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Seven days that shook the financial world

September 20, 2008

Text: Phil Mintz

It was the week that shook the financial world to the core. On Friday, Sept. 12, traders left the New York Stock Exchange for the weekend. But key banking officials, facing the impending failure of the venerable Lehman Brothers investment house and a shaky outlook for two other huge financial players - investment firm Merrill Lynch and insurance giant American International Group - began a series of weekend meetings in an effort to prevent a possible collapse of the global financial system.

Over the next seven days, the nation's financial leaders, captained by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, produced a rapid succession of moves that reversed a decades-long trend toward financial deregulation and fundamentally changed the face of the American financial system.

Lehman failed and Merrill was sold to Bank of America. The government took effective control of AIG in an $85 billion bailout. And, in the biggest intervention of all, officials proposed to purchase the troubled mortgage assets of financial firms, a move that could cost hundreds of billions of additional dollars.

Meanwhile, worried investors sent the stock markets into a dizzying ride of huge gains and losses.

Here's how the events unfolded:

Image: Lower Manhattan and the Financial District are seen from Brooklyn at sunset | Photograph: Mario Tama/Getty Images

Also read: Keep Wall Street out of the retirement business

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