Five years ago, WaMu was at the top of it's game gobbling up other banks, even last year at this time, they had just completed their purchase of Providian Bank. 2008 however, was a much different picture then the Chief Executive of Washington Mutual had imagined five years earlier
.“We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.”
2008 marked the beginning of the end as they were seized by Federal Regulators, and had their assets sold/turned over to JP Morgan Chase. Look for those banks to take on the Chase name in 2009, once Chase begins it's re-branding process. Eventually, even the WaMu credit/Debit cards will be replaced by Chase cards.
9. Bear Stearns Falls
It took only a few days, a rising sense of panic - and a critical e-mail - to spell the end of the 85-year-old investment bank.- CNN Money
8. Ethanol problems
Iowa's ethanol industry was generally seen as a temporary solution for long-standing rural problems, but few Iowans expected the profitability of ethanol to evaporate as quickly as it has in recent months.
The collapse of worldwide oil demand and prices effectively sucked the energy out of Iowa's growing ethanol industry. New plant construction had slowed in 2007, but this year the industry went in reverse with three of Iowa's 32 ethanol plants closing.
This fall, two ethanol producers with Iowa operations sought bankruptcy court protection: VeraSun Energy Corp. of Sioux Falls, S.D., and Pine Lake Corn Processors of Steamboat Rock. VeraSun reported a third-quarter loss of $464 million and asked the bankruptcy court to allow it to cancel futures contracts to buy corn from farmers after corn prices tanked.
Average profits on a gallon of ethanol fell from 31 cents last summer to 3 cents in November, according to Iowa State University.
Aditionally, with the number of starving people around the world, I have to wonder why we are putting food of any kind in our gas tank anyway.
7. Subprime Collapse
“Innovation has brought about a multitude of new products, such as sub-prime loans… Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in sub-prime mortgage lending… fostering constructive innovation that is both responsive to market demand and beneficial to consumers.”
So said Alan Greenspan, then chairman of the US Federal Reserve, on 8 April 2005.
- MoneyWeek.com
6. Energy price whiplash
From the perspective of energy prices, 2008 was a tale of two cities. For the first six months of the year, the headlines were about rising oil prices, potential shortages, and record gasoline prices. The second half the year featured a complete 180 degree turn with the entire move from January 2007 through July 2008 being erased and then some. As I pen this article, prices are threatening the $35/bbl level for crude oil and $5.50 for natural gas. In typical fashion, the financial media once again missed the real story here. The post-election revelation that the US has been in a recession since at least late 2007 was no real surprise to many of us, but underscored one of the points we have tried to establish all along in these weekly commentaries. Inflation is a monetary event, not an economic one. The fact that the largest run-up of oil prices in history came at a time when the US was in a recession throws water all over the idea that increasing prices are caused by economic growth alone. As has now been proven rather nicely this past year, that assertion could not be more wrong.
However, the real story behind the violent gyrations in oil prices and the markets in general is two-fold. First, the gyrations are indicative of a dying monetary system and rampant misinformation as ‘investors', under the influence of mainstream media race first in one direction, then in another in a frantic attempt to predict the next bubble. These are the dynamics that have caused massive dislocations in bonds, stocks, currencies, and commodities over the past year. The fiat foundation is shaking beneath us. Secondly, the dynamics of petroleum supply are fragile, and such violent price swings and false market signals will have dire consequences moving forward. This issue will be discussed in greater detail next week, but in simple terms, we will see petroleum shortages because of this mess – likely in the next year to 18 months.
5. Banks stay silent on bailout and Fed money
Revealing the true nature of the economic crisis, banks who received a bailout of taxpayer money, refused to identify how they were spending OUR money.
"We have not disclosed that to the public. We're declining to." Thomas Kelly – JP Morgan Chase – rec'd $25 Billion from the TARP
"We're not providing dollar-in, dollar-out tracking." Barry Koling – SunTrust – rec'd $3.5 Billion from the TARP
"We manage our capital in its aggregate." Tim Deighton – Regions Financial – rec'd $3.5 Billion from the TARP
This is the attitude that the big banks have towards you, the taxpayer, who saved their jobs, their billion dollar bonuses, and their companies. The frightening thing about this situation is that the hubris of the financial industry as a whole has continued to mount despite the fact that they are constantly having to beg Congress for more of your money. Where has this money gone? At this point, the only valid assumption, in the absence of disclosure by the banks, is that the money is being stolen. The increasing likelihood that we are witnessing the biggest bank robbery of all time makes this story a dead wringer for #1.
4. Congressional Bailout
It will be years before anyone fully understands what was, or was not, accomplished when Congress in October approved a $700 billion bailout of the financial system. There's already been much criticism about how that money is being spent, and there will be more.
San Francisco-based Wells Fargo, one of the largest banks in the country, received $25 billion from the government's Troubled Assets Relief Program without even asking for it. Wells Fargo, which is Iowa's largest bank and which has mortgage and consumer finance operations in the Des Moines area, has not said how it will spend the money.
Several other Iowa finance institutions also could benefit. Principal Financial Group has applied for $2 billion. Heartland Financial Group of Dubuque will receive $81.7 million, West Des Moines' West Bank will get $36 million, MidWestOne of Iowa City will receive $34.9 million, and North Central Bancshares Inc., $10.2 million.
3. Obama Wins
So you may be wondering what a political story is doing in a list of my picks for top financial/economic stories of the year. Simply because, many Americans voted for him based on the economic conditions and his promise of change. What ever his change is, he now has 4 and possibly 8 years to show us what those changes will be. The American public has given him a chance. In so doing, he has become the first African-American to be elected President of the United States of America.
2. Economic crash has consumers paying cash
If there's a silver lining to the dark economic clouds hanging overhead, it's that people are going back to paying for their purchases with cash instead of credit.
"I think there is a movement; I think part of it has been forced on people (by the tightening credit market)," said financial planner Rick Bloom, author of the column Money Matters in the Observer & Eccentric Newspapers.
But that's not a bad thing, Bloom said.
"I think Americans got addicted to easy credit," he said. "If you can only pay the minimum payment, you can't afford the item."
Living within your means - spending less than you earn - is an old-fashioned lifestyle that provides peace of mind, said bankruptcy attorney Michael D. Lieberman of Southfield.
"The ability to sleep at night is the way I look at it," Lieberman said, adding that overspending adds a lot of needless stress to households and marriages.
I couldn't have said it any better myself. In fact, I have said it several times in this blog and was criticized for it. I agree, it is a good thing. As I said in some previous posts, we will have a economic hiccup, but as we get back into the "old fashioned" pay as you go mode of life, everything will balance out.
1. 2008 Economic Misery
2008 has been a historic year for the economy and the country. We look back at the financial crisis—from the housing collapse and the credit crisis that changed the economic landscape.
Video: 2008: Economic Misery
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go ahead share your thoughts with me now.
