Financial Crisis Timeline
March 18, 2009 AIG Chairman and Chief Executive Officer Edward Liddy:
"Although we have wound down more than $1 trillion in the portfolio of AIG Financial Products in the unit that is at the root of our financial problems that portfolio remains very large $1.6 trillion and it continues to contain substantial risk. The financial downside for taxpayers is potentially very large and very real, and that's why we're winding this business down."
"To prevent undue risk exposure in the meantime, AIG has made a set of retention payments to employees based upon a compensation system that prior management put in place. Payments were made to employees in the Financial Products unit that caused many of AIG's problems. And Americans are asking why pay these people anything at all?"
"Here is why. I am trying to prevent an uncontrolled collapse of that business. This is the only way to improve AIG's ability to pay taxpayers back quickly and completely, and the only way to avoid a systemic shock to the economy that U.S. Government help was meant to prevent."
March 9, 2009 Warren Buffet CNBC:
In September, I think we were days away from collapse. If there was a week where 200 billion, as I remember, in the first three days or so poured out of the money market funds, which had about 3 trillion in them, the money was just gushing out when Reserve broke the buck. That meant that the commercial paper market was disappearing. You know, the blood was being drained from the American economic body and we had some very prompt, wise, action. Chairman Bernanke, the Fed, I mean, they stepped in and said the commercial paper market is going to work. That made a huge difference. People came in and said the money market funds, you know, you weren't going to lose money in money market funds. They said the same thing about money market funds we should now say about the whole banking system. And actually, we've said it in various ways. If you read that Federal Reserve New York chairman speech, it says it, but it doesn't say it the way the American people will get it. The president of the United States has to say it very clearly that you just don't have to worry about that.
Feb. 24, 2009 U.S. Federal Reserve Board chairman Ben Bernanke:
there is a reasonable prospect the recession will end this year.
Feb. 23, 2009 George Soros: The scale of the problem is much greater than in the Great Depression because of the leverage involved, Soros said. The ratio of debt to gross domestic product was 350 percent last year, compared with 160 percent in the 1920s, and is set to rise to 500 percent, he said.
The real estate bubble was created as much by relaxed lending standards and the valuation of collateral as the availability of credit, he said. The bubble began in the early 1980s, and the subprime-mortgage debacle acted as the detonator, Soros said. The crisis was made possible by the globalization of financial markets and securitization of debt, he said.
Risk management has become so 'refined and sophisticated' regulators can no longer follow what is happening, he said.
Oct. 10, 2008 With the privatization of the banking sector, completed in 2000, Iceland's banks used substantial wholesale funding to finance their entry into the local mortgage market and acquire foreign financial firms, mainly in Britain and Scandinavia. In just five years, the banks went from being almost entirely domestic lenders to becoming major international financial intermediaries. In 2000, says Richard Portes, a professor of economics at London Business School, two-thirds of their financing came from domestic sources and one-third from abroad. More recently -- until the crisis hit -- that ratio was reversed. But as wholesale funding markets seized up, Iceland's banks started to collapse under a mountain of foreign debt.
November 2004, William Fleckenstein
I have long believed that when the economy and stock market started to sink once again that the Greenspan Fed would be seen as the dangerous menace that it is. I also have felt that the recognition of their incompetence would exacerbate the unwinding, as folks became frightened upon realizing that the last decade had been a facade, and that people were now on their own to face and try to conquer the economic imbalances that have been created. The change in psychology that will coincide with these events is what I refer to as "the next time down." In an environment like that, the decline in stocks, housing prices, and the dollar would negatively impact the economy, and they would all feed on each other. I will leave it to your imagination to decide exactly how ugly things may get.
Jan. 7, 1973 Greenspan:
Prediction to the New York Times that "it is very rare that you can be as unqualifiedly bullish as you can be right now" -- four days before the Dow Jones Industrial Average peaked at 1,051 and plunged 46 percent over the next two years.
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