Question

Which is the correct chronological sequence starting with the first:

a) Fannie and Freddie entering the subprime loan business; Bear Stearns liquidity crisis; Fannie and Freddie insolvency; the collapse of Lehman brothers; TARP.

b) Bear Stearns liquidity crisis; Fannie and Freddie entering the subprime loan business; Fannie and Freddie insolvency; the collapse of Lehman brothers; TARP.

c) Bear Stearns liquidity crisis; the collapse of Lehman brothers; Fannie and Freddie entering the subprime loan business; Fannie and Freddie insolvency; TARP.

d) Fannie and Freddie entering the subprime loan business; Bear Stearns liquidity crisis; Fannie and Freddie insolvency; the collapse of Lehman brothers; passage of Dodd-Frank; TARP.

Answer 1

The housing and financial crisis of 2007-09 has been one of the worst recessions of all time impacting not just the US but the global economy.

The subprime crisis started with huge amount of mortgage loans provided by lenders to the poor credit borrowers. The mortgage backed securities were sold in the mortgage market. As housing bubble started to burst, the financial crisis followed.

The non-Bank mortgage underwriting exploded during the 2001-07 period and Fannie and Freddie Mac entered this growing subprime loan business a little late.

In 2008 March, Bear Sterns liquidity crisis came and Fed helped JP Morgan Chase to buy Bear Sterns.

On 7 September 2008, Fed took over Fannie and Freddie Mac after their insolvency.

In the second week of September, Lehman brothers collapsed after Fed declined to bail it out.

By end of September 2008, the Troubled Asset Relief Program (TARP) was initiated to stabilize the financial system.

Dodd-Frank came in 2010.

Thus, correct option is A.