On the heels and in the midst of the worst financial crisis since the Great Depression, 2010 was one of the more interesting years in financial markets. Here, with some help from our readers, we attempt to list the most influential people and events that shaped this unique year in markets. We suspect that we missed some, and we are sure your list may be different, but this is what we have come up with. We welcome your input in the online comment section.
POLITICS
Barack Obama, President of the United States. With the backing of a Democrat controlled Congress, Obama was able to pass the controversial Health Care bill and sweeping financial reform with the intention of removing systemic risk from the nation’s financial centers.
Republican landslide. Taking advantage of the slow pace of recovery and fueled by anger generated by the Tea Party movement over bailouts and Health Care reform, the GOP produced a massive shift in Congress, putting John Boehner (Rep. Ohio) in the Speaker’s chair.
Barney Frank/Chris Dodd, Chairs of financial committees during 111th Congress. Dodd and Frank co-authored the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its passage brought the largest reform to the United States financial centers since the Great Depression.
Jean-Claude Trichet, President of the European Central Bank. Throughout 2010, Europe was rocked with multiple sovereign debt crises as a number of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) faced the possibility of default. Under Trichet, the European Central Bank bailed out Greece and Ireland.
AngelA Merkel, Chancellor of Germany. Not only is Germany Europe’s largest economy, it is also its most prosperous and stable one. While decisions over the solvency of Europe’s peripheral countries are made in Brussels, they must go through Merkel as well.
Hu Jintao, President and Paramount Leader of People’s Republic of China. The title should tell you all you need to know. U.S. leaders have been trying to twist his arm to float the Chinese yuan. But when you are the world’s largest creditor, you get to do the arm twisting.
REGULATORS
Gary Gensler, Chairman of the Commodity Futures Trading Commission (CFTC). The financial crisis of 2008 transformed the CFTC from a regulatory backwater to prime time news and Gensler, who as an assistant Treasury secretary in the 1990s fought to keep over-the-counter derivatives free from regulation, is now their main regulator.
Ben Bernanke, Chairman of the Federal Reserve. Some may argue the Fed and Big Ben lost some of their authority to the Treasury in the recently passed Dodd-Frank Act, but who else in this country can conjure up $600 billion from thin air in Jackson Hole?
Martha Tirinnanzi, Chairman, Clearinghouse Working Group of Federal Housing Finance Agency (FHFA). How does an official at a regulator with too many letters make the list? When she decides to move Fannie and Freddie’s $3 trillion in OTC interest rates swaps into clearinghouses.
Mary L. Schapiro, Chairman of the Securities and Exchange Commission (SEC). While the SEC is racing to enact the statutes of Dodd-Frank and has stepped-up investigations and enforcement actions, Schapiro and the SEC still are lambasted for missing Bernie Madoff’s Ponzi scheme for so long.
Paul Volcker, Former chairman of Obama’s economic advisory panel and past Fed Chairman. Volcker lobbied Congress as Dodd-Frank was being written to restrict banks’ abilities to make speculative trades with proprietary funds. Though watered down some, the Volcker rule separates investment banking, private equity and proprietary trading sections of financial institutions from their consumer lending arms.
Timothy Geithner, United States Secretary of the Treasury. Geithner has headed the Treasury through much of the financial crisis and subsequent bailout. Currently, he is working with other G-20 nations to avert an all-out currency war.
EXCHANGES
Derivatives clearing. With all the complaining by banks, you wouldn’t know that clearing OTC derivatives has been in the works for several years. It is now mandated by Dodd-Frank and many players are scrambling to get a piece of the action.
Terry Duffy, Executive Chairman of CME Group. As head of the exchange that trades 95% of all futures contracts, Duffy is preparing the company to take advantage of opportunities under Dodd-Frank. In 2010, CME Group began trading in interest rate swaps, and Duffy has been a familiar face at Congressional hearings.
Jeff Sprecher, Chairman and CEO of Intercontinental Exchange (ICE). As Dodd-Frank reforms are being implemented, the removal of risk associated with credit default swaps (CDS) is being closely watched. Sprecher was the first to use a clearinghouse model to clear CDSs.
Bill Brodsky, Chairman and CEO of Chicago Board Options Exchange (CBOE). After years of legal battles, Brodsky finally was able to demutualize CBOE and execute an initial public offering in June 2010 — all while maintaining CBOE’s top-dog status in the competitive equity options arena.
OTHER PLAYERS
Jon Stewart, host of Comedy Central’s The Daily Show. Perhaps it is sad that some of the most insightful and biting political and business commentary comes from a late night comedy talk show host, but Stewart clearly does his homework and swings from both sides of the plate, absent the obvious agenda of other cable news outlets.
Bernie Madoff, Former head of Bernard L. Madoff Investment Securities LLC. Though the Madoff ponzi scheme, the biggest in history at $65 billion, was old news by 2010, regulatory policy and investment processes have been influenced greatly by this painful episode.
Goldman Sachs, Investment bank. No firm has had as big an influence on Washington D.C. as Goldman Sachs. The laundry list of former employees is a who’s-who of Washington officials. The bank was sued by the SEC this year for security fraud that resulted in a $550 million slap on the wrist.
David Walker, former Comptroller General of the United States and head of the Government Accountability Office. Since leaving the GAO, Walker embarked on a fiscal wake-up tour and has served as a Paul Revere on our burgeoning debt problems. People have taken notice.
T. Boone Pickens, former oil industry executive and hedge fund manager. The highly successful entrepreneur has been pushing his "Pickens Plan" for American energy independence. While the plan has not been adopted by Congress, his goal to move to domestic energy has gone viral.
Nassim Nicholas Taleb, Author of "The Black Swan" and "Fooled by Randomness." Taleb’s theories have gained validity since correctly predicting the financial crises in 2008. He even has testifed before Congress. The move to create products to measure Black Swan events is a testament to the epistemologist’s impact.
Gold bugs. Previously a fringe movement that would come in and out of favor in times of geopolitical stress as the derisively labeled name suggests — now you cannot turn around without being hit with the message that gold is the only currency with sustained value.
High Frequency Trading (HFT). While often misunderstood and already under suspicion by those looking for a scapegoat for market underperformance, HFTs came under greater scrutiny following the May 6 Flash Crash.
Flash Crash. On May 6, with less than an hour left until the traditional market close, after equity indexes had already absorbed a huge sell-off, equity markets went into a tailspin. Indexes lost 5% in less than 15 minutes and many individual equities traded down to a penny. Months later, a CFTC/SEC report pegged the catalyst on a single large mutual sell order in the E-mini S&P 500, an analysis few insiders thought was credible.
