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Top 10 Financial Heroes and Villains of 2013

Annus Mirabilis/Annus Horribilis


NEW YORK (MainStreet) — 2013 was a banner year for news, on Wall Street and around the world. The Dow and the S&P set record after record, reaching all-time highs even as the fiscal chaos of Washington's budgetary battles led to sequestration cuts and a government shutdown. Silicon Valley as well as the capital was rocked by revelations of blanket surveillance, and details began to emerge of massive rate rigging schemes by the world's most powerful banks. What follows is a review of the heroes and villains who drove this year's headlines to such euphoric heights and such miserable lows (with apologies to devotees of the healthcare.gov fiasco, surely the product of some villainous back-end work but too ongoing for a retrospective rehash).

The Fourth Estate Strikes Back


It's been a rough century so far for journalism, but in 2013 three U.S. reporters — two expatriates (Glenn Greenwald and Laura Poitras) and a freelancer (Barton Gellman) — showed that the press is capable of breaking enormous stories of urgent public interest. Their reporting, based on NSA documents leaked by Edward Snowden, challenged governments and major corporations, and caught the eye of billionaire Pierre Omidyar: the founder and chairman of eBay is funding a new media venture led by Greenwald and Poitras, having pledged at least as much money as it would have cost him to purchase The Washington Post (bought by Amazon's Jeff Bezos in August for $250 million).

 

Snowden Saves Silicon Valley From Itself (and the NSA, Maybe)


Last century, Eisenhower warned of the military-industrial complex, a nexus of public and private power whose interests and aims might not accord with what he saw as "our basic purposes": "to keep the peace; to foster progress in human achievement, and to enhance liberty, dignity and integrity among people and among nations." This year the world got some idea of the scope and scale of a new hybrid monster imperiling those same goals — the intelligence-tech complex — and Silicon Valley, both victim and accomplice of the NSA, has Edward Snowden to thank for the chance that reform might come before dragnet-style surveillance, deeply unpopular with potential customers around the world, becomes entrenched in U.S. telecom systems.

The Anti-Larry Summers


In October, a woman got the nod to serve as the world's most powerful economist, and all it took was perennial White House favorite Lawrence Summers' decision to withdraw from consideration. In announcing Janet Yellen's nomination to succeed Ben Bernanke as Fed chair, Barack Obama said, "She had sounded the alarm bell early about the housing market bubble and excesses in the financial markets before the recession." That's a bit hyperbolic. In 2005 Yellen predicted that the home price bubble would register as "a good-sized bump in the road" but suggested "the economy would likely be able to absorb the shock." By her own account, she "did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.'s – I didn't see any of that coming until it happened." Still, Yellen's candor contrasts favorably with the unapologetic style of a certain other veteran policymaker, and her focus on the labor market, in lieu of Summers's financial sector commitments, holds some promise for those concerned with income inequality and the real economy.

Twitter Pops in IPO


Twitter's November listing on the NYSE satisfied Wall Street's desire for a first-day price pop, which was frustrated so spectacularly by Facebook's debut on the NASDAQ last year. But with the stock price hovering bluebird-like close to $60 per share, there's natural concern that the not-yet-profitable company could be overvalued. Twitter's apparent uncertainty over what to do differently post-IPO is less than encouraging: a sudden change to its block functionality on December 12 was reversed within hours after users complained, and there are reports of other commercially-minded changes that risk alienating those who've brought the social messaging service this far in under eight years.

Harvard Economists v. Excel

In 2012, Kenneth Rogoff was presented by the FT as the toast of Davos, his counsel "much sought-after by western leaders trying to navigate their way out of the crisis." The advice he reportedly gave to politicians like Barack Obama and British chancellor George Osborne, which soon became policy: cut government spending. In April, Rogoff's most famous result—published in a paper coauthored with his Harvard colleague Carmen Reinhart—was revealed by a UMass Amherst graduate student to have resulted from a spreadsheet mistake. It turns out that the average growth rate for 20 advanced economies with high debt-to-GDP ratios during the postwar period is 2.2%, not -0.1%, when Australia, Austria, Belgium, Canada, and Denmark are included in the relevant Excel column.

Virtual Moneymen


Bitcoin emerged from its digital chrysalis to captivate the business press this year; valuations over $1,000 will do that to an asset. But a government crackdown on virtual currency was probably inevitable, given its origins among libertarian anti-monetarists and cypherpunk utopians, and that too happened in 2013. In May the feds busted Liberty Reserve, an anonymous wire transfer service with 1 million users, and in October they shuttered the bitcoin black market Silk Road, seizing $28.5 million worth of the crypto currency. But the cruelest blow came from the People's Bank of China, whose December anti-bitcoin declaration sent prices as low as $422.50.

Spies of Bloomberg


What do you call a financial information empire encompassing both a business news division and a subscription service for Wall Street professionals? In May, when Bloomberg News reporters were revealed to have been monitoring clients' general Bloomberg terminal activity for years, we learned the answer: "a giant conflict of interest." In addition to Goldman Sachs partners and JPMorgan traders, the spying reportedly targeted such high-profile Bloomberg users as Ben Bernanke and Timothy Geithner—"just for fun," "to show how powerful" the company's data tools are, in the words of a former employee.

Chip Wilson Flies by the Seat of His Yoga Pants


Lululemon Athletica was an improbable success story: a publicly traded company built on the appeal of yoga. But an original sin lurked in this paradise of high-end women's apparel: founder Chip Wilson was the sort of guy who'd say he chose a company name with three Ls in order to entrance Japanese customers. ("It's funny to watch them try to say it.") Things came apart for Lululemon this year, like the see-through fabric of their pilling-prone luon pant. Wilson demonstrated severe incomprehension of what it means to be an aspirational brand when he blamed "some women's bodies" for the poor performance of his high-priced products. Wilson stepped down as non-executive chairman in December, and a new CEO will take over in January, tasked with turning around a company that lost more than 20% of its market value in 2013.

Rate Rigging Traders


Last year the Libor scandal broke, revealing more than two decades of fraudulent tinkering with a benchmark interest rate that undergirds hundreds of trillions of dollars in derivatives. A Foot Locker's worth of other shoes dropped in 2013. In March, we learned that the CFTC is looking into manipulation of gold and silver prices by the banks who set them; in April it emerged that the interest rate swap benchmark known as ISDAfix was also a suspected product of collusion. Now the ultimate scam is being uncovered: the likely skewing of foreign exchange rates by currency traders looking to boost their profits. So the value of money itself has perhaps been fixed in secret by self-dealing bankers.

Shutdown Cowboys


On Oct. 1 the federal government went into hibernation, maintaining only vital functions in the face of a metabolic crisis: the lack of a budget or continuing resolution for fiscal year 2014. The 16-day freeze, inspired by Republican opposition to Obamacare, cost the economy between $2 and $6 billion in lost output, according to The Office of Management and Budget. Among the shutdown's economic effects: "Delayed the Alaskan crab fishing season, costing fisherman thousands of dollars"; "Delayed aircraft purchases and deliveries ... valued at $1.9 billion"; "delayed almost $4 billion in tax refunds," pushing back "the start of the 2014 tax filing season by up to two weeks."

--Written by Eamon Murphy for MainStreet

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