Even as warning signs in credit markets picked up pace in 2007, Federal Reserve officials were slow to come alive to the risks of a crisis.
Some Fed officials expressed worries about the subprime mortgage crisis, according to transcripts of the 2007 meetings released on Friday with a customary five-year lag.
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But many believed the troubles would be contained and short-lived, and concern about inflation helped delay action until well into the year.
Below is a timeline of events in 2007 and a sampling of policymakers' reactions:
January 30-31: Fed keeps short-term interest-rates at 5.25 percent. "We're not seeing anything out of the ordinary or a persistent pattern, and that gives me more confidence that nothing really bad is going to happen here," Fed Board Governor Frederic Mishkin says at the meeting.
February 27: Freddie Mac stops buying the most risky subprime mortgages.
April 2: Subprime mortgage lender New Century Financial Corp files for bankruptcy.
May 9: Fed keeps short-term interest-rates at 5.25 percent. Fed Chairman Ben Bernanke: "The balance of risks with inflation being the greater still seems to me to be a reasonable approach."
June 1: S&P and Moody's downgrade more than 100 bonds backed by subprime mortgages.
June 7: Bear Stearns freezes redemptions from hedge fund specializing in subprime mortgages.
June 28: Fed keeps short-term interest-rates at 5.25 percent. Dallas Fed President Richard Fisher warns on Bear Stearns: "I don't think the issue is contained. I do think there is enormous risk." Still, he supports holding policy steady.
July 24: Countrywide Financial Corp warns of "difficult conditions."
July 31: Bear Stearns liquidates two hedge funds specializing in subprime mortgages.
August 3: "Mad Money's" Jim Cramer on fallout from Bear Stearns: Bernanke "has no idea how bad it is out there! ... The Fed is asleep!"
August 6: American Home Mortgage Investment Corp files for bankruptcy.
August 7: Fed keeps short-term interest-rates at 5.25 percent. "I still feel the presence of a 600-pound gorilla in the room, and that is the housing sector," San Francisco Fed President Janet Yellen says. Still, after citing risks to inflation, she concludes, "I certainly agree that policy is well positioned, and we should leave it exactly where it is."
August 9: BNP Paribas freezes redemptions on three funds.
August 10: Fed notes unusual funding needs at banks, says will provide funds as needed.
September 14: Bank of England announces emergency funding for large-mortgage lender Northern Rock.
September 18: Fed cuts short-term interest rate target to 4.75 percent. Chicago Fed President Charles Evans, who supported the cut based on his outlook, says: "As long as the financial difficulties are contained, and that is our working assumption, we expect growth to return to potential by the second half of 2008."
October 10: U.S. Treasury Secretary Henry Paulson announces "Hope Now Alliance" to help subprime borrowers.
October 15: Major U.S. banks announce mortgage debt rescue fund
October 31: Fed cuts short-term interest rate target to 4.50 percent.
December 6: New York Fed President Timothy Geithner: "I think what is happening in markets now is very serious and really potentially very dangerous. Its fundamental cause, as many of you have said, is this interaction between macro uncertainty and fear about the likely bout ahead for housing and the U.S. economy."
December 11: Fed cuts short-term interest rate target to 4.25 percent.
December 12: Fed creates Term Auction Facility to provide banks with liquidity; establishes currency swap lines with European Central Bank.
(Reporting by Alister Bull, Pedro da Costa, Ann Saphir, Jonathan Spicer; Editing by Leslie Adler)