In the third instalment of IFAonline's annual review, predictions of economic disaster become reality as the UK economy stumbles and, a year after the credit crunch began, the global financial system teeters on the edge of chaos...
Continued problems in the banking sector led the FTSE 100 into an official bear market, with the index down more than 20% from its peak, a situation that would get much worse in later months.
John Templeton, a legendary investor, philanthropist and founder of the extremely successful Templeton Growth Fund, died on 8 July at the ripe old age of 95.
The FSA banned a total of seven mortgage brokers in July 2008 as it cracked down on poor advice and bad practice in the industry. Lending intermediaries were further damaged by news that much of the secured loan market had shut down after Barclays closed its subsidiaries.
Sub-prime mortgage lender Edeus came up with a novel solution to funding problems by offering its borrowers large discounts to repay their loans in full. Unfortunately the plan could not save the firm, which went into administration later in the year.
The British economy continued to deteriorate through the summer, with RBS announcing a historic loss of £691m in the first half of the year. Chief executive Sir Fred Goodwin said he regretted the mistakes the banking group had made.
The situation quickly worsened as a report by the office for national statistics revealed the UK economy had stalled for the first time in more than 15 years, with 0% economic growth in the second quarter.
Rumours of a Stamp Duty 'holiday' led to further problems in the housing market as potential homebuyers waited for the Treasury to make a decision.
By the end of August Estate Agents claimed 83% of home movers had delayed their transaction to see if they could save money.
September 2008 is likely to be remembered by the financial services industry for many years to come, and for all the wrong reasons.
On 14 September, Lehman Brothers, one of Wall Streets biggest investments banks, was declared bankrupt and the firm collapsed, dragging stock markets down with it.
The end of Lehmans triggered a chain reaction that almost brought down the world's largest insurer, AIG, before the US Government intervened to nationalise the firm as part of an $85bn rescue package.
As panic spread to Europe, some of the UK's largest banks looked close to collapse, forcing the Government to broker a £12.2bn deal for Lloyds TSB to takeover HBOS. Alistair Darling blamed reckless short selling of HBOS shares for the downfall of the UK's largest mortgage lender, and the FSA banned short positions on a wide range of financial stocks.
By the end of the month, a collection of bad debts and fear among depositors brought down the Bradford & Bingley, Britain's largest buy-to-let lender, forcing the taxpayer to acquire its toxic mortgage book while Santander took over its savings and branch network.
Tune in once again tomorrow for the final instalment of IFAonline's review of 2008IFAonline
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