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GLOBAL FINANCIAL CRISIS TIMELINE:

The following Timeline is from BBC, WSJ, Reuters ....:

GROWING SUB-PRIME PROBLEMS

After a two year period between 2004 and 2006 when US interest rates rose from 1% to 5.35%, the US housing market begins to suffer, with prices falling and a rise in homeowners defaulting on their mortgages.

Default rates on sub-prime loans - another term that has since entered regular usage - rise to record levels.

These are loans offered to borrowers with poor or no credit histories. They are dubbed Ninja loans - for people with No Income, No Jobs or Assets.

2006, a boom in U.S. housing prices abruptly reverses course; between the fourth quarter of 2005 and the first quarter of 2006, median U.S. housing prices fall 3.3 percent. These declines accelerate in 2007. The downturn prompts a collapse of the U.S. sub-prime mortgage industry, which offered loans to individuals with poor credit or no cash for a down payment. More than twenty-five subprime lending firms declare bankruptcy in February and March 2007. The collapse rattles the Dow Jones Industrial Average, which on February 27 loses 416 points, or 3.3 percent, its biggest one-day point loss since 9/11.

APRIL-AUGUST 2007: SUB-PRIME CONTAGION

2 April

New Century Financial, which specialises in sub-prime mortgages, files for Chapter 11 bankruptcy protection and cuts half of its workforce.

However, because of the way the sub-prime mortgage debt was sold off and repackaged into a vast array of financial instruments, the effects of the collapse in the sub-prime market begin to spread way beyond the US mortgage providers to banks around the world.

18 July

Bear Stearns is the investment world's first high-profile sub-prime casualty.

It has to tell investors that they will get little, if any, of the money invested in two of its hedge funds after rival banks refuse to help it bail them out.

20 July

A warning that the US sub-prime crisis could cost up to $100bn (£50bn) follows from Federal Reserve chairman Ben Bernanke.

During the next week, the Dow Jones share index suffers its worst decline in almost five years, falling 4.2%.

Confidence is undermined by fears about how many banks have so-called "toxic" sub-prime related investments.

AUGUST 2007: SCALE OF THE CREDIT CRISIS EMERGES

9 August 2007

This is "the day the world changed", according to Adam Applegarth, then chief executive of Northern Rock.

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.

This is a clear sign that banks are refusing to do business with each other.

BNP Paribas steers clear of offering to buy out its clients' investments in these sub-prime related funds, prompting the BBC's Robert Peston to describe BNP's statement as "scary".

Later, the European Central Bank pumps 95bn euros (£63bn) into the banking market to try and improve liquidity. It adds a further 108.7bn euros over the next few days.

The US Federal Reserve, the Bank of Canada and the Bank of Japan do the same.

17 August

The US Federal Reserve cuts the rate at which it lends to banks by half of a percentage point to 5.75% to try to help banks deal with credit problems.

It says the credit crunch could be a risk to economic growth.

21 August

BBC News reports that UK sub-prime lenders begin to withdraw mortgages or put up the cost of borrowing for UK homeowners with poor credit histories.

28 August

The first rescue of a bank occurs when German regional bank Sachsen Landesbank is sold to a larger rival, Landesbank Baden-Wuerttemberg, to save it from collapse.

SEPTEMBER 2007: A RUN ON A BANK

3 September

German regional lender IKB unveils a $1bn loss on investments linked to the US sub-prime market. It is the first bank to announce significant losses.

4 September

In a further sign of the banks' reluctance to do business with each other, the rate at which they will lend to other banks rises to its highest level since December 1998.

The Libor rate is 6.7975%, way above the Bank of England's 5.75% base rate, showing banks are concerned they will not get back the money they have lent - or that they will need it themselves.

13 September

The BBC reveals that Northern Rock has asked for and been granted emergency financial support from the Bank of England, in the latter's role as lender of last resort.

Northern Rock relied heavily on the markets, rather than savers deposits, to fund its mortgage lending. But the onset of the credit crunch means that its funding has dried up.

14 September

What follows the rescue is the biggest run on a British bank for more than a century.

