BIS Quarterly Review, September 2007 (If you want indepth report on Mortage crisis)

[The Straight Story]

The entire report is here:
http://www.bis.org/publ/qtrpdf/r_qt0709.htm

The overview:
1. Overview: credit retrenchment triggers liquidity squeeze
Full text (PDF, 16 pages, 218 kb)

http://www.bis.org/publ/qtrpdf/r_qt0709a.pdf


Time Line (from the paper)

Timeline: Key events over the period
Date Event
15 June Moody’s downgrades the ratings of 131 ABSs backed by subprime home loans and places about
250 bonds on review for downgrade.

20 June News reports suggest that two Bear Stearns-managed hedge funds invested in securities backed
by subprime mortgage loans are close to being shut down.

22 June One of the troubled hedge funds is bailed out through an injection of $3.2 billion in loans.

10 July S&P places $7.3 billion worth of 2006 vintage ABSs backed by residential mortgage loans on
negative ratings watch and announces a review of CDO deals exposed to such collateral;
Moody’s downgrades $5 billion worth of subprime mortgage bonds.

11 July Moody’s places 184 mortgage-backed CDO tranches on downgrade review; further reviews and
downgrades are announced by all major rating agencies in the following days.

24 July US home loan lender Countrywide Financial Corp reports a drop in earnings and warns of difficult
conditions ahead.

26 July The NAHB index indicates that new home sales slid by 6.6% year on year in June; DR Horton,
the largest homebuilder in the United States, reports an April–June quarter loss.

30 July Germany’s IKB warns of losses related to the fallout in the US subprime mortgage market and
reveals that its main shareholder, Kreditanstalt für Wiederaufbau (KfW), has assumed its financial
obligations from liquidity facilities provided to an asset-backed commercial paper (ABCP) conduit
exposed to subprime loans.

31 July American Home Mortgage Investment Corp announces its inability to fund lending obligations;
Moody’s reports that the loss expectations feeding into the ratings for securitisations backed by
Alt-A loans will be adjusted.

1 August Further losses exposed at IKB lead to a €3.5 billion rescue fund being put together by KfW and a
group of public and private sector banks.

6 August American Home Mortgage Investment Corp files for Chapter 11 bankruptcy, leading to a term
extension on outstanding ABCP by one of its funding conduits.

9 August BNP Paribas freezes redemptions for three investment funds, citing an inability to appropriately
value them in the current market environment; the ECB injects €95 billion of liquidity into the
interbank market; other central banks take similar steps.

17 August The Federal Reserve’s Open Market Committee issues a statement observing that the downside
risks to growth have increased appreciably; the Federal Reserve Board approves a 50 basis point
reduction in the discount rate and announces that term financing will be provided for up to 30
days.

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