Anatomy of a downturn

A closer look at the global ‘credit crunch’


The ‘credit crunch’ may have
its roots in the US, but it’s
now a global problem
Governments in Great Britain,
Belgium, the Netherlands and
even Iceland have been forced
to bail out some of their biggest
banks
The Rudd Government has
moved to protect bank deposits
for the next 3 years
Importantly, the Australian
banking system, which is more
regulated than that in the US,
has held up very well
 Anatomy of a downturn
a closer look at the global ‘credit crunch’

January March
2008 2007

JP Morgan buys US investment

US Federal Reserve cuts
interest rates by 0.75% amid
fears the US economy could
fall into recession
bank Bear Stearns in an
‘emergency’ rescue deal
US Federal Reserve provides
US$200 billion to commercial
banks in another bid to free up
market liquidity
 Anatomy of a downturn
a closer look at the global ‘credit crunch’
April 2008
International Monetary
Fund warns losses related
to the ‘credit crunch’ could
top US$1 trillion
September
2008
7 September 2008
US government seizes control of mortgage lenders
Fannie Mae and Freddie Mac
15 September 2008
Lehman Brothers files for bankruptcy. Merrill Lynch is
bought by Bank of America for US$50 billion
16 September 2008
American International Group (AIG), the US’s biggest
insurer, receives an US$85 billion loan from the US
Federal Reserve to stave off bankruptcy
28 September 2008
US bank, Washington Mutual, is seized by US
regulators in the biggest US bank failure in history
 Anatomy of a downturn
a closer look at the global ‘credit crunch’

September
2008

28 September 2008
Britain, Belgium and the Netherlands are
forced to bail out several major banks. US
30 September 2008
government announces US$700 billion plan
$55 billion dollars is
to rescue Wall Street
wiped off the
29 September 2008 Australian share
Citigroup bids for US bank Wachovia in a market in a single day
deal backed by US authorities
One day later, the
US House of Representatives narrowly market recovers by
rejects the US$700 billion bailout plan by a more than 4%
vote of 228-205, sending global share
markets tumbling
 Anatomy of a downturn
a closer look at the global ‘credit crunch’

October
2008

3 October 2008
After a second vote, the US House of
Representatives passes the US$700 billion
bailout plan

6 - 10 October 2008
Concerns that bailout plan won’t prevent a
global recession sends global shares sliding:

Japan -24.3%
Europe -22.2%
UK - 21.0%
US -18.2%
Australia -15.6%
The list of casualties keeps growing …