Depositors withdraw £1bn when the branches open the following day and continue to take their money out until the government guarantees all Northern Rock savers' money on 17 September.

18 September

In his first comments since the crisis at Northern Rock became public, Sir Callum McCarthy, chairman of City watchdog the Financial Services Authority, asserts that the era of cheap and easy credit is probably over.

He tells BBC News that the changes in the financial system are "a good development, painful though it may seem at the moment".

The US Federal Reserve cuts its main interest rate by half a percentage point to 4.75%.

19 September

After previously refusing to inject any funding into the markets, the Bank of England announces that it will auction £10bn.

Crucially, it agrees to accept mortgages from banks as collateral for these three-month loans, but insists that even if it had made this facility available to Northern Rock three weeks ago, it would not have been enough to solve its funding problems.

OCTOBER 2007: MAJOR LOSSES BEGIN TO EMERGE

1 October

Swiss bank UBS is the first of the world's top-flight banks to announce losses resulting from the collapse in the value of sub-prime related investments.

The chairman and chief executive of the investment bank step down as it writes off $3.4bn worth of investments.

Later in the day, banking giant Citigroup unveils a sub-prime related loss of $3.1bn.

15 October

A fortnight later, Citigroup writes down a further $5.9bn.

Within six months, its stated losses amount to $40bn - the biggest of any bank.

30 October

Merrill Lynch's chief executive, Stan O'Neal, resigns after the investment bank unveils a $7.9bn exposure to bad debt.

NOVEMBER 2007: UK HOUSING MARKET 'TURNS DOWN'

29 November

The Nationwide building society says the UK housing market is "turning down". It says the average cost of a home fell 0.8% in November from the previous month. It is the biggest fall in 12 years.

The annual rate of house price inflation now stands at 6.9%, down from 9.7% reported in October, the Nationwide says.

The Bank of England also says that the number of mortgage approvals has fallen to a near three-year low.

30 November

The Council for Mortgage Lenders (CML) issues the starkest warning yet of the impact of the credit crunch on the mortgage market.

The CML points to the possibility of a dramatic shrinkage in the ability of mortgage lenders to offer mortgages in the coming year unless extra funds are made available to the "still dysfunctional" financial markets.

DECEMBER 2007: HELP IS AT HAND

6 December

US President George W Bush outlines plans to help more than a million homeowners facing foreclosure.

Democrats dismiss it as "little more than financial wallpaper".

The Bank of England tries to do its bit, too, by cutting interest rates by a quarter of one percent to 5.5%.

13 December

The US Federal Reserve co-ordinates an unprecedented action by five leading central banks around the world to offer billions of dollars in loans to banks.

The Bank of England calls it an attempt to "forestall any prospective sharp tightening of credit conditions". The move succeeds in temporarily lowering the rate at which banks lend to each other, Libor.

17 December

The central banks continue to make more funding available.

There is a $20bn auction from the US Federal Reserve and, the following day, $500bn from the European Central Bank to help commercial banks over the Christmas period.

NEXT UP: THE BOND INSURERS

19 December

Ratings agency Standard and Poor's downgrades its investment rating of a number of companies, called monoline insurers, that 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.

Timeline: How the sub-prime losses accumulated

9 January 2008

The World Bank predicts that global economic growth with slow in 2008, as the credit crunch hits the richest nations. But the resilience of China and India will temper the impact, so that growth should slow to 3.3% from 3.6% in 2007, the Bank says.

18 January

A rush to withdraw money from its commercial property funds forces Scottish Equitable to introduce delays of up to 12 months for investors wanting to take their money out.

It blames the rush of withdrawals on concerns about the US sub-prime mortgage collapse, recession worries and interest rates.

21 January

Global stock markets, including London's FTSE 100 index, suffer their biggest falls since 11 September 2001.

22 January

The US Federal Reserve cuts interest rates by three quarters of a percentage point to 3.5%, its biggest cut in 25 years, to try and prevent the economy from slumping into recession.

