How did we get here?

It's been nearly a month since this whole business with the banks, bail-outs, bad mortgages and stock sell-offs really started to come to light. I'm using a timeline CNNMoney put together to retrace my steps a bit.

A little background

I'm currently working at a trading firm's IT department. While I'm not intimately involved with the details of any trading activity, I do have a first-hand view of what the market's doing on a daily basis.

I had done some work with an Irvine, CA unit of Lehman Brothers back in 2005 and 2006. On about Sept 10, I tried to see if I could find any of the Lehman people I worked with on LinkedIn or something. After a little web searching , I discovered that the unit I worked with had gone out of business. They specialized in providing small business loans, so I figured then that it was just the market correcting itself in light of the property foreclosures and subprime mortgage issue. I mean, JP Morgan Chase was forced to buy Bear Sterns back in May, but the market, while down a bit, was still hovering at about 12,000/11,000 for the last couple months.

Well, the shit was about to hit the fan...

Monday, September 15, 2008

The day started out like it normally does. Got up, took a shower, brushed teeth. All that. We turned on the morning news and I saw on the bottom ticker that Lehman Brothers was filing for Chapter 11 and Bank of America was going to buy Merrill Lynch. Shit. I rushed to get ready, as I knew the market was going to be busy that day.

All I could say was there was a stiff nervousness in the air. Lehman was desperate to find a buyer like Bear Sterns did, but they had too many problems. Lehman and Merrill were gone and there was news that AIG was downgraded and trying to sell assets. The Dow lost 500+ points and closed at 10,917.

Tuesday, September 16, 2008

I woke up late and got to the office at about 7:45. The market dropped in early morning trading but rallied when the Fed kept interest rates. The Dow ended up back over 11,000. Post market close there was a lot of talk of Barclays picking up the $2 billion worth of profitable business Lehman had left over.

Wednesday, September 17, 2008

Late the night before, the government announced that it would take 80% stake of New York-based AIG for $85 billion, essentially giving it a loan to sell itself off in a controlled manner. The market tanked 450 points by the end of the day, mostly because of bank stocks. Morgan Stanley and Goldman Sachs posted numbers that weren't as bad as expected, but they still took a dive. By now, there was walk of both Wachovia and Washingon Mutual going down.

The SEC announced a ban on short selling for most of the Financial symbols on the market, hoping to stop any further free fall.

Thursday, September 18, 2008

Power in numbers, I suppose. Five banks got together and formed a $180 billion fund to invest in world markets. Thinking back on this now, I wonder where this money has gone.

AIG was removed from the Dow and was replaced by Kraft. In the afternoon, there was discussion of a bigger bailout. Treasury Secretary Paulson became a household name by now, as he started to work with Congress to draft something. The Dow recouped most of the 450 points it lost the day before.

Friday, September 19, 2008

The short-selling ban came into effect today and Paulson released information on his bailout plan, outlining the hundreds of billions of dollars that the taxpayers would pay. Investors loved it and the market jumped 370 points. Now, the market has been volatile for well over a year, and everyone thought that the activity was unprecedented. This was a whole new ballgame.

By the end of the week, I was so drained that the Lehman bankruptcy had seemed like months before. It's truly amazing what kind of activity happened this week.

Saturday/Sunday, September 20 - 21, 2008

My lovely wife is more in-tune to the market than I am, but we both watched closely over the weekend. The amount that Paulson and the government proposed was $700 billion.

Monday, September 22, 2008

We learned early in the morning that Goldman and Morgan Stanley would be converted into traditional banks. This meant that the days of high-flying investment banks were over. I think it was just a few weeks before that my cousin ended up at a velvet-roped event at a fancy night club in Chicago, sponsored by an investment banking group taking their interns out. I guess it's to be determined who will buy the bottles of Grey Goose and hit on all the ladies at the bar. The investment bankers are dinosaurs.

The Dow dropped 373 points as investors were unsure about the bailout. We started hearing Wall St. vs Main St. type talks from Obama and McCain as they were on the campaign trail. You could imagine that not a lot of people were particularly happy that the taxpayers were going to be the ones floating the bill for instituations that were deemed "too big to fail".

Tuesday, September 23 - Friday, September 26, 2008

There was a lot of partisan debate over the bailout plan and its details for the rest of the week. On Tuesday, though, it was announced that billionaire Warren Buffett (not Jimmy's brother), was dropping a cool $5 billion into Goldman Sachs.

Bush made a speech on Wednesday that scared the bejeesus out of a lot of people and the split between parties was even wider on Thursday when negotiations to the deal broke down even further. There was rumor that Henry Paulson got down on his knees and begged reporters not to tell people how bad the meeting went.

Thurday, September 25 marked the end of Washington Mutual, making them the biggest bank failure in history. I'm gonna miss all the, now ironic, WaMu ads with the fat greedy bankers. Wachovia was next...

The end of the week the market ended at 11,143 for the Dow.

