A spectacular market crash, a dramatic rebound, a financial system and economy pulled back from the brink of collapse -- who writes this stuff, Hollywood?
The most riveting reality TV of 2009 was what emanated regularly from Wall Street and Washington. Sacramento didn’t lack for effort, either.
Here are my picks for the year’s most lasting financial memories:
1. Market Timer of the Year: President Obama. Wall Street greeted Barack Obama’s ascendance to the presidency Jan. 20 with a 4% dive in the Dow Jones industrial average. It was mostly downhill from there.
By March 3, the Dow was down 52% from its 2007 all-time high. That day, the president decided to offer America some investment advice.
“What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it,” Obama said.
He may have mangled the terminology, but Obama’s timing couldn’t have been much better: Six days later, on March 9, the stock market bottomed at 12-year lows. The market’s gains since Obama’s “buy” recommendation: 57% on the Dow, 62% on the Standard & Poor’s 500 index and 73% on the Nasdaq composite.
2. Has $787 billion ever made so few people happy? The Obama administration’s economic-stimulus spending program, passed by Congress in February, was ridiculed from the get-go as too little, too late, too much pork barrel or all of the above.
The White House may have figured that that would be the Republican response. But it had to wince when Caterpillar Inc., whose chief executive, Jim Owens, sat on Obama’s Economic Recovery Advisory Board, criticized the stimulus plan as “less aggressive” than those of other countries and held up China as an example of how to do stimulus right.
Billionaire Warren Buffett wasn’t much more complimentary when he called the stimulus plan “sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in.” Hmm. . . .
3. We have a plan, we’re working on it. No, really, we are. Investors waited, waited, waited last winter for Treasury Secretary Timothy F. Geithner to flesh out the details of the White House’s promised plan to deal with the banking industry’s mountain of toxic real estate debt.
Geithner’s foot-dragging contributed to Wall Street’s sense that the administration really had no plan.
Even “Saturday Night Live” picked up on the markets’ exasperation. In a skit March 7 -- two days before stocks hit their bear-market lows -- SNL’s Will Forte played a clueless Geithner holding a call-in TV show to offer $420 billion to anyone coming up with a solution to the banking crisis.
The Treasury finally unveiled its Public-Private Investment Program on March 23, agreeing to partner with private investors to buy up to $1 trillion in toxic mortgage assets. Since then, however, the program has been sharply scaled back -- in part because the financial system has stabilized -- and because of a lack of interest from the banks holding the rotting assets.
4. California scheming. Let us count the ways in 2009 that the Golden State bolstered its image as the most fiscally unfixable member of the Union.
The year began with Standard & Poor’s cutting California’s debt rating to the lowest of any state, breaking a tie with Louisiana for that distinction.
In May, as the budget picture in Sacramento worsened and the state faced the need to borrow billions of dollars in short-term funds, Treasurer Bill Lockyer sought an unprecedented federal guarantee of the debt as a way to ensure that investors would buy it. The Obama administration’s response: “Uh, no.”
In July, with the Legislature and Gov. Arnold Schwarzenegger still battling over a budget for the new fiscal year, Lockyer put all debt offerings on hold, and Controller John Chiang began issuing IOUs to pay many of the state’s bills.
Soon after, Fitch Ratings cut California’s debt rating to “BBB” from “A-minus.” (Note to kids: B is OK as a test score, but you don’t want it as your state’s credit grade.)
By September, with the budget balanced with the help of smoke, mirrors and a cheap brand of duct tape, Chiang began redeeming the IOUs and Lockyer began borrowing again via bond sales. And borrowing. And borrowing.
This month, facing a new budget deficit quickly turning into a chasm, California again put the hat out to Washington: The Times reported that Schwarzenegger would demand $8 billion in federal aid or he’d hack the state’s main welfare program.
5. Goldman as the Heart of Darkness? Leave it to Goldman Sachs Group Inc. to inspire a new curiosity about deep-sea cephalopods. It just wasn’t by choice.
Goldman, Wall Street’s preeminent investment bank and, as such, perhaps the most reviled financial company of our age, was the subject of a long Rolling Stone piece by journalist Matt Taibbi in June.
His theme: Goldman, by design, has been at the center of the biggest investment bubbles since the Depression, including the tech bubble in the late-1990s, the housing bubble this decade, and the oil bubble in the first half of 2008.
Taibbi wrote: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Goldman, the beneficiary of $10 billion in federal bailout money (since repaid), did itself no PR favor by reporting record second-quarter earnings in July. That inspired a New Yorker magazine spoof of an internal memo from CEO Lloyd Blankfein to the troops, advising moderation in celebratory displays: “For now, let’s take down the giant scoreboard that reads ‘Main Street: zero. Wall Street: a billion gazillion bajillion.’ ”
6. Ben Bernanke tries to give America a big hug. Federal Reserve Chairman Ben S. Bernanke spent much of 2009 on two endeavors: Funneling hundreds of billions of dollars into all corners of the financial system via the central bank’s alphabet soup of emergency lending plans, and trying to show that even the Fed had a touchy-feely human side.
In March, Bernanke took a trip down memory lane, agreeing to be interviewed in his hometown of Dillon, S.C., by CBS’ “60 Minutes.” The main topic, of course: the economy, and how the Fed was trying to keep a recession from turning into a depression.
In July, in another first for a Fed chief, Bernanke took questions from a town-hall audience in Kansas City, Mo.
By walking among the people Bernanke may well have persuaded Obama to reappoint him for a second term. It may also have helped him nab “Person of the Year” honors from Time magazine.
Nonetheless, a Gallup poll in July ranked the Fed dead last among nine U.S. agencies in terms of how good a job they were doing.
No word on whether Bernanke is considering the ultimate image booster: a gig on “Dancing With the Stars.”
7. Felon of the Year. Bernard Madoff faced no real competition for this dishonor. Though he confessed to his $65-billion, 16-year-long Ponzi scheme in December 2008, the case captivated and disgusted America for much of 2009.
Madoff, who got a 150-year sentence in June, not only ruined the fortunes of thousands as well as his family name, but he also dealt a severe blow to the image of the Securities and Exchange Commission.
In a postmortem, SEC Inspector General H. David Kotz painted a picture of SEC incompetence, asserting that the agency’s repeated failures to expose Madoff allowed him to suck in more victims.
Madoff, meanwhile, still grabs headlines: This month he was transferred to a medical center at the North Carolina prison where he’s doing time. Reports had him suffering from dizziness, but a nearby TV station said Madoff had facial fractures, broken ribs and a collapsed lung -- injuries consistent with an assault.
Get-well cards can be sent to Bernie Madoff, Inmate No. 61727-054, P.O. Box 1600, Butner, NC 27509.