2008 financial crisis

Overview

The 2008 financial crisis was a major worldwide financial crisis which started in the U.S. The first phase was the subprime mortgage crisis, which began in early 2007 as mortgage-backed securities (MBS) tied to U.S. real estate, and a vast web of derivatives linked to those MBS, collapsed in value. A liquidity crisis spread to global institutions by mid-2007 and climaxed with the bankruptcy of Lehman Brothers in September 2008, which triggered a stock market crash and bank runs in several countries. The crisis exacerbated the Great Recession, a global recession that began in late 2007, and contributed to major crises in Iceland and the eurozone. During the 1990s, the U.S. Congress passed legislation intended to expand affordable housing through looser financing laws, and in 1999 parts of the 1933 Banking Act (Glass–Steagall Act) were repealed, enabling institutions to mix low-risk operations, such as commercial banking and insurance, with higher-risk operations such as investment banking and proprietary trading. As the Federal Reserve (Fed) lowered the federal funds rate from 2000 to 2003, institutions increasingly targeted low-income homebuyers, largely belonging to racial minorities, with high-risk subprime loans; this development went unattended by regulators. As interest rates rose from 2004 to 2006, monthly payments on these largely adjustable-rate mortgages spiked, leading to a wave of defaults, foreclosures, and bankruptcies among subprime lenders in early 2007. As housing demand and prices continued to fall, the financial contagion spread to global credit markets by August 2007. In March 2008, Bear Stearns, one of the largest U.S. investment banks, was sold to JPMorgan Chase in a "fire sale" backed by Fed financing. In response to the crisis, governments around the world deployed massive bailouts of financial institutions and used monetary and fiscal policy to prevent a collapse of the global financial system. On September 7, 2008, Fannie Mae and Freddie Mac, two government-sponsored enterprises which owned or guaranteed half of the U.S. housing market, were seized by the federal government. On September 15, Lehman Brothers filed for the largest bankruptcy in the country's history, which was followed that month by a Fed bailout of American International Group and the seizure of Washington Mutual in the largest bank failure in U.S. history. On October 3, Congress passed the Emergency Economic Stabilization Act, authorizing the Treasury Department to purchase toxic assets and bank stocks through the $700 billion Troubled Asset Relief Program (TARP). The Fed began a program of quantitative easing by buying treasury bonds and other assets, and the American Recovery and Reinvestment Act, signed in February 2009 by President Barack Obama, included various measures which, combined with actions taken in other countries, ended the worst of the Great Recession by mid-2009. Assessments of the crisis's impact in the U.S. vary, but suggest that some 8.7 million jobs were lost, causing unemployment to rise from 5% in 2007 to a high of 10% in October 2009. The percentage of citizens living in poverty rose from 12.5% in 2007 to 15.1% in 2010. The Dow Jones Industrial Average fell by 53% between October 2007 and March 2009, and some estimates suggest that one in four households lost 75% or more of their net worth. In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act was passed, overhauling financial regulations. It was opposed by many Republicans, and it was weakened by the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. The Basel III capital and liquidity standards were also adopted by countries around the world.

