THE year began with Northern Rock being nationalised, and ended with the biggest financial scam in the history of the world.
In between, one of America's Big Four investment banks, Lehman Brothers, was allowed to go to the wall by US regulators in September; Bank of America swallowed Merrill Lynch the same day; and a stricken Royal Bank of Scotland has been left with the U
K taxpayer as a 59 per cent shareholder.
Shareholders have also voted for Edinburgh-based banking giant HBOS to be taken over by Lloyds TSB as the Halifax Bank of Scotland group was fatally wounded by recession swamping its big mortgage lending and property investment activities.
In short, 2008's headlines were dominated by fears that the world's financial system itself might fail.
This was despite governments pouring billions of pounds and dollars into propping up banks brought low by flaky lending in areas like subprime and the obscure-sounding structured investment vehicles (SIVs).
Last March, before Lehman's collapse due to a major, flawed bet on the US real estate market, 85-year-old blue-blood American bank Bear Stearns was bought for just $2 a share after getting into lending difficulties. The shares had traded at $169 a year earlier.
And when the financial collapse was narrowly averted, we moved seamlessly into a wider global recession that sees nearly two million unemployed in the UK now and a projected three million by the end of 2009.
Central banks went into severe rate-cutting mode to try and avoid the world plunging into a 1930s-style Great Depression. The jury is still out on whether they have succeeded.
Across the Atlantic, the Federal Reserve has slashed US interest rates from 1 per cent to virtually zero. They were at 4.25 per cent at the beginning of 2008.
In the UK, the Bank of England cut rates by increasingly large amounts throughout the year – including 1.5 per cent in November and another 1 per cent in December – to leave them at 2 per cent compared with 5.5 per cent at the start of the year. Many pundits believe we will follow the US next year to leave rates at virtually zero to try and help hard-pressed homeowners and businesses.
Just when we thought it could not get any worse for banks, it did. Bernard Madoff's investment advisory firm on Wall Street pulled off a $50 billion swindle, taking in some of the world's leading banks and hedge funds.
It was a take on the notorious Ponzi scheme, where investors are paid purely through new money coming into the scheme from other investors. Madoff and the banks came unstuck in December when investors started taking their funds out because of the recession.
So far HSBC is understood to have a £600m-plus exposure to the scam, while RBS says it could lose up to £400m.
Rogue trading remained in fashion on this side of the pond as well. Jerome Kerviel ran up losses of £3.7bn at Societé Générale in Paris last February.
The recession has hit far more widely than banking, however. The FTSE 100 stock market index has lost nearly a third of its value this year, with retailers and housebuilders two of the sector's most directly in the firing line as consumers tighten their belts and over-leveraged banks screw down on mortgage lending.
In October alone, the Footsie lost nearly 11 per cent of its value – the worst monthly loss since the 1987 market crash.
Last spring, the Halifax said UK house prices were falling at their fastest rate since the 1992 recession.
Retailing household names like Woolworths and MFI sank into administration, with tens of thousands of redundancies.
Despite major price promotions on the high street, from Marks & Spencer to Debenhams, many are predicting this Christmas will have been the worst for retail for decades.
The Bank of England came in for some flak, as it was still predicting recession was likely to be avoided as late in the year as August. The BoE was not alone in being wrong, however.
In September, the CBI was forecasting growth of 0.3 per cent in 2009, changing this to a 1.7 per cent forecast contraction two months later. More recent forecasts put 2009's downturn in GDP as high as 3 per cent.
Among a host of other jobs-bloodletting across the economy, oil giant BP cut 5,000 jobs and said the eventual headcount reduction would be "materially higher".
National Express, which runs the east coast mainline between Edinburgh and London, announced it was making 750 redundant.
Dunfermline Building Society shed nearly a fifth of its HQ jobs – 50 out of 290 – to cut costs in what it said were difficult conditions. It pledged to remain mutual, however.
Britain's high tax regime came under pressure, with a number of companies signalling their intention to domicile elsewhere or at least consider it. This included Shire Pharmaceuticals, United Business Media, Experian and Invesco.
A famous old Scottish business name, Scottish & Newcastle Breweries, was taken out in a joint £7.8bn takeover by Heineken of Holland and Carlsberg of Denmark, the Dutch taking control of the UK operations. S&N held out for months, forcing the consortium to increase its initial offer by £1bn.
Britain's nuclear energy industry went French, as EDF paid £12.5bn for British Energy, whose plants include Hunterston and Torness in Scotland.
SMG (Scottish Media Group) completed the £53.2m sale of Virgin Radio to a group backed by India media giants TIML. SMG has since become STV Group.
Oil burst through $100 a barrel last January, continuing upwards towards the heady heights of $147 in late July. It has now come back sharply in a clear sign the world expects demand to fall in a global recession, and is trading closer to the $40 mark.
Airlines, squeezed between the high cost of fuel and the recession impacting both business and leisure travel, have looked for mergers to try and compensate.
British Airways's £2.9bn merger talks with Australia's Qantas have just broken down, but BA remains in tie-up talks with Spain's Iberia.
Lufthansa has just bought Austrian Airlines, and, along with Air France, is courting Alitalia.
Meanwhile, Michael O'Leary's Ryanair has come back for a second takeover attempt with Aer Lingus.
And across the Atlantic, the US government is trying to push through a multi-billion pound rescue package for its hard-pressed automotive industry, with major names like General Motors and Ford on the brink of insolvency.
The pain has also been felt by Japanese car giant Toyota, which is now veering towards its first operating loss in 70 years.
Meanwhile, sterling has dropped to within spitting distance of parity with the euro as the world believes Britain will suffer more from the recession than its European neighbours.
There's every sign that 2009 is shaping up to be the most challenging year for the global economy in decades.
Goodwin steps down as RBS bailed outA SCOTTISH business titan left the corporate stage in the year, as Sir Fred Goodwin had to step down as part of the government's bailout of a badly-listing Royal Bank of Scotland, writes Martin Flanagan.
It was a tarnished farewell for former banking wunderkind Goodwin, who joined the RBS board as deputy chief executive in 1998, succeeding to the top job a few years later.
Goodwin, still only 50 now, presided over a strong period of growth at the Royal, which at one stage became the fifth-biggest bank in the world.
But to critics he was "Fred the Shred" for his costcutting reputation and a "serial acquirer" for seemingly constant takeovers.
His multi-billion pound takeover of ABN Amro as part of an RBS-led consortium in 2007 was seen as stubbornly paying top-dollar for a bank just as the financial system was imploding.
Goodwin then annoyed institutional shareholders by launching a £12 billion rights issue last summer only months after telling the City RBS remained "well-capitalised".
Further credibility was lost when RBS lost billions of pounds on subprime lending, leading the bank to declare an interim pre-tax loss of nearly £700 million last August.
From that moment, Goodwin and chairman Sir Tom McKillop were damaged goods in the City's eyes, and the government bailout – and insertion of Stephen Hester as RBS's new chief executive – sealed their fate.
Goodwin has all but left the bank now, with McKillop due to step down at next spring's AGM.
The full article contains 1434 words and appears in The Scotsman newspaper.
