sold on to investors globally.
Falling house prices and rising interest rates lead to high numbers of people who cannot repay their mortgages. Investors suffer losses, making them reluctant to take on more CDOs. Credit markets freeze as banks are reluctant to lend to each other, not knowing how many bad loans could be on their rivals' books.
The impact of the sub-prime mortgage crisis is quickly shown to have implications beyond the United States. Losses are felt by investment banks as far afield as Australia. Firms cancel sales of bonds worth billions of dollars, citing market conditions.
The US Federal Bank and the European Central Bank tries to bolster the money markets by making funds available for banks to borrow on more favourable terms. Interest rates are also cut in an effort to encourage lending.
But the short-term help does not solve the liquidity crisis - or availability of cash for banks - as banks remain cautious about lending to each other.
A lack of credit - to banks, companies and individuals - brings with it the threat of recession, job losses, bankruptcies, repossessions and a rise in living costs.
UK bank Northern Rock seeks an emergency loan to stay afloat, prompting a "run" on the bank, as worried customers withdraw £2bn. The bank is later nationalised. In the US, the near-collapse of Bear Stearns leads to a crisis of confidence in the financial sector and the end of investment-only banks.
Seeking a long-term solution, the US government agrees a $700bn bail-out that will buy up Wall Street's bad debts in return for stake in the banks.
The US government plans to borrow the money from world financial markets and hopes it can sell the distressed assets back once the housing market has stabilised.
The UK government launches its own bail-out, making £400bn extra capital available to eight of the UK's largest banks and building societies in return for preference shares in them.
In return for its investment, the government expects to get a stake in the banks - although exactly how much is not quite clear yet.
Economies around the world are affected by the credit crunch. Governments move to nationalise banks from Iceland to France. Central banks in the US, Canada and some parts of Europe take the unprecedented step of co-ordinating a half-point percent cut in interest rates in an effort to ease the crisis.
Shares have risen and fallen with news of failures, takeovers and bail-outs. In part, this reflects investors' confidence in the banking system. While bank shares have been hammered because of bad debts, retailers have been hit as consumer confidence is shaken by falling house prices and job insecurity.
Investment bank BNP Paribas tells investors they will not be able to take money out of two of its funds because it cannot value the assets in them, owing to a "complete evaporation of liquidity" in the market.
It is the clearest sign yet that banks are refusing to do business with each other.
The chairman and chief executive of the bank step down. Later, banking giant Citigroup unveils a sub-prime related loss of $3.1bn. A fortnight on Citigroup is forced to write down a further $5.9bn. Within six months, its stated losses amount to $40bn.
Ratings agency Standard and Poor's downgrades its investment rating of a number of so-called monoline insurers, which specialise in insuring bonds. They guarantee to repay the loans if the issuer goes bust.
There is concern that insurers will not be able to pay out, forcing banks to announce another big round of losses.
The Qatar Investment Authority, the state-owned investment arm of the Gulf state, will invest £1.7bn in the British bank, giving it a 7.7% share in the business. A number of other foreign investors increase their existing holdings.
Lloyds TSB announces it is to take over Britain's biggest mortgage lender
HBOS in a £12bn deal
creating a banking giant holding close to one-third of the UK's savings and mortgage market. The deal follows a run on HBOS shares.
The US House of Representatives rejects a $700bn rescue plan for the US financial system - sending shockwaves around the world.
It opens up new uncertainties about how banks will deal with their exposure to toxic loans and how credit markets can begin to operate more normally. Wall Street shares plunge, with the Dow Jones index slumping 7% or 770 points, a record one-day point fall.
The government is also offering up to £200bn ($350bn) in short-term lending support.
The US Federal Reserve, European Central Bank (ECB), Bank of England, and the central banks of Canada, Sweden and Switzerland
make emergency interest rate cuts
of half a percentage point. The Fed cuts its base lending rate to 1.5%, the ECB to 3.75%, and the Bank of England to 4.5%.
The UK government announces plans to pump billions of pounds of taxpayers' money into three UK banks in
one of the UK's biggest nationalisations.
Royal Bank of Scotland (RBS), Lloyds TSB and HBOS will have a total of £37bn injected into them.
The takeover of troubled US bank Wachovia by Well Fargo is
approved by regulators
. Banking giant Citigroup had tried to block the move after it launched rival bid.
The US government unveils
a $250bn (£143bn) plan
to purchase stakes in a wide variety of banks in an effort to restore confidence in the sector.
President George W Bush says it will help to return stability to the US banking sector and ultimately help preserve free markets.
Figures for US retail sales in September show a fall of 1.2%, the biggest monthly decline in more than three years, as hard-up consumers avoid the shops.
