The year 2008 marked the worst of the financial crisis, a time when the Federal Reserve struggled to prevent the financial system from collapsing and triggering another depression. The Fed helped orchestrate J.P. Morgan Chase & Co.’s rescue of Bear Stearns and helped the government take over faltering insurer AIG. It created an alphabet soup of programs aimed at stabilizing turbulent credit markets. And it cut its benchmark short-term interest rate from 4.5% to near zero.
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Here’s a timeline of key events and flash points during those dark 12 months, with links to Wall Street Journal stories and related Fed documents.
March 11 – Fed Announces New Emergency Lending Program. The Fed launched the Term Securities Lending Facility, aimed at lending up to $200 billion in Treasury bonds to primary dealer banks secured for 28 days, extending the usual overnight deadline for such transactions. The Fed also authorized an increase in its swap lines with the European Central Bank and the Swiss central bank.
March 17 – J.P. Morgan Buys Bear in Fire Sale, As Fed Widens Credit to Avert Crisis. Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed—after prodding by the federal government and the Fed—to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million.
The Fed announced one of the broadest expansions of its lending authority since the 1930s. For the first time securities dealers could borrow from the Fed on much the same terms as banks. The Fed also lowered the rate charged on such borrowings from what’s known as its discount window by a quarter of a percentage point, to 3.25%, and extended the maximum term to 90 days from 30.
Sept. 29 – Fed Holds Unscheduled Conference Call on Swaps.
Oct. 7 – Fed Holds Unscheduled Conference Call on Severe Impairment of Commercial Paper Market. The topic was a deepening credit crunch threatening money market mutual funds and commercial paper, an important vehicle for short-term funding used by corporations.
In an unprecedented step, the Federal Reserve, along with its counterparts in the euro zone, Japan, England, Switzerland and Sweden, announced a coordinated cut in interest rates. The Fed cut its benchmark rate by half a percentage point to 1.5%.