It is the first emergency cut in rates since 2001. Stock markets around the world recover the previous day's heavy losses.

31 January

A major bond insurer, MBIA, announces a loss of $2.3bn, its biggest to date for a three-month period.

Hit by its exposure to the US sub-prime mortgage crisis, it is reeling from falls in the value of US mortgage-backed debt, which it underwrites.

FEBRUARY - MARCH 2008: BIG NAME CASUALTIES

7 February

US Federal Reserve boss Ben Bernanke adds his voice to concerns about monoline insurers who guarantee the products at the heart of the credit crisis.

He says he is closely monitoring developments "given the adverse effects that problems of financial guarantors can have on financial markets and the economy".

The Bank of England cuts interest rates by a quarter of one percent to 5.25%.

8 February

The number of homes repossessed in 2007 rises to its highest level since 1999.

The Council for Mortgage Lenders says 27,100 owners lost their homes last year, partly as a result problems in the mortgage funding markets.

10 February

Leaders from the G7 group of industrialised nations say worldwide losses stemming from the collapse of the US sub-prime mortgage market could reach $400bn.

17 February

After considering a number of private sector rescue proposals, including from Richard Branson's Virgin Group, the government announces that struggling Northern Rock is to be nationalised for a temporary period.

27 February

Hector Sants, chief executive of the Financial Services Authority, tells the BBC that the way bankers are rewarded encourages short-term risk-taking and ignores long-term shareholder returns.

"There is the incentive for the employee to take the bonus whilst the shareholders may well take the pain in the next few years if the deal doesn't pay out as was expected when the bonus was paid."

He also blamed those investors who had forgotten the golden rule of financing: "Don't buy things that you don't understand."

MARCH 2008

7 March

In its biggest intervention yet, the Federal Reserve makes $200bn of funds available to banks and other institutions to try and improve liquidity in the markets.

This is seen as a result of increasing nervousness about all mortgage backed-securities, not just sub-prime related ones, which is causing the money markets to seize up.

17 March

Wall Street's fifth-largest bank, Bear Stearns, is acquired by larger rival JP Morgan Chase in a deal backed by $30bn of central bank loans.

Bear Stearns, which was hit by a crisis of confidence as other banks stopped lending to it, is sold for $240m. A year earlier, it had been worth £18bn.

28 March

Nationwide predicts UK house prices will fall by the end of the year, revising its previous forecast of no change in prices.

APRIL 2008: THE 100% MORTGAGE IS CONSIGNED TO HISTORY

2 April

Moneyfacts, which monitors financial products, says 20% of mortgage products have been withdrawn from the UK market in the previous seven days.

One of them is First Direct which, unable to cope with demand, stops offering mortgages to new customers.

7 April

The 100% mortgage disappears when Abbey withdraws the last home loan available without a deposit.

The 125% mortgage was consigned to history in February.

8 April

The International Monetary Fund (IMF), which overseas the global economy, warns that potential losses from the credit crunch could reach $1 trillion and may be even higher.

It says the effects are spreading from sub-prime mortgage assets to other sectors, such as commercial property, consumer credit, and company debt.

10 April

The Bank of England cuts interest rates by a quarter of one percent to 5%.

11 April

A warning is issued by the Council for Mortgage Lenders (CML) that the amount of funding available for mortgages could be cut in half this year.

It calls on the Bank of England to kick-start the money markets and ease the effects of the credit crunch.

The CML's chairman Steven Crawshaw says he has "a sense

of shock" at how deeply his industry has been hit by "these unprecedented funding market conditions".

APRIL - JUNE 2008: BANKS PASS ROUND THE HAT

13 April

Ahead of a meeting with the bosses of the UK's biggest banks in Downing Street, Chancellor Alistair Darling urges lenders to pass on the full benefit of the previous week's interest rate cut to homeowners and businesses to help them "get through a difficult time".

15 April

Confidence in the UK housing market falls to its lowest point in 30 years in March, according to the Royal Institution of Chartered Surveyors, because of the "unique liquidity blight".

The situation, however, is good news for buyers with large deposits who can buy property that was previously out of reach, it says.

