ABC News' Charles Herman reports: In the wee hours of the morning, right before a three-day holiday weekend and just as the Bush administration was winding down after eight years and a new president was taking the oath, Bank of America received an additional $20 billion in funds from the Trouble Assets Relief Program as well as a guarantee of future losses on nearly $118 billion. The news came hours before the bank hurriedly released its earnings for the last three months of 2008 and for the year.
Why the last-minute mad dash before the Martin Luther King Jr. Day holiday Monday?
It was exactly a year ago during this same holiday weekend that a global sell-off started Sunday night in overseas markets and continued throughout the day Monday when U.S. markets were closed. At the time -- it almost seems quaint now -- JP Morgan's chief Asian strategist said, “I think the word you would probably use to describe what we are seeing is a ‘crash.’ Markets have fallen very sharply. And one market falling is triggering another market to fall.”
In an attempt to stabilize U.S. financial markets and the economy, the Federal Reserve made a surprise, intrameeting interest rate cut that was the biggest single-point cut in more than 25 years, only an hour before trading began. The Dow Jones industrial average dropped 500 points -- below 11,800 -- but eventually recovered in the first hour of trading. The sell-off and the worries about the health of the U.S. economy helped create “bipartisan harmony,” as ABC News’ Jonathan Karl described it, between a president and Congress that were debating the passage of a stimulus package.
"All of us understand that we need to work together; all of us understand that we need to do something that will be effective; and all of us understand that now is the time to work together to get a package done," President Bush said.
Later that same week, we learned that Jerome Kerviel, a trader at Paris-based Societe Generale, had made a series of bad bets that cost the bank possibly as much as $7.2 billion. The bank’s attempt to resolve the trades made by Kerviel were credited by many as accelerating the overseas market decline that in turn pushed the Fed to cut rates.
The Fed said its decision was not influenced by Kerviel. “Although Federal Reserve officials were not aware of developments at Societe Generale before they announced their decision on Tuesday morning, they remain comfortable with their interest rate decision.”
This moment in history brought to you by the ABC News Business Unit.