Perfect financial storm: Economy tops 2008 business stories

This was the year of the meltdown.

Wall Street crashed. The banking system failed. The credit markets squeezed consumers and businesses alike. Many people lost their retirement savings, their jobs, their homes and filed bankruptcy at alarming rates.

And after the presidential election, the federal government finally admitted we were already in a recession. Financial experts called it the greatest economic crisis since the Great Depression.

"There was a catastrophic financial meltdown that led to the freezing up of the credit markets," said David Klein, senior vice president/financial consultant at RBC Wealth Management in Vernon Hills. "This meltdown, while it came this year, was caused by a lack of oversight and began a number of years ago."

The mass psychology that consumers should consume more, at all costs, finally cost all of us, said Diana J. Joseph, managing director of Dearborn Partners LLC in Chicago.

"The magnitude and extent of the resulting fallout was growing with each day that we refused to throttle back," said Joseph.

"The excesses grew until they exploded."

Besides the economic crisis, here are other major business stories of the year.

Wall Street: The stock market redefined volatility this year with wild swings up and down, all in triple digits. September and October saw those swings crash the market and force many timid investors to try to pull their savings out of foundering companies and into their mattress.

Local companies, such as Motorola, saw their stocks plunge to record lows. Motorola's stock hovered in the $4 range this year after being the teens or $20s range in the past.

Nearly all stocks lost value this year. But one company appeared to hold tight on some of those roughest of trading days: Campbell's Soup. Guess you'll need that chicken soup to recuperate from the craziness.

Federal bailouts: The federal government saw the impact of Wall Street and the closing credit markets and sought to keep banks afloat. It pumped roughly $800 billion into the financial industry, and just as much for consumers and the credit markets.

Some of the world's biggest investment and insurance firms, including AIG, took the handouts. Even the ailing auto industry, on the verge of bankruptcy, got some short-term loans.

Foreclosures/housing crisis: About 2 million homeowners nationwide faced some part of the foreclosure process this year. The reasons families couldn't pay their mortgages vary; they include job loss, salary cuts, living beyond one's means, or illness leading to unemployment.

In the Chicago area, foreclosure filings increased to 79,626 during the period of January through October, compared to 63,259 for the same period a year ago.

By autumn, troubled homeowners' woes were compounded further with the crash of Fannie Mae and Freddie Mac - which hold nearly half the nation's mortgages. Some major banks failed, and the U.S. economy tanked.

A $700 billion bailout plan was approved in early October for financial institutions to help open up the credit lines. The Federal Reserve then pumped in an additional $800 billion to buy up mortgage securities and other consumer debt. Homebuilders nationwide struggled as fewer homes were bought. In Rolling Meadows, Kimball Hill's chief executive officer died, and the company later closed due to a lack of a buyer.

Also, existing home sales nationwide fell 8.6 percent to an annual rate of 4.49 million in November, from about 4.91 million in October, according to the National Association of Realtors. In Illinois, existing home sales fell in November to 6,076 sales, compared to 9,191 sales in November 2007 - a 34-percent plunge, according to the Illinois Association of Realtors.

Oil/gasoline prices: Oil prices had their most dramatic fluctuation in price. In July, oil rose to an all-time high of $147.27 per barrel. Gasoline and other petroleum-based fuels hit record highs.

High fuel prices contributed to reductions in spending by consumers and businesses through much of 2008, which helped lead to the current recession, said Thomas Rowen, of Bartlett, director of Institutional Portfolio Management at Fifth Third Bank in Chicago.

More recently, crude oil prices have plummeted as global demand has declined and commodity investors have shed energy holdings.

The price has dropped below $40 per barrel in December. The result has been a drastic decline in the price of gasoline and related fuels.

"This has helped lower recent inflation data and likely made it easier for the Federal Reserve to more aggressively lower interest rates and provide stimulus for an economy in recession," said Rowen.

Newspaper implosions: Newspapers nationwide have been laying off or offering buyouts to thousands of workers, redesigning or consolidating sections, and cutting pay.

Chicago, the home of the legendary "Front Page," saw its own newspapers suffer. The Chicago Sun-Times, Chicago Tribune, Daily Herald and others saw similar cuts. Advertising revenue and circulation were down, while the Internet grew as a news source.

Although the Sun-Times was close to bankruptcy, the Tribune filed for it first. Both metro papers sold off assets and bidders sought to buy the Tribune's Cubs.

Unemployment: Everywhere you turn these days, companies are streamlining their operations, cutting the work force or salaries, or selling off assets. The Labor Department said that unemployment continued at an alarming rate, jumping to a 14-year high of 6.5 percent. About 533,000 jobs nationwide disappeared.

Schaumburg-based Motorola, Chicago-based United Airlines, Bank of America, the automakers, and others led the layoff list here. Even Mayer Brown, a leading Chicago law firm, laid off lawyers.

The troubled airline industry, including United Airlines, furloughed union workers and plans more layoffs.

Telecommunications revolution: AT&T was good to go with its U-Verse high-speed services that converged TV, phone, Internet and wireless services. It also provided more competition for Comcast, which vied for subscribers.

Motorola introduced its high-end Aura phone, MotoZine camera phone and others to compete in an crowded market, and hired a co-CEO to help save its handset business. Telecom equipment maker Alcatel-Lucent, still struggling with its Lucent Technologies merger and a troubled world economy, continued to lay off thousands of workers. Tellabs and others did the same, but they continued to advance wireless technologies worldwide.

New president has business hopping: While Barack Obama made history in November as the first biracial president, he also was one of the few candidates willing to run for the post, knowing he'd have to pick up the pieces from one of the worst financial crisis of our time.

President-elect Obama has been busy filling his cabinet with capable leaders who will address the economic crisis. They are already working on a stimulus package that could cost $850 billion. It will include new jobs, tax relief for the middle class and expanded aid for the unemployed.

Retail reels: A troubled economy, stiffer overseas competition and higher operation costs here forced many to close or cutback. Longtime Northwest suburban icon Lattof Chevrolet closed. Linens N Things, Circuit City, Steve & Barry's, KB Toys, Polaroid, Motor Coach Industries International, Republic Windows, Bally Total Fitness, Pilgrim's Pride, Wickes Furniture, Sharper Image, Lillian Vernon, and others filed bankruptcy or closed stores.