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The Year in Business: 2008
December 31, 2008 5:10 AM
ABC News’ Daniel Arnall reports: 2008 has been the most important year in the lifetime of every working-age American. It is the definition of superlative.
Some of the highlights and headlines that took our breath away:
- Banks failed. Washington Mutual was the biggest failure ever, and 24 other (mostly smaller) banks got the FDIC treatment during the year.
- A bear market settled in. Investors saw trillions of dollars disappear as global stock markets shed more than 50 percent of their peak value (S&P was down 51.9 percent Nov. 20).
Volatility became commonplace. The Dow saw its biggest one-day point gain (936.42 points Oct. 13) and point loss (777.68 Sept. 29) this year. A wild ride.- Someone made off with $50 billion. Bernie Madoff’s alleged global scam bilked an unimaginable amount of money from the rich and not so rich.
- Bear Stearns becomes a rug in JPMorgan’s parlor after a Fed-Treasury-engineered fire sale during a springtime run on the bank.
- Insurance giant AIG is nationalized. Regulators say this firm -- the bookie for hundreds of billions in credit default swaps -- was too big to fail. So taxpayers have already pushed more than $100 billion in chips onto the table.
- Lehman Bros. becomes Wall Street’s black sheep. The government allowed this storied investment bank to collapse, so it filed for Chapter 11 Sept. 15. That was the straw that broke Wall Street’s back, sparking a global sell-off that resulted in worldwide stock losses that pretty much no one could have imagined.
- Money for nothing. The Federal Reserve set its target rate for a key interest rate at 0 to .25 percent -- the lowest level in the history of the central bank. It hoped the low rates would spur borrowing and thus the economy, but banks seem unwilling to lend for fear that borrowers -- be they other banks, businesses or consumers -- will not be able to pay them back.
- Bailout bonanza. By the end of the year, 204 banks had joined the Treasury’s roster of bailout banks. The total amount of capital invested was $172 billion, almost exactly what the government spent on the Departments of Agriculture, Education and State during 2008.
- Faster than we can print it. The Fed flooded the globe with dollars, hoping to shore up crumbling faith in the financial infrastructure. It increased its balance sheet from about $850 billion to more than $2.4 trillion in just eight months.
- Your house worth less. In the past year, home prices across the nation lost value at an astonishing pace. Last year, people were desperately looking for a bottom to the market. By the end of 2008, people had stopped predicting a turnaround, resigned to another year of falling prices.
- Like a derrick, up and down. In July, record oil ($145 a barrel) and gas ($4.11 a gallon) prices had people gasping. By December, a recessionary cutback in demand pushed prices to five-year lows: oil ($35) and gas ($1.61).
- Price shocks. The run-up in energy prices pushed inflation into the headlines and had the Fed raising interest rates to keep things in check. Despite the fact that little time has elapsed, deflation is now a concern that’s on the minds of many economists.
- Pink slips like confetti. The economic slowdown is hitting American workers hard. Every month of 2008 has seen negative numbers -- so far almost 2 million jobs have been lost. And there are millions more to come as many people believe unemployment will reach 9 percent by mid-2009.
- Register recession. For almost a decade, the American consumer has been the engine that’s kept the economy going. With credit diminishing and fears about jobs and home values rising, the tank is empty. Retail analysts say a dismal holiday shopping season (the worst since at least 1970) will set off an avalanche of store closings and possibly push the commercial real estate market into a tailspin.
- Emergency roadside service. The U.S. auto industry is completely broken. After a decade of turnaround plans, it became apparent that GM, Ford and Chrysler weren’t turning fast enough. Consumers bought cars and trucks at an annual pace of about 12 million units, but the companies need 16 million units sold to remain solvent. By year’s end, the Big Three were begging Congress and the administration for a bailout and still can’t guarantee that the industrial engine will be jump-started. (Are you hoping to get an auto loan? Let us know.)
- Stock Market Losses. Click on the chart below for a look at some key numbers for 2008.
December 31, 2008 in Money Beat | Permalink | Share | User Comments (11)
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2008 was one giant reality check!
Posted by: eyeonyou | Dec 31, 2008 6:02:35 AM
READ CAREFULLY:
Once upon a time a man appeared in a village and announced to the
> > villagers that he would buy monkeys for $10 each. The villagers,
> > seeing that there were many monkeys around, went out to the forest and
> > started catching them. The man bought thousands at $10 and, as supply
> > started to diminish, the villagers stopped their effort. He next
> > announced that he would now buy monkeys at $20 each. This renewed the
> > efforts of the villagers and they started catching monkeys again.