Background

The crisis worsened the Great Recession, a global recession that began in mid-2007. It was also followed by the euro area crisis, which began with the start of the Greek government-debt crisis in late 2009, and the 2008–2011 Icelandic financial crisis, which involved the bank failure of all three of the major banks in Iceland and, relative to the size of its economy, was the largest economic collapse suffered by any country in history. It was among the five worst financial crises the world had experienced and led to a loss of more than $2 trillion from the global economy. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 (~$15 trillion in 2024) trillion. The increase in cash out refinancings, as home values rose, fueled an increase in consumption that could no longer be sustained when home prices declined. Many financial institutions owned investments whose value was based on home mortgages such as mortgage-backed securities, or credit derivatives used to insure them against failure, which declined in value significantly. The International Monetary Fund estimated that large U.S. and European banks lost more than $1 trillion on toxic assets and from bad loans from January 2007 to September 2009. Lack of investor confidence in bank solvency and declines in credit availability led to plummeting stock and commodity prices in late 2008 and early 2009. The crisis rapidly spread into a global economic shock, resulting in several bank failures. Economies worldwide slowed during this period since credit tightened and international trade declined. Housing markets suffered and unemployment soared, resulting in evictions and foreclosures. Several businesses failed. From its peak in the second quarter of 2007 at $61.4 trillion, household wealth in the United States fell $11 trillion, to $50.4 trillion by the end of the first quarter of 2009, resulting in a decline in consumption, then a decline in business investment. In the fourth quarter of 2008, the quarter-over-quarter decline in real GDP in the U.S. was 8.4%. The U.S. unemployment rate peaked at 11.0% in October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since the government began collecting the data in 1964. The economic crisis started in the U.S. but spread to the rest of the world. U.S. consumption accounted for more than a third of the growth in global consumption between 2000 and 2007 and the rest of the world depended on the U.S. consumer as a source of demand. Toxic securities were owned by corporate and institutional investors globally. Derivatives such as credit default swaps also increased the linkage between large financial institutions. The de-leveraging of financial institutions, as assets were sold to pay back obligations that could not be refinanced in frozen credit markets, further accelerated the solvency crisis and caused a decrease in international trade. Reductions in the growth rates of developing countries were due to falls in trade, commodity prices, investment and remittances sent from migrant workers (example: Armenia). States with fragile political systems feared that investors from Western states would withdraw their money because of the crisis. As part of national fiscal policy response to the Great Recession, governments and central banks, including the Federal Reserve, the European Central Bank and the Bank of England, provided then-unprecedented trillions of dollars in bailouts and stimulus, including expansive fiscal policy and monetary policy to offset the decline in consumption and lending capacity, avoid a further collapse, encourage lending, restore faith in the integral commercial paper markets, avoid the risk of a deflationary spiral, and provide banks with enough funds to allow customers to make withdrawals. In effect, the central banks went from being the "lender of last resort" to the "lender of only resort" for a significant portion of the economy. In some cases the Fed was considered the "buyer of last resort". During the fourth quarter of 2008, these central banks purchased US$2.5 trillion (~$3.57 trillion in 2024) of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action in world history. Following a model initiated by the 2008 United Kingdom bank rescue package, the governments of European nations and the United States guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $1.5 trillion newly issued preferred stock in major banks. The Federal Reserve created a lot of new currency as a method to combat the liquidity trap. Bailouts came in the form of trillions of dollars of loans, asset purchases, guarantees, and direct spending. Significant controversy accompanied the bailouts, such as in the case of the AIG bonus payments controversy, leading to the development of a variety of "decision making frameworks", to help balance competing policy interests during times of financial crisis. Alistair Darling, the U.K.'s Chancellor of the Exchequer at the time of the crisis, stated in 2018 that Britain came within hours of "a breakdown of law and order" the day that Royal Bank of Scotland was bailed-out. Instead of financing more domestic loans, some banks instead spent some of the stimulus money in more profitable areas such as investing in emerging markets and foreign currencies. In July 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in the United States to "promote the financial stability of the United States". The Basel III capital and liquidity standards were adopted worldwide. Since the 2008 financial crisis, consumer regulators in America have more closely supervised sellers of credit cards and home mortgages in order to deter anticompetitive practices that led to the crisis. At least two major reports on the causes of the crisis were produced by the U.S. Congress: the Financial Crisis Inquiry Commission report, released January 2011, and a report by the United States Senate Homeland Security Permanent Subcommittee on Investigations entitled Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, released April 2011. In total, 47 bankers served jail time as a result of the crisis, over half of whom were from Iceland, where the crisis was the most severe and led to the collapse of all three major Icelandic banks. In April 2012, Geir Haarde of Iceland became the only politician to be convicted as a result of the crisis. In the aftermath of the crisis, U.S. authorities intensified enforcement actions against financial misconduct, including high-profile insider trading prosecutions such as that of Raj Rajaratnam, who was convicted in 2011. Only one banker in the United States served jail time as a result of the crisis, Kareem Serageldin, a banker at Credit Suisse who was sentenced to 30 months in jail and returned $24.6 million in compensation for manipulating bond prices to hide $1 billion of losses. No individuals in the United Kingdom were convicted as a result of the crisis. In SEC v. Goldman Sachs, Goldman Sachs paid a $550 million civil penalty and acknowledged that its marketing materials for CDO contained incomplete information, settling securities fraud charges after allegedly anticipating the financial crisis and selling toxic investments to its clients. With fewer resources to risk in creative destruction, the number of patent applications was flat, compared to exponential increases in patent application in prior years.