Saturday, September 27 and Sunday September 28, 2008

Negotiations continued into the weekend with Democrats and Republicans to get a deal ready. Paulson looked like he hadn't slept in... 2 weeks? Sounds about right. A good way to loose some weight, too, I guess. Get that guy a sandwich.

Monday, September 29, 2008 - The Vote

This is probably the most memorable event that has occurred during this whole historical development. The bailout plan went up for a vote in the House of Reps and ended up not passing, mainly due to most of the Republicans voting against it.

The company where I work has this little machine that makes a DING noise every time a trade fills. While the voting was going on in the House, that beep-master was getting a workout. When it was obvious the plan was going to fail, the Dow dropped 500 points in a matter of a minute. It was the damnedest thing I've ever seen. At the closing bell, the Dow was down 589 points. I remember one of the CNBC correspondants saying that the final total would be 1 or 2 points one way or another. Try 200 points. After the dust settled post-close, the final damage was 777 points down.

To top things off, in a deal arranged by the FDIC, Citibank agreed to buy Wachovia for $2.2 billion. Just boggles the mind how money just disappears like that.

Tuesday, September 30, 2008

The Dow bounced back 485 points after the FDCI said it wanted to increase the $100,000 minimum for insured accounts. Not much happened on the Washington front, as lawmakers were on holiday.

Wednesday, October 1, 2008

The bailout plan went to the Senate, this time with some modifications. It passed 74 to 25 (I wonder where the fuck that one other guy was and if he'll ever get re-elected). The market was fairly flat, but was the first of a long line of consecutive drops that continued through where we are now.

The Cubs lost game 1 of the NLDS to the Dodgers, killing the hope of Cubs fans everywhere. The Chicago sports talk radio guys were pretty defeated.

Thursday, October 2, 2008

Jobless claims came out and we at a seven year high. Down goes the market. 348 points this time. Oh yeah... the Cubs lost game 2 of the NLDS. We almost went to the game but were glad when we saw that it ended up a terrible mess.

Friday, October 3, 2008

The second bailout vote passed in the House this time. Still, the freefall continued: this time 160 points. Wells Fargo stepped in front of Citibank and offered $15 billion of "real" money for Wachovia. Citibank was not happy.

The Governator from California asked the Feds for a $7 billion emergency loan from the government. No precendent there. I'm sure the other 49 states will just ignore that one.

Dow was down 818 for the week for the worst week in seven years.

Saturday, October 4 - Sunday, October 5, 2008

Well, the Cubs lost the NLDS in LA. It was bummer but then Saturday Night Live did another Sarah Palin parody, which was pretty hillarious. If there's one person making a killing during this time, it's Tina Fey. That woman has drawn some ridiculously high ratings for SNL and probably a heafty paycheck from Lourne Michaels.

Monday, October 6, 2008

Even though the bailout passed, it was going to take some time before the money was pumped into the market. Well, at one point the market dropped 800 points. Bank of America, one of the big three banks that remain (JPM and Citi being the others), reported a 68% drop in profits.

Who knows when this shit is going to end. The Dow closed below 10,000 at 9955 for the first time since 2004

Tuesday, October 7, 2008

The Fed to the rescue again. This time it starts buying up short term debt from businesses. At this point, I'm starting to think the experts are throwing darts to the wall. My opinion, of course, but since the Dow tanked another 500 points, it's clear there's no easy fix to get out of this mess.

Wednesday, October 8, 2008

Countries in Europe start taking the US's lead and pumping cash into their own banking system. In a coordinated effort with other countries, the US dropped its interest rate to 1.5%. Pretty soon they're going to be paying people to borrow money.

Investors we excited at first, but the Dow dropped nearly another 200 points.

Thursday, October 9, 2008

With absolutely no confidence in the market, the Treasury started talking about buying stake in banks (maybe lead by the Marx brothers?) GM and Ford were killed during the trading day and were down 31% and 22%, each trading under $5/share. I grew up in Michigan, so I know the impact this would have on the whole state and the country, but dammit, those companies have no one to blame except themselves and the freaking unions they deal with. I can't wait to see the lawsuits from the retirees looking for their health benefits once GM, Ford, or Chrysler are completely out of money. Again, this is my opinion and may incite some flames from the gallery, but...

The Dow was under 9000 as it closed down 687 points, down 2,200 in the month of October, alone.

Friday, October 10, 2008

The amount of trading traffic was crazy at the morning's open. The Dow actually dipped below 8,000 after losing 700 points in the first 5 minutes the market opened. Amazingly, though, at one point, it was 100 over from where it started. A 10% intra-day swing? Are you serious?

Oh, yeah. Oil prices have continued to drop. What's the formula to see the price at the pump, again, because when I filled up for $4.49/gallon last Wednesday, I don't see it.

Apparently, bankruptcy is not an option at GM, but a merger with Chrysler might be. So, what happens when you combine two sinking ships? Maybe we'll see in a week or so.