THE CREDIT CRISIS: 10 YEARS AND COUNTING RICK TOBIN
RealtyTrac had published details about the worsening foreclosure situation in December 2006 just two months
prior in which they noted that foreclosures had increased 35% between December 2005 and December 2006
over the period of 12 months. The rampant foreclosure pace reached 100,000 foreclosure filings per month
between August 2006 and December 2006.
Once the HSBC domino began to fall in February 2007, then the next financial dominoes to fall were just
around the corner as noted by some of these key dates below:
* April 3, 2007: New Century Financial (one of the best known subprime lenders nationwide that was based out
of the Irvine, California region) files for bankruptcy protection.
*June 2007: Two Bear Stearnsmanaged hedge funds that specialized in subprime mortgage pool investments
began to run out of cash, and are forced to begin selling off assets at huge discounts for much needed new
capital to survive. The financial problems from these hedge funds then spreads to other large financial firms on
Wall Street that were some of the biggest investors such as JP Morgan Chase, Citigroup, Merrill Lynch, and
Goldman Sachs. As a result, the two collapsing Bear Stearns investment funds had their own internal domino
collapse that was spreading far and wide across Wall Street and Main Street.
* August 9, 2007: The French bank named BNP Paribas informs their clients that they will not be able to take
any money out of their investment funds that were partly tied to U.S. subprime mortgage pools since BNP
Paribas could not estimate the current market value of the mortgage pool that held too many nonperforming
mortgage loans. Due to the size
of BNP Paribas and the
importance to the rest of the
European and global financial
system, the European Central
Bank (Europe’s version at the
time of the Federal Reserve),
the Federal Reserve, the Bank
of Japan, and the Bank of
Canada all begin to directly or
indirectly try to flood the
markets with more liquidity in
order to save BNP Paribas from
ending up insolvent and in
bankruptcy court.