American families did not fare well, nor did the wealthy families. However, half of the poorer families in the United States did not have wealth declines at all during the crisis because they generally did not own financial investments whose value could fluctuate. The Federal Reserve surveyed 4,000 households from 2007 to 2009, and found that the total wealth of 63% of all Americans declined in that period and 77% of the richest families had a decrease in total wealth, while only 50% of those on the poorer families suffered a decrease.

Timeline

The following is a timeline of the major events of the financial crisis, including government responses, and the subsequent economic recovery.

Pre-2007

April 28, 2004: A meeting is held in the basement of the Federal Reserve with the Gang of Five (Goldman Sachs, Lehman Brothers, Merrill Lynch, Bear Stearns and Morgan Stanley) and the five members of the Securities and Exchange Commission to create an exemption for the five largest investment banks in the U.S. from having to adhere to the net capital rule. This permitted these banks to take on much more debt. May 19, 2005: Fund manager Michael Burry closed a credit default swap against subprime mortgage bonds with Deutsche Bank valued at $60 million – the first such CDS. He projected they would become volatile within two years of the low "teaser rate" of the mortgages expiring. 2006: After years of price increases, housing prices peaked and mortgage loan delinquency rose—the first sign of the bursting of the United States housing bubble. Due to increasingly lax underwriting standards, one-third of all mortgages in 2006 were subprime or no-documentation loans, which comprised 17% of home purchases that year. May 2006: JPMorgan warned clients of a housing downturn, and rising foreclosure rates, especially in sub-prime mortgages. August 2006: The yield curve inverted, signaling a recession was likely within a year or two. November 2006: UBS warned of "an impending crisis in the U.S. housing market".

2007 (January–August)

February 27, 2007: Stock prices in China and the U.S. fell by the most since 2003 as reports of a decline in home prices and durable goods orders stoked growth fears, with Alan Greenspan predicting a recession. Due to increased delinquency rates in subprime lending, Freddie Mac said that it would stop investing in certain subprime loans. April 2, 2007: New Century, an American real estate investment trust specializing in subprime lending and securitization, filed for Chapter 11 bankruptcy protection. This propagated the subprime mortgage crisis. June 20, 2007: After receiving margin calls, Bear Stearns bailed out two of its hedge funds with $20 billion of exposure to collateralized debt obligations including subprime mortgages. July 19, 2007: The Dow Jones Industrial Average (DJIA) closed above 14,000 for the first time, at 14,000.41. July 30, 2007: IKB Deutsche Industriebank, the first banking casualty of the crisis, announces its bailout by German public financial institution KfW. July 31, 2007: Bear Stearns liquidated the two hedge funds. August 6, 2007: American Home Mortgage filed for bankruptcy. August 9, 2007: BNP Paribas blocked withdrawals from three of its hedge funds with a total of $2.2 billion in assets under management, due to "a complete evaporation of liquidity", making valuation of the funds impossible – a clear sign that banks were refusing to do business with each other. August 16, 2007: The DJIA closes at 12,945.78 after falling on 12 out of the previous 20 trading days following its peak. It had fallen 1,164.63 or 8.3%.

