On October 14, the US also bit the bullet on nationalisation. At a meeting in New York, the US banks were told they must take up to $US250 billion in government equity, "for their own good and the good of the country". There was to be no negotiation.
Wall Street saw its biggest one-day rise in 75 years - but it did not last.
A week later, the fear of defaults had spread from banks to countries as diverse as Iceland, Pakistan, Ukraine, Belarus and Hungary that were forced to seek IMF help as hedge funds, banks and mutual funds recalled the heavy lending they had made to emerging economies.
The biggest danger in the 2008 crisis has been - and still is - that deleveraging will spin out of control into runaway "debt deflation" as falling asset prices make debts look bigger and bigger. This could lead to heavily geared borrowers defaulting in waves, 1930s-style.
All the efforts of central banks to keep money and credit flowing through the year have been aimed at preventing this from happening.
The global financial crisis blow by blow
3 October 2007: First Australian casualty: in just 10 weeks, RAMS Home Loans implodes from hot new listing in July to a fire sale to Westpac for $170 million on October 3 as the wholesale funding market it depends on vanishes.
December 2007: Highly geared Centro Properties has trouble rolling over $3.9 billion in short-term debt as crunch digs deeper into Australia.
January 9 2008: World Bank warns the credit crunch will hit the real economy and slow growth in 2008.
February 2008: Macquarie Group and Babcock & Brown suffer big falls. Complicated investment companies like Centro, Allco, Babcock & Brown and others that used cheap debt to buy fast-rising assets find the equation works savagely in reverse too. Allco goes into receivership in November, Babcock & Brown teeters weeks later.
March 17 2008: Bear Stearns, worth $17 billion one year earlier, is taken over by JPMorgan for $240 million. Collapse comes after more than $US1 trillion has been injected by central banks since August 2007 to kick-start credit markets and prices for debt instruments held by banks. Some investment banks recapitalise with Asian and Middle East sovereign wealth money, although this is soon burned up as yet more losses emerge.
April 8: International Monetary Fund estimate of total write-offs of bad debts and derivatives may double earlier estimates to $US1 trillion. The IMF warns damage will be "broader, deeper, more protracted" than anything imagined so far. Out of 50 million US mortgages, 9 million are in default.
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