The Winners of 2009
On a popular TV variety show exactly 40 years ago, a character fretted about the decade to come: "If the Seventies are anything like the Sixties, we might not be around to find out what the Eighties are like!"
That's just the way many people both in and out of finance viewed the immediate future at the outset of 2009. Thankfully, not only are most of us still here to see 2010, but the odds of any of us being around - and employed - for 2011 and thereafter look far better than they did one year ago.
With that happy thought, here is our annual rundown of individuals, companies and categories whose fortunes rose this past year. As usual, our choices rest on subjective criteria and are listed in no particular order. (Watch for a separate headline item detailing those who fared worst in 2009.)
JPMorganChase's chief executive is on a roll. In stark contrast to its bulge-bracket counterparts, Dimon's institution has forged ahead for the past two years - in revenue and profit, investment banking league tables, and most impressive of all, public reputation. While headline writers and elected officials delight in demonizing rival Goldman Sachs and its CEO, Dimon is lionized as "the government's go-to banker" (Forbes) who "leads his employees with a sensitive moral gut" (Fortune, drawing upon Duff McDonald's laudatory biography published in September). Yet, it's no secret that JPM's strong 2009 results reflect taxpayer aid even more than Goldman's do - specifically, contributions from the former Bear Stearns and Washington Mutual operations that the bank acquired for peanuts in 2008 in separate deals impelled (and financially supported) by Uncle Sam.
Financial markets are maddeningly cyclical. Human beings are maddeningly stubborn. That's why yesterday's contrarian free-thinker so often fossilizes into tomorrow's perma-bear (or occasionally, perma-bull). Not so John Paulson. After the hedge fund manager logged a $15 billion profit shorting the sub-prime market in 2007 and gained $5 billion in 2008 by moving his shorts downstream to bet against big-bank stocks, the path of least resistance in 2009 would have been to remain bearish - as did most other players who profited from the downturn. Instead, Paulson nimbly switched gears in time to catch the upside of the cycle. That tells us BusinessWeek missed the boat when dismissing Paulson & Co.'s (unofficial) returns this year as "so-so."
While bottom-up knowledge of the securitization machine gave Frontpoint's Steve Eisman an early warning of the crisis, the massive government interventions that began late in 2008 handed the ball to a very different sort of analyst: a macroeconomist with high contacts in Washington and other world capitals. Enter Nouriel Roubini, an NYU economist who was a senior staffer in the Clinton Treasury Department and Council of Economic Advisers, specializing in international affairs and policy development. Melding academic and policy credentials with well-timed bearish market calls and a steady stream of eye-candy photo ops, Roubini became an instant celebrity - Dr. Doom reincarnated as a rock star. In November his five-year old forecasting firm, Roubini Global Economics, reportedly laid groundwork for a six-fold expansion of its market research and strategy staff - presaging roughly 17 new slots in London.
Given up for dead a year ago after turning down one in a string of assignments from then-CEO Ken Lewis, the man who at different times has run Bank of America's investment bank, retail bank, asset management business and law department completed a stunning comeback in December by becoming Lewis' successor. The CEO slot went to Moynihan by default after external candidates bowed out and a board partly installed by federal regulators blocked Lewis' first choice of Greg Curl, chief risk officer at the bank. As the Financial Times tells it, Lewis informed directors in December 2008 that Moynihan would soon depart. Instead, the powers that be moved quickly to dismiss then-general counsel Timothy Mayopoulos and installed Moynihan in that slot. Of course, his newest role might turn into a winner's curse, as BofA faces an uphill battle to compete even in an emerging post-TARP, post-recession environment. Time will tell.
The purchase of Barclays Global Investors, announced in June and completed Dec. 1, made BlackRock the world's largest money manager, overseeing some $3 trillion. That deal capped a string of triumphs for the New York-based firm over the past two years. Its valuation and analytics business, BlackRock Solutions, emerged as the pre-eminent player in both governmental and private-sector efforts to quantify what the credit crisis did to sundry institutions' portfolios. In 2008 the firm helped JPMorganChase put a price on Bear Stearns, helped Mitsubishi (through its advisor Lazard) value Morgan Stanley, helped AIG's management price their own credit derivatives holdings, and helped the Fed analyze the assets of Fannie Mae and Freddie Mac. In 2009 it went on to play a central role in running the Fed's mortgage-backed securities purchase program. And in October state insurance regulators considered giving BlackRock a formal role in analyzing insurers' portfolio risks - a task currently left to credit rating firms.
Like JPMorganChase, London-based Barclays fished in troubled waters and came up smiling. Its 2008 purchase of Lehman Brothers' U.S. operations turned out well, paving the way for the bank to expand through 2009 and hire aggressively both in the U.S. and Asia - for equities in particular. Barclays also benefited from refusing any direct bailout aid from the UK government throughout the crisis.
Corporate Debt Bankers and Traders
Supported by government debt guarantees and massive liquidity injections, corporate bond issuance roared to a record $1.24 trillion this year according to Bloomberg data. Liquidity and trading activity also revived after most debt markets had shut down during the final months of 2008. Even high-yield debt markets sprang back to life. That made 2009 a great year for fixed-income capital markets dealmakers and bond traders. But the boom in issuance looks to taper off in 2010, while calmer market conditions may limit trading activity and profits.
The New York State Attorney General bullied AIG Financial Products executives into agreeing to return some $50 million in retention pay they'd earned under employment contracts. His efforts also helped convince Ken Lewis to step down at Bank of America.
The Big Three Credit Rating Firms
Yes, you read that right. This tight-knit oligopoly is so widely seen as a necessary evil that early efforts to force them to abandon their morally compromised business model foundered, leaving Moody's, Standard & Poor's and Fitch Ratings to soldier on in their current form. When push came to shove, even the fiercest critics in Washington concluded that rocking the credit-rating boat in the midst of a credit storm could drag the economy back to the depths. So in the end, the major rating firms won merely by surviving.