Ford Motor Company (F)’s Big Debut and a Flood of Warning Signs

Fed Chairman Ben Bernanke attempted to get out in front of the danger by urging the House Budget Committee to enact a fiscal-stimulus package, which reinforced former Treasury Secretary Larry Summers’ call for up to $150 billion in stimulus two days earlier.

Since the beginning of that year, a steep drop in many bank stocks had begun to pick up steam after Citigroup Inc. (NYSE:C) and Merrill Lynch both reported huge quarterly losses on bad mortgage bets. Bernanke had estimated subprime losses to be in the $100 billion range, but he warned that it could end up higher. By this point, the Fed had already cut the funds rate three times since September and had loaned banks $70 billion in the previous month via multiple auctions.

The recession turned out to be worse than most had expected. By the end of 2008 the Dow had lost 34% of its value, and many other stocks in weakened sectors had been devastated. Citi had fallen 77% and DryShips 86%, and by midyear more than 9% of all American mortgages were either delinquent or in foreclosure, a figure that would near 15% the following year. The Dow recovered to early 2008 levels by 2011, but banking and shipping stocks remain in a much weaker state than they were in on Jan. 17, 2008.

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The article Ford’s Big Debut and a Flood of Warning Signs originally appeared on Fool.com.

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