21 April

The Bank of England announces details of an ambitious £50bn plan designed to help credit-squeezed banks by allowing them to swap potentially risky mortgage debts for secure government bonds.

Relative to the size of the UK banking system, this plan is much larger than anything any other central bank has attempted, the BBC's economics editor Stephanie Flanders says.

22 April

Royal Bank of Scotland announces a plan to raise money from its shareholders. The £12bn rights issue is the biggest in UK corporate history and is designed to boost its coffers.

Other banks are expected to follow suit.

The firm also announces a write-down of £5.9bn on the value of its investments between April and June - the largest yet for a British bank.

25 April

Persimmon is the first UK house builder to announce major cutbacks. It abandons its plans to build homes on any new sites, citing the lack of affordable mortgages and a fall in consumer confidence.

Its sales have fallen by a quarter since the beginning of the year, the firm says.

29 April

The number of new mortgages approved in March was 44% lower than a year earlier, the CML says. A total of 64,000 got the green light, the lowest monthly number since records began in 1999.

30 April

The first annual fall in house prices for 12 years is recorded by Nationwide.

It says prices in April were 1% lower than the levels seen in April 2007 following a "steep decline" in home buying over the previous six months.

Later in the week, figures for April from the UK's biggest lender, Halifax, show a 0.9% annual fall.

MAY 2008

2 May

More than 850 companies have gone into administration between January and March, government figures show, a rise of 54% on the previous year. Retail and construction firms are hardest hit.

14 May

Bradford & Bingley starts trying to raise £300m of extra cash from its shareholders in a rights issue.

It is Britain's biggest buy-to-let lender and has been relying on the wholesale money markets for a high proportion of its funding, rather than savers' deposits.

A fortnight later (2 June), it announces it is selling a 23% stake to private equity firm Texas Pacific Group for £179m to raise more funds.

22 May

Swiss bank UBS, one of the worst affected by the credit crunch, launches a $15.5bn rights issue to cover some of the $37bn it lost on assets linked to US mortgage debt.

JUNE 2008

19 June

There are significant developments in two major credit crunch-related investigations in the United States, which it is hoped will restore confidence in the credit markets.

The FBI arrests 406 people, including brokers and housing developers, as part of a crackdown on alleged mortgage frauds worth $1bn.

Separately, two former Bear Stearns face criminal charges related to the collapse of two hedge funds linked to sub-prime mortgages.

It is alleged they knew of the funds' problems but did not disclose them to its investors, who lost a total of $1.4bn.

25 June

Barclays says it is planning to raise £4.5bn in a share issue to bolster its balance sheet.

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.

3 July

It's official. After almost a year of regular usage in the media and in conversations in homes and businesses across the UK, the terms "credit crunch" and "sub-prime" make it into the latest edition of the Concise Oxford English Dictionary.

JULY 2008: MAJOR LENDERS ON THE EDGE

8 July

The gloomy findings of a survey of its members prompt the British Chambers of Commerce (BCC) to suggest that the UK is facing a serious risk of recession within months.

The credit crunch and rising costs have caused a "menacing deterioration" of the prospects for small and medium-sized firms, the BCC says.

Meanwhile, the FTSE 100 stock index briefly dips into a "bear market", in which the market suffers a 20% fall from its recent highs.

House builder Persimmon says it has cut its workforce by 2,000 since the beginning of the year.

It takes the total number of job losses announced in the industry this week to almost 4,000.

13 July

US mortgage lender IndyMac collapses - the second-biggest bank in US history to fail.

Regulators seize the bank's assets, fearing it might not be able to meet withdrawals by depositors after more than $1bn was withdrawn in the preceding 11 days.

14 July

The following day, the financial authorities step in to assist America's two largest lenders, Fannie Mae and Freddie Mac. As owners or guarantors of $5 trillion worth of home loans, they are crucial to the US housing market and authorities agree they could not be allowed to fail.

The previous week, there had been a panic amongst investors that they might collapse, causing their share prices to plummet.

