Continuing from my last post of 2008 Year in Review: The Economy, Government and Financial Markets: January - September, this will show how the government really increased its efforts going through October in thru the New Year. I will be continuing this blog with the current economic update in San Diego and surrounding areas and an excerpt of Gary Watts' economic forecast. Please let me know your thoughts and feel free to discuss...
2008 Year in Review: The Economy, Government and Financial Markets: October - December.
Oct. 03: Wells Fargo announces an agreement with Wachovia with no assistance from FDIC. Congress passes the Emergency Economic Stabilization Act to provide $700 billion (TARP) so the Treasury can use the money to buy distressed mortgage-related securities from banks.
Oct. 07: FDIC announces deposit insurance coverage to $250,000 per depositor.
Oct. 08: Fed cuts rate to 1.5% and agrees to lend AIG another $37.8 billion, bringing the total to $123 billion.
Oct. 12: Fed approves the purchase of Wachovia by Wells Fargo.
Oct. 14: Treasury says it will use $250 billion to inject capital into the banking system and another $125 billion to loan to the 9 largest banks (because they need the money). The FDIC announces that it will guarantee up to a total of $1.4 trillion in loans between banks.
Oct. 24: PNC Financial purchases National City Corp., creating the 5th largest bank in the nation.
Oct. 29: The Fed cuts the interest rate to 1.0% the lowest rate since 1958!
Nov. 10: The Fed and Treasury replace loans to AIG with a new $152 billion package - largest in U.S. history! American Express receives approval to become a bank.
Nov. 11: The Treasury announces new streamline loan programs for HUD and the HOPE alliance.
Nov. 12: Treasury says it will no longer buy distressed mortgage-related assets, but will inject capital into banks.
Nov. 14: Treasury purchases $33.5 billion in shares of preferred stock in 21 U.S. banks. Three large insurance companies seek money from the TARP program.
Nov. 17: Treasury announces it has loaned a total of $158.6 billion to 30 U.S. banks.
Nov. 18: The three automobile giants go to Congress for TARP money.
Nov. 20: Fannie Mae and Freddie Mac suspend mortgage foreclosures until January 31, 2009.
Nov. 21: Treasury purchases $3 billion of stock in 23 more U.S. banks.
Nov. 23: The Treasury says it will invest $20 billion in Citigroup. Citigroup received $25 billion on Oct. 14
Nov. 25: The Fed announces that it will purchase up to $600 billion more in mortgage-related loans and will lend another $200 billion to holders of securities backed by various types of consumer loans under TALF.
Nov. 25: The Fed announces new programs to buy Fannie Mae, Freddie Mac, Federal Home Loan Bank, and mortgage-backed securities up to $100 billion with another $500 billion through asset managers.
Nov. 26: Fed approves Bank of America's acquisition of Merrill Lynch.
Dec. 03: SEC agrees to measure transparency and accountability at credit rating agencies for greater disclosure.
Dec. 05: Treasury purchases another $4 billion of preferred stock in 35 U.S. banks.
Dec. 10: FDIC reiterates that it will guarantee all FDIC claims in the event of bank failures.
Dec. 11: National Bureau of Economic Research announces that the U.S. expansion peaked in December ‘07 and we have been in a recession ever since!
Dec. 12: Treasury buys $6.25 billion of stock in another 28 U.S. banks.
Dec. 15: Fed approves the acquisition of National City Corp. by PNC Mortgage Co.
Dec. 16: The Federal Reserve reduces the discount rate to 0.25%.
Dec. 19: Treasury approves $13.4 billion for General Motors and $4 billion for Chrysler through TARP. Treasury purchases another $27.9 billion in stock from 49 more U.S. banks.
Dec. 22: The Fed approves Citigroup as a bank holding company.
Dec. 23: Treasury buys $1.91 billion of stock in 43 U.S. banks.
Dec. 24: The Fed approves GMAC and IB Finance Holding to become a bank, and approves $33 billion to a Utah industrial loan company to become a commercial bank.
Dec. 29: Treasury buys $5 billion equity stake in GMAC, and gives $1 billion to GM to help GMAC become a bank.
Dec. 30: Fed announces the beginning purchases of mortgage-backed securities from Fannie Mae and Freddie Mac, as announced on Nov. 25th.
Dec. 30: The SEC recommends the suspension of fair value accounting standards.
Dec. 31: Treasury buys $1.91 billion of stock in another seven U.S. banks.
Epilogue:
As 2008 came to a close, the government had either loaned or guaranteed a total of $8.7 trillion dollars, which resulted in the money supply increasing by 71.8%! All this intervention has yet to help the economy, provide stability in our banking system or make credit available for the financial markets.
2.6 million jobs were lost last year (worst since 1945) and the unemployment rate has risen to 7.2%
1.8 million mortgages entered foreclosure, with the banks taking back 860,000 properties!
Stocks declined 37% and financial stocks declined 55.3%!
The mortgage relief for homeowners has yet to materialize in any significant way. One reason is that those securitized loans represent 68% of the total home mortgage market. These instruments are just too complex to unwind easily; they possess too many different owners in various "tranche" positions and, as housing prices fall, there is no simple way to fix this mess, which was originated by complex computer models...
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