2007 (September–December)

September 14, 2007: Northern Rock, a medium-sized and highly leveraged British bank, received support from the Bank of England. This led to investors panicking and a bank run. September 18, 2007: The Federal Open Market Committee began reducing the federal funds rate from its peak of 5.25% in response to worries about liquidity and confidence. September 28, 2007: NetBank suffered from bank failure and filed bankruptcy due to exposure to home loans. October 9, 2007: The DJIA hit its peak closing price of 14,164.53. October 15, 2007: Citigroup, Bank of America, and JPMorgan Chase announced plans for the $80 billion Master Liquidity Enhancement Conduit to provide liquidity to structured investment vehicles. The plan was abandoned in December. November 26, 2007: US markets enter a correction as worries about the financial sector continued to mount. December 2007: Unemployment in the US hit 5%. December 12, 2007: The Federal Reserve instituted the Term auction facility to supply short-term credit to banks with sub-prime mortgages. December 17, 2007: Delta Financial Corporation filed bankruptcy after failing to securitize subprime loans. December 19, 2007: the Standard and Poor's rating agency downgrades the ratings of many monoline insurers which pay out bonds that fail. December 31, 2007: Despite volatility through the last day of the year, markets close above where they started the year, with the DJIA closing at 13,264.82, up 6.4% for the year.

2008 (January–August)

January 11, 2008: Bank of America agreed to buy Countrywide Financial for $4 billion in stock. January 18, 2008: Stock markets fell to a yearly low as the credit rating of Ambac, a bond insurance company, was downgraded. Meanwhile, an increase in the amount of withdrawals caused Scottish Equitable to implement delays of up to 12 months on people wishing to withdraw money. January 21, 2008: As US markets were closed for Martin Luther King Jr. Day, the FTSE 100 Index in the United Kingdom tumbled 323.5 points or 5.5% in its largest crash since the September 11 attacks. January 22, 2008: The US Federal Reserve cut interest rates by 0.75% to stimulate the economy, the largest drop in 25 years and the first emergency cut since 2001. January 2008: U.S. stocks had the worst January since there was over 2000 concerns about the exposure of companies that issue bond insurance. February 13, 2008: The Economic Stimulus Act of 2008 was enacted, which included a tax rebate. February 22, 2008: The nationalisation of Northern Rock was completed. March 5, 2008: The Carlyle Group received margin calls on its mortgage bond fund. March 17, 2008: Bear Stearns, with $46 billion of mortgage assets that had not been written down and $10 trillion in total assets, faced bankruptcy; instead, in its first emergency meeting in 30 years, the Federal Reserve agreed to guarantee its bad loans to facilitate its acquisition by JPMorgan Chase for $2/share. A week earlier, the stock was trading at $60/share and a year earlier it traded for $178/share. The buyout price was increased to $10/share the following week. March 18, 2008: In a contentious meeting, the Federal Reserve cut the federal funds rate by 75 basis points, its 6th cut in 6 months. It also allowed Fannie Mae & Freddie Mac to buy $200 billion in subprime mortgages from banks. Officials thought this would contain the possible crisis. The U.S. dollar weakened and commodity prices soared.[data missing] Late June 2008: Despite the U.S. stock market falling to 20% below its highs, commodity-related stocks soared as oil traded above $140/barrel for the first time and steel prices rose above $1,000 per ton. Worries about inflation combined with a strong demand from China encouraging people to invest in commodities during the 2000s commodities boom. July 11, 2008: IndyMac failed. Oil prices peaked at $147.50 July 30, 2008: The Housing and Economic Recovery Act of 2008 was enacted. August 2008: Unemployment hit 6% in the US.

