Global financial crisis in October 2008
[12] At a meeting on Monday night emergency legislation was passed granting broad powers to the government to seize and regulate banks.
[15] Denmark, Austria, and possibly Germany[clarification needed], joined Ireland and Greece[16] in guaranteeing bank deposits on Monday, October 6.
The plan included increased ability to borrow from the government, offered assistance in raising equity, and a statement of support for international efforts.
The Russian Parliament passed a plan authorizing lending of $36 billion gained from global oil sales to banks which met creditworthiness requirements.
[54][55] The government of the United States, as authorized by the Emergency Economic Stabilization Act, announced plans to infuse funds into banks by purchasing equity interests in them, in effect, partial nationalization, as done in Britain.
[58] On October 10, within the first five minutes of the trading session on Wall Street, the Dow Jones Industrial Average plunged 697 points, falling below 7900 to its lowest level since March 17, 2003.
Trading on Friday was marked by extreme volatility with a steep loss in the first few minutes followed by a rise into positive territory, closing down at the end of the day.
[61][62][63] As meetings proceeded with global financial leaders in Washington on Saturday, October 11, the United States government announced a change in emphasis in its rescue efforts from buying illiquid assets to recapitalizing banks, including strong banks, in exchange for preferred equity; and purchase of mortgages by Fannie Mae and Freddie Mac.
[65] On Sunday, October 12, European leaders, meeting in Paris, led by France and Germany, announced recapitalization plans for Europe's banks.
Central bank Governor Svein Gjedrem also made critical comments about some of the measures that had been implemented already by other countries, among them the concerted rate cuts which he said "was a strong card, which had a two-hour impact".
No enforceable mechanism was created to support the pledge, but it is believed to extend to major firms such as Morgan Stanley and Goldman Sachs.
[69] On October 13 stock markets worldwide rose with the Dow Jones industrial average showing a 400-point leap at the start of trading.
On Monday the International Monetary Fund offered possible technical and financial aid to Hungary which has suffered during the crisis due to the flight of investors to euro, Swiss franc, and dollar denominated investments.
As in the rest of the world, on Monday stock prices rose on the Hungarian exchange and pressure on the national currency, the forint eased.
In return for the bailout, the banks agreed to cancel dividend payments until the loans are repaid, have board members appointed by the Treasury, and limit executive pay.
[74] The European Central Bank attempted to revive credit market by weekly injections of unlimited euro funds at an interest rate of 3.75%.
Among the measures included are lifting restrictions on companies buying back their shares, strengthening disclosure on short selling, and the temporary suspension of the sale of government-owned stocks.
On Monday France announced a €10.5 billion rescue plan for six of its largest banks, including Crédit Agricole, BNP and Société Générale.
[85] Despite some improvement in the availability of credit, stock markets and weak currencies such as the British pound and the euro continued to decline worldwide during the week of October 19.
The Dow Industrials Index, on the other hand, experienced a week of extreme volatility with violent swings both upwards and downwards, eventually ending lower.
[86][87][88][89] On Wednesday, Pakistan joined Iceland, Hungary, Serbia and Ukraine and requested aid from the International Monetary Fund in dealing with severe balance of payments difficulties.
[90] Hungary, Russia, Ukraine, Pakistan, Turkey, South Africa, Argentina, Iceland, Estonia, Latvia, Lithuania, Romania and Bulgaria were all experiencing financial difficulties with others threatened.
[91][92] On Friday, October 24, stock markets plummeted worldwide amidst growing fears among investors that a deep global recession is imminent if not already settled in.
[94][95] On Sunday, October 26, Hungary and Ukraine made tentative arrangements with the International Monetary Fund for emergency aid packages.
[99] On Monday, October 27, Hong Kong stocks crashed, losing more than 12% of their value while in Japan, the Nikkei 225 Index plummeted by 6.4% to its lowest level since 1982.
After suffering an initial drop, the Dow Jones Industrial Average was in slightly positive territory for much of the trading day but eventually closed down 203 points.
[104] (A TARP oversight report by GAO, published December 2008, listed a total of 44 banks participating in the Treasury's $250bn (~$347 billion in 2023) "Capital Purchase Program" initiative.
Recipients include Oleg Deripaska of Rusal owner of Norilsk Nickel and Mikhail Fridman of Alfa Group whose assets VimpelCom and TNK-BP were threatened.
[112][113] Also on Thursday the Federal Reserve established a $30 billion currency swap line with South Korea and Singapore as well as Brazil and Mexico.
[114] JPMorgan Chase, the largest bank in the United States, announced that it would work with homeowners who demonstrate a willingness to pay their mortgages by reducing interest payments or principal.
