Cover Story : 20 Years Of Turmoil And Progress

ANNIVERSARY TIMELINE



OCTOBER 19, 1987:
STOCK MARKET CRASH
The Dow Jones Industrial Average (DJIA) falls 508 points, or 22.6%, in the steepest decline since 1929. Portfolio insurance and computerized trading takes some of the blame for what ranks as the fifth-largest point drop in the DJIA.

 

1988:
US SAVINGS & LOAN CRISIS
Deregulated S&Ls get in over their heads, and more than 1,000 institutions fail, in many cases as the result of malfeasance and fraud. The ensuing bailout costs the US government an estimated $125 billion in direct subsidies.

 

1990: JAPAN’S ASSET
BUBBLE BURSTS
After the Bank of Japan raises rates to cool its overheated economy, the Nikkei stock index plunges more than 30,000 points. It continues to struggle for more than a decade until its post-bubble low of 7,608 in 2003, down 80% from its high.

 

SEPTEMBER 16, 1992:
UK EXITS ERM
Britain is forced to leave the European Exchange Rate Mechanism following a wave of speculative attacks on its currency. Quantum, a hedge fund managed by George Soros, pockets $1.1 billion profit after selling short $10 billion worth of pounds.


DECEMBER 20, 1994:
MEXICAN PESO CRISIS
Mexico devalues the peso, and the financial crisis that follows halves the currency’s value. The US intervenes quickly, buying pesos in the open market and granting Mexico $50 billion in loan guarantees.

 

FEBRUARY 1995:
ROGUE TRADER NICK LEESON
Leeson, a 28-year-old trader based in Singapore, loses more than $1 billion on futures pegged to the Nikkei 225 stock index in Japan and singlehandedly brings down Barings Bank, the UK’s oldest investment bank.

 

JULY 1997: THE ASIAN
FINANCIAL CRISIS
Thailand runs out of foreign exchange reserves to support its currency and floats the baht, which falls 20% to a record low. The crisis spreads through much of Asia, with the Philippines, Indonesia, South Korea and Thailand the most affected. The IMF establishes a $40 billion program to support these currencies.

 

OCTOBER 27, 1997:
THE “MINI CRASH”
The DJIA falls 554 points—which at 7.2% is relatively small in percentage terms—caused in large part by worries about the growing economic impact of the Asian financial crisis. The New York Stock Exchange imposes trading curbs for the first time and closes early for the day.

 

AUGUST 17, 1998:
RUSSIAN FINANCIAL CRISIS
The Russian economy is hit by declining oil prices in the global recession of 1998 that follows the Asian financial crisis. The Russian central bank widens the trading band for the ruble, which drops 12% on the day of the announcement. The government also imposes a 90-day moratorium on foreign-debt payments.

 

AUGUST 31, 1998:
WALL STREET REACTS
The DJIA falls 512 points in a delayed reaction to the Russian financial crisis and on worries that Latin America could be next. Meanwhile, investors are unnerved by news that North Korea launched a three-stage missile eastward over Japan, extending the range of its existing rockets.

 

SEPTEMBER 1998:
LONG-TERM CAPITAL MANAGEMENT
The hedge fund gets into trouble when a general flight to liquidity following Russia’s default leads to a repricing of risk. The Federal Reserve Bank of New York organizes a rescue, fearing the impact on global financial markets if it allows the hedge fund to go under.

 

1999:
ARGENTINA ENTERS RECESSION
As its exports are hurt by a devaluation of the Brazilian real, Argentina’s GDP falls 4%, marking the beginning of a recession that would last for three years. The crisis boils over into riots in December 2001, when the government devalues the peso and freezes bank assets.

 

APRIL 14, 2000:
INTERNET BUBBLE BURSTS
The DJIA tumbles 617 points, its second-largest point drop, while the technology-laden Nasdaq composite index falls 355 points, or 9.7%, to 3,321 in its biggest point decline ever. The Nasdaq index loses more than 1,000 points for the week and is off more than 34% from its record high set just a month earlier, as it suddenly dawns on investors that many of the “new economy” Internet companies that went public are highly overvalued and might never show a profit.

 

FEBRUARY 22, 2001:
FINANCIAL CRISIS IN TURKEY
Prime Minister Bulent Ecevit clashes openly with President Ahmet Necdet Sezer over reforms, triggering a crisis. Interest rates shoot up to 7,000%, and stock prices fall. The Turkish lira loses more than 40% of its value as the government abandons exchange controls.


SEPTEMBER 17, 2001:
RECORD ONE-DAY POINT DROP IN DJIA
The New York Stock Exchange reopens after being closed since the September 11 terrorist attacks. The DJIA falls 684 points, its largest single-day point loss ever.

 

DECEMBER 2, 2001:
ENRON FILES FOR BANKRUPTCY
Enron’s stock price plunges after it is revealed that much of its profits are the result of deals with special-purpose entities that it controls.

 

JULY 2002:
URUGUAY BANKING CRISIS
Uruguay suffers a massive run on its banks, causing the government to freeze banking operations. Uruguay’s real GDP falls by 12% in 2002 as a result of its heavy dependence on neighboring Argentina. The US Treasury provides a $1.5 billion bridge loan to the Uruguayan government to tide it over to a bank-rescue fund financed by multinational organizations including the IMF.

 

2003: SARS
Severe acute respiratory syndrome is seen as the biggest threat to the fast-growing Asian region since the 1997-1998 financial crisis. First discovered in February 2003, the virus quickly spreads to 29 countries. By the time it is contained in July, there are 774 confirmed deaths, but confidence in Asia’s economic future is unshaken.

 

2007: US SUBPRIME
MORTGAGE CRISIS
Losses in the subprime market trigger a credit crunch. The risks are distributed widely through securitization, and worries that the crisis would spread to the broader economy disrupt global financial markets for months. The Federal Reserve cuts interest rates and floods the market with liquidity. The stock market bounces back to record highs in October on hopes that the crisis is successfully contained, only to fall again as major banks begin to reveal the true, multi-billion-dollar scale of their losses.

 

 

Gordon Platt
 

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