2008 (September)

September 7, 2008: The Federal takeover of Fannie Mae and Freddie Mac was implemented. September 15, 2008: After the Federal Reserve declined to guarantee its loans as it did for Bear Stearns, the bankruptcy of Lehman Brothers led to a 504.48-point (4.42%) drop in the DJIA, its worst decline in seven years. To avoid bankruptcy, Merrill Lynch was acquired by Bank of America for $50 billion in a transaction facilitated by the government. Lehman had been in talks to be sold to either Bank of America or Barclays but neither bank wanted to acquire the entire company. September 16, 2008: The Federal Reserve took over American International Group with $85 billion in debt and equity funding. The Reserve Primary Fund "broke the buck" as a result of its exposure to Lehman Brothers securities. September 17, 2008: Investors withdrew $144 billion from U.S. money market funds, the equivalent of a bank run on money market funds, which frequently invest in commercial paper issued by corporations to fund their operations and payrolls, causing the short-term lending market to freeze. The withdrawal compared to $7.1 billion in withdrawals the week prior. This interrupted the ability of corporations to rollover their short-term debt. The U.S. government extended insurance for money market accounts analogous to bank deposit insurance via a temporary guarantee and with Federal Reserve programs to purchase commercial paper. September 18, 2008: In a dramatic meeting, United States Secretary of the Treasury Henry Paulson and Chair of the Federal Reserve Ben Bernanke met with Speaker of the United States House of Representatives Nancy Pelosi and warned that the credit markets were close to a complete meltdown. Bernanke requested a $700 billion fund to acquire toxic mortgages and reportedly told them: "If we don't do this, we may not have an economy on Monday". September 19, 2008: The Federal Reserve created the Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility to temporarily insure money market funds and allow the credit markets to continue operating. September 20, 2008: Paulson requested the U.S. Congress authorize a $700 billion fund to acquire toxic mortgages, telling Congress "If it doesn't pass, then heaven help us all". September 21, 2008: Goldman Sachs and Morgan Stanley converted from investment banks to bank holding companies to increase their protection by the Federal Reserve. September 22, 2008: MUFG Bank acquired 20% of Morgan Stanley. September 23, 2008: Berkshire Hathaway made a $5 billion investment in Goldman Sachs. September 26, 2008: Washington Mutual went bankrupt and was seized by the Federal Deposit Insurance Corporation after a bank run in which panicked depositors withdrew $16.7 billion in 10 days. September 29, 2008: By a vote of 225–208, with most Democrats in support and Republicans against, the House of Representatives rejected the Emergency Economic Stabilization Act of 2008, which included the $700 billion Troubled Asset Relief Program. In response, the DJIA dropped 777.68 points, or 6.98%, then the largest point drop in history. The S&P 500 Index fell 8.8% and the Nasdaq Composite fell 9.1%. Several stock market indices worldwide fell 10%. Gold prices soared to $900/ounce. The Federal Reserve doubled its credit swaps with foreign central banks as they all needed to provide liquidity. Wachovia reached a deal to sell itself to Citigroup; however, the deal would have made shares worthless and required government funding. September 30, 2008: President George W. Bush addressed the country, saying "Congress must act... Our economy is depending on decisive action from the government. The sooner we address the problem, the sooner we can get back on the path of growth and job creation". The DJIA rebounded 4.7%.

2008 (October)

October 1, 2008: The U.S. Senate passed the Emergency Economic Stabilization Act of 2008. October 2, 2008: Stock market indices fell 4% as investors were nervous ahead of a vote in the U.S. House of Representatives on the Emergency Economic Stabilization Act of 2008. October 3, 2008: The House of Representatives passed the Emergency Economic Stabilization Act of 2008 and the $700 billion Troubled Asset Relief Program. Bush signed the legislation that same day. Wachovia reached a deal to be acquired by Wells Fargo in a deal that did not require government funding. October 6–10, 2008: From October 6–10, 2008, the Dow Jones Industrial Average (DJIA) closed lower in all five sessions. Volume levels were record-breaking. The DJIA fell 1,874.19 points, or 18.2%, in its worst weekly decline ever on both a points and percentage basis. The S&P 500 fell more than 20%. October 7, 2008: In the U.S., per the Emergency Economic Stabilization Act of 2008, the Federal Deposit Insurance Corporation increased deposit insurance coverage to $250,000 per depositor.

