The US government has implemented a series of measures to help the troubled financial sector, and the wider economy, since the crisis broke in September 2008. The following timeline gives some of the key developments in the evolution of the various bail-out packages.
- TARP (Troubled Assets Relief Program): The $700bn (£478bn) rescue package run by the US Treasury and approved by Congress in October 2008. The first half of the money was disbursed before Christmas, and mainly spent on taking stakes in banks. Some of the remaining money has also been spent on rescuing the auto industry, guaranteeing loans for small businesses and providing assistance for homeowners who want to refinance mortgages. The Obama administration has pencilled in an additional $250bn in bail-out funds in its 20009/10 budget proposals.
- Economic Recovery Plan: The American Recovery and Reinvestment Act is the $787bn stimulus plan to boost economic growth backed by the Obama administration. It includes a mixture of tax cuts, aid to states, and infrastructure spending. It has been passed by Congress and signed into law, but much of the spending will take place in 2010.
- Federal Reserve: The US central bank has introduced several new lending facilities to help ease credit and pressures on financial markets, including purchases of mortgage-backed securities, commercial bonds of companies, and assets held by non-bank financial institutions such as credit card or auto loan companies. This program, known as Term Asset Backed Lending Facility (TALF), has been expanded and the Fed's commitments could swell to $3 trillion - 20% of GDP. The Fed is also now directly buying up US government debt to increase the money supply and lower interest rates.
US officials start working on a $700bn plan to help rid US banks of their bad debts in order to tackle the devastating global financial crisis. After a meeting with Congress members, US Treasury Secretary Henry Paulson says new laws are needed to deal with the "root" of the problem.
US Senate approves a revised version of the rescue plan, including tax breaks for families and businesses, among other measures designed to win over sceptics. The original bill was criticised for pandering to the needs of Wall Street bankers at the expense of ordinary citizens.
The US House of Representatives passes the government's rescue plan. The new version is adopted after the Senate added about $100bn in new tax breaks to win Republican votes.
The US Federal Reserve announces plans to buy massive amounts of short-term debt from companies in an effort to unfreeze the money markets.
TAPPING THE RESCUE MONEY
The US government taps into the $700bn available from the Emergency Economic Stabilization Act to announce a $250bn plan to purchase stakes in a wide variety of banks in an effort to restore confidence in the sector. Government deposit insurance is expanded to cover accounts used by small businesses.
The United States government announces it will sell bonds worth $55bn in an effort to finance its bank rescue programme. The Treasury Department launches a new type of bond, which will reach maturity after three years.
Insurance giant AIG gets fresh financial help from the US government, which brings the total aid package for the firm to about $150bn (£94bn). The government will put $40bn into the firm by buying preference shares, which will give it an ownership stake in AIG. The $40bn comes from the $700bn bail-out package for the US financial system.
CHANGE OF DIRECTION
US Treasury Secretary Henry Paulson says authorities have abandoned plans to use some of the $700bn to buy up banks' bad debts. Instead, the bail-out fund will continue to be used to buy shares in the lenders to help boost their balance sheets.
The Federal Reserve says it is to inject another $800bn into the US economy in a further effort to stabilise the financial system. About $600bn will be used to buy up mortgage-backed securities while $200bn is being targeted at unfreezing the consumer credit market.
The US government says it will provide $17.4bn in loans to help troubled carmakers General Motors and Chrysler survive - though Ford says it hopes to cope without the aid.
President George W Bush says allowing the US car industry to fail would not be "a responsible course of action".
OBAMA'S PLAN UNVEILED
15 January 2009
Democratic leaders in the House of Representatives unveil a $825bn recovery package aimed at turning around the US economy.
The mix of tax cuts and spending - developed with President-elect Barack Obama - aims to create millions of jobs as it attempts to halt the recession.
Separately, the US Treasury announces that Bank of America will receive $20bn (£13.4bn) in fresh government aid and $118bn worth of guarantees against bad assets. This is in addition to the $25bn it received last October.
The US's largest bank has struggled to absorb the losses incurred when it took over Merrill Lynch.
US Treasury Secretary-designate Tim Geithner tells the Senate Finance Committee that the TARP bail-out funds may not be adequate to meet the current crisis, and pledges that future funds will be targeted to help homeowners and small businesses.
He also reveals that the administration is planning to bring forward plans to improve regulation of the financial sector and fresh plans to aid the ailing housing sector.
President Obama pledges that his economic recovery package will be at the centrepiece of his administration and says he hopes that the $825bn plan will pass Congress by mid-February. The House of Representative has already begun deliberations on the plan, which includes tax cuts, aid to states, and a boost to spending on infrastructure.
Mr Obama says that 80% of the spending will take place within 18 months.
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.
The US government has announced wide ranging measures to help domestic small businesses cope with the ravages of the global economic downturn. The package will use up to $15bn (£10.6bn)to increase liquidity to encourage lending to small companies.
Car parts suppliers in the United States are to receive $5bn (£3.5bn) in financing from the government. The money will be made available from the government's bank bail-out fund.
The US Treasury unveils details of a plan, worth up to a possible $1 trillion, designed to encourage investors to buy up toxic assets.