21 July

Just 8% of HBOS investors agree to take up the new shares offered in its £4bn rights issue, because they are priced higher than existing shares are trading on the stock market. But HBOS still gets the £4bn it wanted, as the unsold new shares are bought by the issue's underwriters.

31 July

UK house prices show their biggest annual fall since the Nationwide began its housing survey in 1991, a decline of 8.1%.

The average home now costs £169,316. That is nearly £15,000 cheaper than in the same month last year.

Meanwhile, the Home Builders Federation tells the BBC that it expects the number of new homes built in England and Wales this year to be the lowest since 1924.

'Comprehensive action'

As part of the changes, the management of the two companies will be replaced while the firms will be given access to extra funding to support their business going forward.

Treasury Secretary Henry Paulson said the government was intervening in the wider interests of the financial system and of taxpayers since the financial position of the two firms was fast deteriorating.

He added that the two firms' debt levels posed a "systemic risk" to financial stability and that, without action, the situation would get worse.

"We examined all options available and determined this comprehensive and complementary set of actions best met the objectives of market stability, mortgage availability and taxpayer protection," he said.

"Fannie Mae and Freddie Mac are so large and interwoven in our financial system that a failure of either of them would create great turmoil in financial markets here and around the globe."

US treasury statement on the future of Freddie Mac and Fannie Mae

The move is intended to keep the two companies afloat, amid fears that either could go bankrupt as borrowers default on their home loans.

The two firms will be administered by the Federal Housing Finance Agency until their long-term future is decided.

The Congressional Budget Office has said such a move could cost up to $25bn but Mr Paulson said there was no reason why taxpayers should have to directly foot the bill.

The likely disappearance of two of Wall Street's biggest names - Lehman Brothers and Merrill Lynch - looks like a big change in US government policy.

In March, when fellow investment bank Bear Stearns had to seek emergency funding, it was acquired by JP Morgan, but the takeover was backed by the US central bank, the Federal Reserve, which sweetened the deal with a $30bn (£17bn) loan.

Only a week ago, the US government took over the giant mortgage finance providers Fannie Mae and Freddie Mac, which between them guarantee about $5.3 trillion (£3 trillion) of mortgages.

But over the weekend, when other banks were considering taking over Lehman Brothers, no incentives appear to have been offered by the government.

"The US Treasury has decided it was time for shock therapy, and taken an extremely gutsy gamble by letting Lehman fail, against widespread expectations that a solution would be brokered over the weekend," says Marco Annuziata, global chief economist at Unicredit.

"If it works, it should boost considerably the hopes that the global financial system can work itself out of the year-long crisis, but the risk is enormous."

'Very healthy'

Peter Douglas from the hedge fund consultancy GFIA agrees that there could be long-term benefits from the government's decision.

"The US and the Federal Reserve in particular, appear to be drawing a line under public funding," he says.

"Longer term this is very healthy as it accelerates the clearing process, and therefore the rehabilitation of the financial system."

But it is important to appreciate the differences between some of the institutions that have received government money, according to Jon Danielsson from London School of Economics.

"Bear Stearns was a change in policy for the US government because it had not fully appreciated the problem of how interconnected the banks are," he says.

He adds that government policy before that had been to help High Street banks but not investment banks, but that it considered the damage that would have been done by Bear Stearns failing was so great that its takeover had to be supported.

"This policy came under such a lot of criticism in the US that it was not able to repeat it for Lehman Brothers," says Mr Danielsson.

Members of Congress were among those who objected to the Bear Stearns bail-out, saying that by limiting the damage caused by failure, the government was encouraging banks to take greater risks in the future.

"Last week, after the bail-out of Fannie Mae and Freddie Mac, you could see traders rushing to the market to take more risks," says Paola Subacchi, research director in international economics at Chatham House.

Former Federal Reserve chairman Alan Greenspan has predicted that more financial firms will fail.

"We shouldn't try to protect every single institution. The ordinary course of financial change has winners and losers," he told the US network ABC.