The UK is on the brink of a recession according to figures released by the Office for National Statistics. The economy shrank for the first time in 16 years between July and September, as economic growth fell by 0.5%.
The International Monetary Fund (IMF) approves a
$2.1bn (£1.4bn) loan for Iceland
, after the country's banking system collapsed in October. It is the first IMF loan for a Western European nation since 1976.
The US government announces a
$20bn (£13.4bn) rescue plan
for troubled banking giant Citigroup after its shares plunge by more than 60% in a week.
The UK government announces a temporary cut in the level of VAT - to 15% from 17.5% - in its
. Chancellor Alistair Darling also says government borrowing will rise to record levels, but defends the move as essential to save the UK from a deep and long-lasting recession.
The US Federal Reserve announces it will
inject another $800bn into the economy
in a further effort to stabilise the financial system and encourage lending. About $600bn will be used to buy up mortgage-backed securities while $200bn is being targeted at unfreezing the consumer credit market.
is officially declared by the National Bureau of Economic Research, a leading panel including economists from Stanford, Harvard and MIT. The committee concludes that the US economy started to contract in December 2007.
French President Nicolas Sarkozy unveils a
26bn euro stimulus plan
to help France fend off financial crisis, with money to be spent on public sector investments and loans for the country's troubled carmakers.
Bank of America announces up to 35,000 job losses over three years following its takeover of Merrill Lynch. It says the cuts will be spread across both businesses.
The US government reaches an agreement to provide
Bank of America
with another $20bn in fresh aid from its $700bn financial rescue fund. The emergency funding will help the troubled bank absorb the losses it incurred when it bought Merrill Lynch.
US banking giant Citigroup
announces plans to split the firm in two, as it reports a quarterly loss of $8.29bn (£5.6bn).
The UK has officially
entered a recession
as fourth quarter GDP falls by 1.5% compared to the previous three months.
President Obama pledges that his
economic recovery package
will be at the centrepiece of his administration. Mr Obama says that 80% of the spending will take place within 18 months.
World economic growth is set to fall to just 0.5% this year, its lowest rate since World War II, warns the International Monetary Fund (IMF). It now projects the
will see its economy shrink by 2.8% next year, the worst contraction among advanced nations.
The International Labour Organization said that as many as 51 million
could be lost this year because of the global economic crisis.
The Bank of England
cuts interest rates
to a record low of 1% from 1.5% - the fifth interest rate cut since October.
US President Barack Obama signs his $787bn (£548bn)
economic stimulus plan
into law, calling it "the most sweeping recovery package in our history".
The plan is aimed at saving or creating 3.5 million jobs and boosting consumer spending and rebuilding infrastructure.
Insurance giant AIG reports the
largest quarterly loss in US corporate history
of $61.7bn (£43bn) in the final three months of 2008. The firm is also to receive an extra $30bn from the US government as part of a revamped rescue package.
Leaders of the world's largest economies reach an agreement at the
G20 summit in London
to tackle the global financial crisis with measures worth $1.1 trillion (£681bn).
The IMF raises its forecast of total financial sector writedowns to $4 trillion. It says
in its Global Stability Report
that only $1 trillion has been written down so far, and that almost half the exposure is outside the US.
The UK reveals its most pessimistic Budget forecast yet. Chancellor Alistair Darling says the UK economy will shrink by 3.5% in 2009 and predicts a £175bn budget deficit
amounting to more than 10% of GDP.
SIGNS OF RECOVERY, SIGNS OF COLLAPSE
One of the "big three" US carmakers, Chrysler,
enters bankruptcy protection
after pressure from the US government. The majority of its assets are to be sold to Fiat.
Bankers made "an astonishing mess" of the financial system,
the UK Treasury Committee says.
The effects of the banking crisis will be felt for generations, the MPs warned.
The US government announces a
major reform of banking regulation
to prevent future financial crises. President Barack Obama describes it as the biggest shake-up of the US system of financial scrutiny since the 1930s.
General Motors says it has emerged from bankruptcy protection after creating a
made up of the carmaker's best assets. The leaner GM will own four key brands including Cadillac and will be 61% owned by the US government.
Goldman Sachs beats analysts' forecasts
with a net profit of $3.44bn (£2.1bn) for April to June. It says it has set aside $6.65bn for pay and bonuses in the quarter. Several - but not all - other US banks subsequently announce big profits. However, analysts warn that the US banking crisis is not yet over.
UK unemployment rose by a record 281,000 to 2.38 million in the three months to May, the Office for National Statistics says. The
jobless rate increased to 7.6%,
the highest in more than 10 years.
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