> > Soon the supply diminished even further and people started going back
> > to their farms. The offer increased to $25 each and the supply of
> > monkeys became so scarce it was an effort to even find a monkey, let
> > alone catch it! The man now announced that he would buy monkeys at
> > $50 each! However, since he had to go to the city on some business,
> > his assistant would buy on his behalf. In the absence of the man, the
> > assistant told the villagers: "Look at all these monkeys in the big
> > cage that the man has already collected. I will sell them to you at
> > $35 and when the man returns from the city, you can sell them to him
> > for $50 each." The villagers rounded up all their savings and bought
> > all the monkeys for 700 billion dollars. They never saw the man or his
> > assistant again, only lots and lots of monkeys! Now you have a better
> > understanding of how the WALL STREET BAILOUT PLAN WILL WORK !!!!
Posted by: who cares | Dec 31, 2008 6:10:16 AM
The list of financial disasters presented here is quite long but still incomplete. No mention of the 401k investments taking a whopping 50% loss instead of seeing at least some 3-4% gain. The CEO and executive salaries and bonuses that reward absolute incompetence and lack of accountability, as exemplified by the CEO of Lehman or Merrill Lynch who walked off with 26 million dollars for just 4 weeks on the job. Government spending totally out of control, contributing to unprecedented deficits. Let 2008 go down in history as the year when the main stream lost its complete faith and confidence in the competence of wall street managers and executives, the management of the US auto industry and the Government financial regulatory and oversight bodies. 2008 is the historic year in which capitalism as we have known it in the USA, collapsed and is dying. We the people also realize in this year that we are becoming the most regulated yet ineffectively so and potentially the most innovative but in reality hampering innovation. With all the lessons that could be learned and the dissatisfaction with some institutions that are failing us, USA as a country is full of hope and promise and we should be proud to be Americans, humbled but rejuvenated, troubled but ready to work for better days and a brighter future. God bless America and peace to all our fellow citizens of the planet. There is a new president in the White house and hope springs eternal and radical but peaceful change begins in 2009.
Posted by: gjkotw01 | Dec 31, 2008 6:48:06 AM
okay, this past year has been bad but it's no great depression! I wish the media would stop making that comparison.
Posted by: mk | Dec 31, 2008 7:17:51 AM
2008 is the year that the people on top received a reality check, too bad they got a bailout check too.
Liked the comment by "who cares".
How about this analogy.
Can give a man a fish (700 billion) but tomorrow he will again be hungry. Teach him how to fish (be economically responsible) and he can feed himself.
Posted by: Dennis | Dec 31, 2008 11:30:51 AM
I believe Peter Schiff and Ron Paul predicted all of these things when people were laughing at them. I suggest we start listening to those that were correct instead of Bernanke and Paulson who were dead wrong.
Posted by: Huh | Dec 31, 2008 11:56:39 AM
Doesn't one whammy follow the previous and precede the next?
Posted by: GrammarPolice | Dec 31, 2008 3:59:40 PM
2009 will be a complete recovery because of OBAMA 's enormous experience and keen insight into directing the worlds largest free market economy. A 21st century philosophy of regulation, create 5 million jobs, reform the health care system, pay for everyone's college tuition who wants to go, start even more road construction projects, fund the tooth fairy ! and ALL whammy's are GW Bush's fault !
Posted by: OBAMA 2008 ! | Jan 1, 2009 3:16:03 AM
I think we are already in a Great Depression. It's just taking time to feel it's full effects. The comparision by the media is accurate.
Posted by: ItsNotEinstein | Jan 1, 2009 4:29:15 AM
This is the worst time we have seen as a country our jobs are disappearing overseas. Somehow, Someway we need to come together and help one another get through these tough times. Pass along the pay it forward concept to everyone you know & meet
Posted by: Michael Q | Jan 1, 2009 1:32:16 PM
The billions of dollars used to bail out companies should have been paid to the american public.
If you made less than a certain amount of money and had debt (mainly credit card and mortgage debt) that had not been paid due to job loss / layoff (or even due to poor money management skills) since a certain date, then the government should bail you out. You get the money to pay the companies and everyone is getting out of debt (and credit can be restored). The bankruptcy claims go down and the american public gets a fresh start.
The way it has happened the american public is paying for the bail out without any benefits and the companies are not showing what happened to the monies they have received.
Posted by: Cindy C | Jan 12, 2009 11:30:38 PM
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