Previous crisis

While there was no direct help for Lehman Brothers, the Federal Reserve did announce other help for the banking system, including broadening the range of collateral that financial institutions can put up to obtain central bank loans.

The government may be hoping that the banks themselves find a way out of the crisis, and indeed on Sunday 10 of the world's biggest lenders agreed to establish a $70bn emergency fund, which any one of them may tap up to a third of should they face any liquidity problems.

"If you look at previous crises such as the secondary banking crisis in 1973-75, that's the kind of solution you need rather than governments endlessly throwing money at the problem," says Terry Smith, chief executive of the brokerage Tullet Prebon.

It is in this atmosphere that AIG, formerly the world's biggest insurer, is - according to the Wall Street Journal and New York Times - approaching the Federal Reserve for a $40bn bridging loan.

"If they didn't give the money to Lehman they are not going to give the money to an insurance company," predicts Jon Danielsson.

November

Fri Dec 12, 2008 12:01pm GMT

Reuters - Here is a chronology of the global financial crisis since November:

November 4 - Democratic candidate Barack Obama wins in the U.S. presidential election, ending a source of uncertainty for global investors.

November 6 - The Bank of England cuts rates by 1.5 points to 3 percent, the lowest level in more than half a century. The ECB reduces its benchmark interest rate by 0.5 percentage point to 3.25 percent.

November 12 - Bank of England says that Britain's economy will shrink sharply in 2009 and that inflation could be less than 1 percent.

November 13 - Germany says its economy, Europe's largest, contracted by 0.5 percent in the third quarter, putting it in recession for the first time in five years.

November 15 - World leaders pledge rapid action at a G20 summit to rescue a weakening global economy, setting out plans to toughen oversight of major global banks and to try for a breakthrough in trade talks by year's end.

November 17 - Japan becomes the latest major economy to fall into recession, with France close behind.

November 23 - The United States announces a rescue package for Citigroup Inc, agreeing to shoulder most losses on about $306 billion of the bank's risky assets. A further $20 billion of new capital is offered the next day.

November 24 - Britain's finance minister Alistair Darling, says he will cut sales tax and extend help for small businesses, low earners and households in a package worth 20 billion pounds.

November 25 - The U.S. Federal Reserve unveils an $800 billion plan to buy mortgage-related debt and back consumer loans. Of this, $600 billion is to buy mortgage-related debt and securities. The remainder is to support consumer debt securities.

November 26 - European Commission chief Jose Manuel Barroso proposes a 200 billion euros ($264 billion) fiscal stimulus package to revive the group's struggling economies.

DECEMBER

December 1 - The U.S. economy had slipped into recession in December 2007, says the National Bureau of Economic Research, a prestigious private research group.

December 2 - The BoJ unveils 3 trillion yen ($32 billion) in new measures to ease an acute squeeze in corporate funding.

December 4 - The ECB drops its benchmark rate by 0.75 percentage point to 2.50 percent, the euro zone's biggest cut ever.

-- The BoE slashes interest rates by 1 percentage point to two percent, the lowest level since 1951.

December 9 - Canada's central bank cuts its benchmark interest rate by three-quarters of a percentage point to 1.5 percent, the lowest it has been since 1958. The bank also says the country is now entering a recession.

-- Japan's Sony Corp says it will cut 16,000 jobs, curb investment and pull out of businesses to save $1.1 billion a year. The job cuts are the biggest announced by an Asian company so far.

December 11 - Bank of America Corp says it plans to eliminate 30,000 to 35,000 jobs over three years, reflecting its pending purchase of Merrill Lynch & Co and weaker business activity.

-- The U.S. Senate refuses to back a $14 billion rescue package for America's top auto makers. General Motors Corp and Chrysler LLC needed immediate aid to avert a collapse, while Ford Motor Co wanted a hefty line of credit.

December 12 - In Brussels, a European Union summit commits to an economic stimulus package worth about 1.5 percent of total EU output or around 200 billion euros ($264 billion).

TO BE CONTINUED.....

The current global financial crisis is worst since the great depression. It is not limited to one sector, industry or one country. It is global. What are the root causes of this crisis?

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