October 8, 2008: The Indonesian stock market halted trading after a 10% drop in one day. Global central banks held emergency meetings and coordinated interest rate cuts before the US stock markets opened. October 11, 2008: The head of the International Monetary Fund (IMF) warned that the world financial system was teetering on the "brink of systemic meltdown". October 14, 2008: Having been suspended for three successive trading days (October 9, 10 and 13), the Icelandic stock market reopened on October 14, with the main index, the OMX Iceland 15, closing at 678.4, which was about 77% lower than the 3,004.6 at the close on October 8, after the value of the three big banks, which had formed 73.2% of the value of the OMX Iceland 15, had been set to zero, leading to the 2008–2011 Icelandic financial crisis. The Federal Deposit Insurance Corporation created the Temporary Liquidity Guarantee Program to guarantee the senior debt of all FDIC-insured institutions through June 30, 2009. October 16, 2008: A rescue plan was unveiled for Swiss banks UBS AG and Credit Suisse. October 24, 2008: Many of the world's stock exchanges experienced the worst declines in their history, with drops of around 10% in most indices. In the U.S., the DJIA fell 3.6%, although not as much as other markets. The United States dollar, the Japanese yen and the Swiss franc soared against other major currencies, particularly the British pound and Canadian dollar, as world investors sought safe havens. A currency crisis developed, with investors transferring vast capital resources into stronger currencies, leading many governments of emerging economies to seek aid from the International Monetary Fund. Later that day, the deputy governor of the Bank of England, Charlie Bean, suggested that "This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history". In a transaction pushed by regulators, PNC Financial Services agreed to acquire National City Corp.

2008 (November–December)

November 6, 2008: The IMF predicted a worldwide recession of −0.3% for 2009. On the same day, the Bank of England and the European Central Bank, respectively, reduced their interest rates from 4.5% to 3%, and from 3.75% to 3.25%. November 10, 2008: American Express converted to a bank holding company. November 20, 2008: Iceland obtained an emergency loan from the International Monetary Fund after the failure of banks in Iceland resulted in a devaluation of the Icelandic króna and threatened the government with bankruptcy. November 25, 2008: The Term Asset-Backed Securities Loan Facility was announced. November 29, 2008: Economist Dean Baker observed:There is a really good reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years ago have little or nothing today. Businesses are facing the worst downturn since the Great Depression. This matters for credit decisions. A homeowner with equity in her home is very unlikely to default on a car loan or credit card debt. They will draw on this equity rather than lose their car and/or have a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the case of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007 ... While many banks are obviously at the brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. The problem with the economy is the loss of close to $6 trillion in housing wealth and an even larger amount of stock wealth. December 1, 2008: The NBER announced the US was in a recession and had been since December 2007. The Dow tumbled 679.95 points or 7.8% on the news. December 6, 2008: The 2008 Greek riots began, sparked in part by economic conditions in the country. December 16, 2008: The federal funds rate was lowered to 0%. December 20, 2008: Financing under the Troubled Asset Relief Program was made available to General Motors and Chrysler.

