A year ago, with the markets and the economy in meltdown, the SmartMoney Power 30 was full of the usual cast of government giants and Wall Street heavyweights: Bernanke, Geithner, Buffett. But as we move to a new phase, a time of slow but seemingly steady recovery, some of the biggest players might seem more on the fringe—academics, advisers, even a lobbyist. What follows is a mix of the famous and not-so-famous, all trying to make sure in their own way that the Great Recession turns into the Great Recovery.
CEO, Goldman Sachs
It was one thing to take a big investment from Warren Buffett in the heat of the financial meltdown, but Uncle Sam? Better to keep him at a distance. That’s the not-so-subtle message from Goldman (GS: 185.57*, +0.07, +0.03%), which has emerged as one of Wall Street’s strongest survivors of the financial crisis. Blankfein, a 55-year-old former tax lawyer, was the first banking executive to repay government loans made during the crisis-$10 billion in Goldman’s case. While that freed the firm from strict oversight on its business, expect it to continue to take heat for its generous pay practices.
Indeed, now that Goldman has emerged from the meltdown at the head of a smaller pack, Blankfein’s biggest challenge isn’t boosting profits or beating competitors, says Rochdale Securities analyst Richard Bove: It’s a “punitive government,” itching to slap new restrictions on Wall Street. Blankfein, well aware of Main Street’s beefs, recently said, “Compensation should encourage real teamwork and discourage selfish behavior, including excessive risk taking.” The comments came weeks after record second-quarter profits put Goldman on track for a big boost in pay packages this year.
CEO, Berkshire Hathaway
His investments ran into a few rough spots in the crash, but his $5 billion injection to help stabilize Goldman Sachs during the financial panic looks like a winner, and Berkshire (BRK.A: 100800.00*, -170.00, -0.16%) shares have had a sharp rebound from their lows. Never afraid to say what’s on his mind, Buffett uses his substantial credibility with markets and policy makers to opine on the issues of the day-such as the dangers of the nation’s growing debt load.
Chairman and CEO, JPMorgan Chase
Last year’s financial meltdown left Dimon at the helm of the country’s largest and, arguably, strongest bank (JPM: 45.99*, +0.01, +0.02%). That gives him a lot of sway as the administration considers new regulations. But with TARP behind him, Dimon has been less of an inside coach and more of an outside critic as the administration shapes recovery plans. Banks and the government “must now truly work together to prevent the recurrence of another such crisis,” he says.
Dimon, 53, is also voicing fears that overzealous bureaucrats might see all derivatives in a bad light (his clients need customized derivatives to hedge risk), and he says choking off financial product innovation will cost America jobs and lengthen the recovery. “If innovation is stifled in America, then capital will simply flow to other nations where it is welcome,” he wrote in a recent op-ed piece.
As government and business continue their tug-of-war, Fink has influence with both. The 56-year-old son of a shoe-store owner was one of the first traders on Wall Street to sell mortgage-backed securities. Now the onetime head of real estate products at First Boston regularly takes calls from the Treasury for guidance on how to clean them up. No surprise, then, that Washington called on BlackRock (BLK: 237.91*, +7.72, +3.35%) to manage the toxic assets of the Bear Stearns and American International Group bailouts, as well as its program to revive the beaten-down housing market. These days Fink is juggling his role as government adviser with that of master acquirer. In June his firm agreed to buy exchange-traded-funds giant Barclays Global Investors, a move that will make BlackRock the world’s leading money manager, with about $3.1 trillion in assets. Barclays will add nearly half the ETF market to BlackRock’s growing set of products for big institutions and individuals. But some say it could also take Fink’s eye off the ball in expanding BlackRock’s mutual fund business, which has taken a low-key approach with retail customers, at least when compared to better-known competitors.
BlackRock’s fund business more than doubled when it merged with Merrill Lynch’s asset-management unit three years ago, but its institutional business has long been its strength. With about 2.5 percent of all mutual fund assets, there’s plenty of room for the firm to grow, analysts say. Its reach will “need to get bigger,” says Stifel Nicolaus analyst Jeffrey Hopson. So what’s next? “A lot of advertising,” to promote the company’s products, says Fink.
Administrator, State Administration of Foreign Exchange; Deputy Governor, People’s Bank of China
Let’s keep this guy happy: Yi, 51, helps oversee China’s estimated $1 trillion in U.S. Treasury bonds. With a Ph.D. in economics from the University of Illinois, he later became an economics professor at Indiana University-Purdue University Indianapolis before returning to China. Now, as the U.S. government continues to print trillions of dollars to bail out the economy, China has signaled that its appetite for U.S. debt might have its limits. While any quick moves away from Treasurys would hurt both countries, China has already begun diversifying its foreign reserves away from Uncle Sam. And any pullback by America’s biggest creditor would mean higher interest rates here at home.
Managing Director, Pimco
As investors rediscover the benefits of bonds, the Total Return fund is in a sweet spot, which only adds to the clout of the Zen-like 65-year-old Gross. He has already made his mark on the recovery by seeing opportunity in toxic assets-and by virulently opposing any nationalization of the country’s banks. His prescription for the government today: Keep spending. “Although deficits are astronomically high,” warns Gross, our recent market surge will become the dreaded “dead-cat bounce” if the government doesn’t maintain or increase spending. “Forget the balanced budget,” he advises.
Economics Professor, New York University
Fame and fortune aren’t typically associated with the biggest financial crisis since the Great Depression. But that’s what the past two years have brought about for Roubini. The economics professor, whose ultrabearish views were once scoffed at by mainstream economists, warned long before most that we were headed for financial disaster. Now he is one of the most sought-after experts on where the economy is headed next. But his recent celebrity status — his high-profile speeches can command fees of more than $30,000, and his late-night parties attract models and business executives alike — hasn’t sweetened his financial outlook.
Despite some signs of recovery, Roubini doesn’t see the recession bottoming out until December. After that, he sees a slow and painful recovery, with economic growth hovering around 1 percent and unemployment rising as high as 11 percent. He’s also warning that the government’s monetary policies could lead to another recession or crippling inflation by 2011. There’s “no easy path to getting it right,” says Roubini, but “the chance of a quick recovery is out the window.”
Chairman, Security and Exchange Commission
The leader of the agency charged with protecting investors and maintaining orderly markets is fighting a war on two fronts. On the one hand, the Obama administration is threatening to scale back the SEC’s authority to protect investors, since the agency failed to stop Bernard Madoff’s Ponzi scheme and other high-profile scams. At the same time, Schapiro, 54, is getting heat for taking a tougher stance against brokerage firms on issues like trading and compliance, moves critics say could hamper economic growth.
Schapiro, a former head of the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority, tells SmartMoney her biggest concern is protecting investors and beefing up a staff struggling to stay on top of enforcement. “We have a lot on our plates and a lot more coming,” says Schapiro, whose 400 examiners receive about 1.5 million complaints a year. But she’ll have to convince Congress and the White House that the SEC is able to handle it all. Otherwise, the job of protecting investors could shift to another government agency.
The 2009 SmartMoney Power 30