5 September 2008, global markets were thrown into panic mode as US investment bank Lehman Brothers filed for bankruptcy after failing to secure a rescue sale.
The announcement kicked off a day of unprecedented corporate chaos in the US – by late morning, Bank of America had agreed to buy struggling Merrill Lynch, and the Fed has asked the rest of the US bank community to shore up AIG to the tune of $70bn. Three years on, we look back at the events that shaped “meltdown Monday”.
BERNANKE LOOSENS LENDING RESTRICTIONS
In the early hours of Monday 15 September, 2008, Federal Reserve chairman Ben Bernanke expands short-term lending to banks by taking all investment-grade debt as collateral, instead of just T-bills and other high-grade securities.
“THE STEPS WE ARE ANNOUNCING TODAY, ALONG WITH SIGNIFICANT COMMITMENTS FROM THE PRIVATE SECTOR, ARE INTENDED TO MITIGATE THE POTENTIAL RISKS AND DISRUPTIONS TO MARKETS” -- BEN BERNANKE, FED CHAIRMAN
FTSE LOSES 200 POINTS
The FTSE 100 lost over 200 points, closing 3.92 per cent down on the day’s session. It lost 4.5 per cent by midday but then rallied slightly from a low of 5,124 to close at 5,204.
AIG LOOKS FOR CASH TO AVOID DOWNGRADE
Insurance giant American International Group races to raise cash in order to avoid credit rating downgrades. Shares of the firm lost close to two-thirds of their value during trading as the market nervously waited for the company to announce a restructuring plan.
The US federal government asks Goldman Sachs and JPMorgan Chase to head up a $70-$75bn lending pool for the troubled company.
“I NEVER ONCE CONSIDERED THAT IT WAS APPROPRIATE TO PUT TAXPAYER MONEY ON THE LINE WHEN IT CAME TO LEHMAN BROTHERS” -- HENRY PAULSON, TREASURY SECRETARY
LEHMAN EMPLOYEES CLEAR THEIR DESKS
Bankers at Lehman Brothers, which had 26,000 employees at the end of June 2008, began clearing their desks on Monday morning
BANK OF AMERICA BUYS MERRILL LYNCH
After talks for Bank of America to buy Lehman fall through, it announces an agreement to acquire Merrill Lynch for up to £50bn. "It didn't take but two seconds to see the strategic implications, the positive implications," said BofA chief executive Ken Lewis at the time.
BUSH ATTEMPTS TO CALM INVESTORS
Speaking in the Rose Garden at the White House, US President George W Bush acknowledged that markets were in turmoil, and sought to calm investors by saying: “We are working to reduce disruptions and minimise the impact on the [broader economy].”
LEHMAN BROTHERS FILES FOR CHAPTER 11
Just after midnight in New York, Lehman Brothers files for bankruptcy under Chapter 11 with the US Bankruptcy Court for the Southern District of New York