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Last Updated: Friday, 31 August 2007, 13:00 GMT 14:00 UK
Timeline: Sub-prime problems
Stock market traders
The volatile world markets have given many traders headaches
Global markets have been shaken up by fears of a credit crunch.

Billions of dollars have been wiped off share prices, while the credit markets have been going through a period of repricing that prompted fears of a meltdown.

But what triggered all the problems, and what were the main events?

30 June 2004
The US Federal Reserve starts a cycle of interest rate rises that will lift borrowing costs from 1%, their lowest level since the 1950s, to the current level of 5.25%.

The central bank will go on to increase interest rates 17 times in a row as it tries to slow inflation. It pauses in June 2006, and has not lifted borrowing costs from 5.25% since then.

August 2005 through 2006
Higher borrowing costs start to impact on the US housing market and the property boom starts to unwind.

Building rates drop sharply to decade lows and prices also start to come down.

Defaults on sub-prime mortgages - where lenders give cash to people with poor or no credit history at higher than normal repayment levels - start to increase.

12 March 2007
Shares in New Century Financial, one of the biggest sub-prime lenders in the US, are suspended amid fears it may be heading for bankruptcy.

16 March
US-based sub-prime firm Accredited Home Lenders Holding says it will pass on $2.7bn of money loaned - at a heavy discount - in order to generate some cash for its business.

2 April
New Century Financial files for Chapter 11 bankruptcy protection after it was forced by its backers to repurchase billions of dollars worth of bad loans.

The company says it will have to cut 3,200 jobs, more than half of its workforce, as a result of the move.

24 May
Shares in Bear Stearns come under pressure as questions are raised about the investment bank's exposure to the sub-prime market in the US.

14 June
Reports emerge that Bear Stearns is liquidating its assets in a hedge fund that made large bets on the US sub-prime market.

20 June
Merrill Lynch seizes and sells $800m (400m) of bonds that are being used as collateral for loans made to Bear Stearns' hedge funds.

22 June
Bear Stearns says it will provide $3.2bn in loans to bail out one of its hedge funds, the High-Grade Structured Credit Strategies Fund.

The bailout of the fund would be the largest by a bank in almost a decade.

Analysts have also been questioning the position of another fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund.

25 June
Reports emerge that Bear Stearns will have to rescue a second hedge fund as rival banks refuse to help in bailing it out.

29 June
Bear Stearns hires a new head of asset management to find out what went wrong at its hedge funds.

4 July
The UK's Financial Services Authority (FSA) says it will take action against five brokers that sell sub-prime mortgages, claiming they offer loans to people who should not be given them.

10 July
Independent market analyst Datamonitor says UK sub-prime mortgages are set to grow faster than mainstream mortgages, with the market worth some 31.5bn by 2011.

13 July
US industrial firm General Electric decides to sell the WMC Mortgage sub-prime lending business that it bought in 2004.

"The mortgage industry has greatly changed since the purchase of WMC," says its chief Laurent Bossard.

18 July
Bear Stearns tells investors that they will get little, if any, money back from the two hedge funds that the lender has had to rescue.

20 July
Federal Reserve chairman Ben Bernanke warns that the crisis in the US sub-prime lending market could cost up to $100bn.

26 July
Bear Stearns seizes assets from one of its problem-hit hedge funds as it tries to stem losses.

27 July
Worries about the sub-prime crisis hammer global stock markets and the main US Dow Jones stock index loses 4.2% in five sessions, its worst weekly decline in almost five years.

31 July
Bear Stearns stops clients from withdrawing cash from a third fund, saying it has been overwhelmed by redemption requests.

The lender also files for bankruptcy protection for the two funds it had to bail out earlier.

3 August
US stock markets fall heavily, with the main Dow Jones Index ending the session 2.1% lower, amid fears about how many financial firms are exposed to problems in the sub-prime market.

A top Bear Stearns executive says credit markets are in the worst turmoil he has seen in 22 years.

London's main FTSE 100 stock index closes down 1.2% at 6,224.3, with French and German markets also declining.

5 August
Bear Stearns co-president Warren Spector steps down, as the lender looks to restore investor confidence following the problems with its sub-prime exposure.

6 August
American Home Mortgage, one of the largest US independent home loan providers, files for bankruptcy after laying off the majority of its staff.

The company says it is a victim of the slump in the US housing market that has caught out many sub-prime borrowers and lenders.

9 August
French bank BNP Paribas suspends three investment funds worth 2bn euros (1.4bn), citing problems in the US sub-prime mortgage sector.

BNP says that it cannot value the assets in the fund, because the market has disappeared.

Dutch bank NIBC announces losses of 137m euros from asset-backed securities in the first half of this year.

The European Central Bank (ECB) pumps 95bn euros into the eurozone banking market to allay fears about a sub-prime credit crunch.

The US Federal Reserve and the Bank of Japan take similar steps.

10 August
Global stock markets stay under intense pressure.

London's FTSE 100 index has its worst day in more than four years, closing 3.7% lower.

The ECB provides an extra 61bn euros of funds for banks.

The US Fed says it will provide as much money as is needed to combat the credit crunch.

13 August
Wall Street giant Goldman Sachs says it will pump $2bn into one of its funds to help shore up its value.

The ECB pumps 47.7bn euros into the money markets, its third cash injection in as many working days.

Central banks in the US and Japan also top up earlier injections.

14 August
Stock markets remain jittery as news continues to come out about the exposure of banks to the fallout from the sub-prime market.

Swiss bank UBS warns that the market turmoil is likely to hit its earnings in the July to September period.

Australian mortgage lender Rams Home says the "unprecedented disruptions" in credit markets may reduce its profit.

17 August
The US Federal Reserve cuts the interest rate at which it lends to banks by a quarter of a percentage point to help banks deal with credit problems.

26 August
The German regional bank SachsenLB is rapidly sold to Germany's biggest regional bank, Landesbank Baden-Wuerttemberg.

It came close to collapsing under its exposure to sub-prime debt.

30 August
German Chancellor Angela Merkel criticises credit ratings agencies for not spotting companies with credit problems.

There has been criticism of the high ratings given to bundles of debt that included sub-prime mortgages.


MARKET DATA - 11:36 UK

FTSE 100
5429.64up
23.70 0.44%
Dax
5733.05up
19.54 0.34%
Cac 40
3784.02up
14.48 0.38%
Dow Jones
10403.79up
78.53 0.76%
Nasdaq
2273.57up
35.31 1.58%
S&P 500
1115.71up
11.22 1.02%
BBC Global 30
5707.15up
20.65 0.36%
Data delayed by at least 15 minutes


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