2009

January 6, 2009: Citi claimed that Singapore would experience "the most severe recession in [its] history" in 2009. In the end, the economy grew in 2009 by 0.1% and in 2010 by 14.5%. January 20–26, 2009: The 2009 Icelandic financial crisis protests intensified and the Icelandic government collapsed. February 13, 2009: Congress approved the American Recovery and Reinvestment Act of 2009, a $787 billion economic stimulus package. President Barack Obama signed it February 17. February 20, 2009: The DJIA closed at a six-year low, amidst worries that the largest banks in the United States would have to be nationalized. February 27, 2009: The DJIA closed at its lowest value since 1997 as the U.S. government increased its stake in Citigroup to 36%, raising further fears of nationalization and a report showed that GDP shrank at the sharpest pace in 26 years. Early March 2009: The drop in stock prices was compared to that of the Great Depression. March 3, 2009: President Obama stated that "Buying stocks is a potentially good deal if you've got a long-term perspective on it". March 6, 2009: The Dow Jones hit its lowest level of 6,469.95, a drop of 54% from its peak of 14,164 on October 9, 2007, over a span of 17 months, before beginning to recover. March 10, 2009: Shares of Citigroup rose 38% after the CEO said that the company was profitable in the first two months of the year and expressed optimism about its capital position going forward. Major stock market indices rose 5–7%, marking the bottom of the stock market decline. March 12, 2009: Stock market indices in the U.S. rose another 4% after Bank of America said it was profitable in January and February and would likely not need more government funding. Bernie Madoff was convicted. First quarter of 2009: For the first quarter of 2009, the annualized rate of decline in GDP was 14.4% in Germany, 15.2% in Japan, 7.4% in the UK, 18% in Latvia, 9.8% in the Euro area and 21.5% for Mexico. April 2, 2009: Unrest over economic policy and bonuses paid to bankers resulted in the 2009 G20 London summit protests. April 10, 2009: Time magazine declared "More Quickly Than It Began, The Banking Crisis Is Over". April 29, 2009: The Federal Reserve projected GDP growth of 2.5–3% in 2010; an unemployment plateau in 2009 and 2010 around 10% with moderation in 2011; and inflation rates around 1–2%. May 1, 2009: People protested economic conditions globally during the 2009 May Day protests. May 20, 2009: President Obama signed the Fraud Enforcement and Recovery Act of 2009. June 2009: The National Bureau of Economic Research (NBER) declared June 2009 as the end date of the U.S. recession. The Federal Open Market Committee release in June 2009 stated:... the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability. June 17, 2009: Barack Obama and key advisers introduced a series of regulatory proposals that addressed consumer protection, executive pay, bank capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind down systemically important institutions. December 11, 2009: United States House of Representatives passed bill H.R. 4173, a precursor to what became the Dodd–Frank Wall Street Reform and Consumer Protection Act.

2010

January 22, 2010: President Obama introduced "The Volcker Rule" limiting the ability of banks to engage in proprietary trading, named after Paul Volcker, who publicly argued for the proposed changes. Obama also proposed a Financial Crisis Responsibility Fee on large banks. January 27, 2010: President Obama declared on "the markets are now stabilized, and we've recovered most of the money we spent on the banks". First quarter 2010: Delinquency rates in the United States peaked at 11.54%. April 15, 2010: U.S. Senate introduced bill S.3217, Restoring American Financial Stability Act of 2010. May 2010: The U.S. Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Volcker Rule against proprietary trading was not part of the legislation. July 21, 2010: Dodd–Frank Wall Street Reform and Consumer Protection Act enacted. September 12, 2010: European regulators introduced Basel III regulations for banks, which increased capital ratios, limits on leverage, narrowed the definition of capital to exclude subordinated debt, limited counter-party risk, and added liquidity requirements. Critics argued that Basel III didn't address the problem of faulty risk-weightings. Major banks suffered losses from AAA-rated created by financial engineering (which creates apparently risk-free assets out of high risk collateral) that required less capital according to Basel II. Lending to AA-rated sovereigns has a risk-weight of zero, thus increasing lending to governments and leading to the next crisis. Johan Norberg argued that regulations (Basel III among others) have indeed led to excessive lending to risky governments (see Euro area crisis) and the European Central Bank pursues even more lending as the solution. November 3, 2010: To improve economic growth, the Federal Reserve announced another round of quantitative easing, dubbed QE2, which included the purchase of $600 billion in long-term Treasuries over the following eight months.