The first few cracks appeared when in June, Bear Stearns, a global investment bank, stopped redemptions in two of its hedge funds, prompting Merrill Lynch, an investment fund, to seize $800 million in assets from the funds.
Even these were small matters compared to what was to happen in the months ahead.
In August 2007, the Dominoes started to fall.
It became apparent by August 2007 that the financial markets could not solve the subprime crisis and that the problems were reverberating well beyond the U.S. borders.
The interbank market that keeps money moving around the globe froze utterly, primarily due to fear of the unknown. A well-known Swiss bank was the first to report its losses due to subprime mortgage investment. It was over three billion dollars!
In the coming months, the Federal Reserve and other central banks would take coordinated action to provide billions of dollars in loans to the global credit markets, which were grinding to a halt as asset prices fell.
