What we also discovered in putting the list together was that in some instances, it became impossible to separate the captain from the team. This year’s D100 is a case in point: Our editors and board of advisors were nearly unanimous in our selection of President Barack Obama as this year’s most powerful corporate governance influence. And yet, to do justice to the seismic shift his policies have brought about in the boardroom, we also had to recognize the many other  “New Voices” in the Administration who are now leading the greatest financial reform of American business since the 1930s.

So, we ask that in the pages ahead you pay more attention to who counts, and less to how we count, in arriving at our final selection of individuals and institutions that have met the requirement to be “most influential.” We think you’ll agree it’s an intricate and impressive mosaic where the whole equals much more than the sum of its parts, which may or may not be greater than 100.

Regulators & Rulemakers

Team Obama
It is often written that reasonable people may disagree, and with Americans and their Presidents, it is practically a way of life. But even an unreasonable person could only conclude that this President and his Administration are having a profound and lasting influence over the boardroom. President Barack Obama has demonstrated an enormous capacity for calm in uncertain times. His relative youth leads to frequent comparisons to John F. Kennedy and his communications skills to those of Ronald Reagan. But it is his aggressive response to the unparalleled economic challenges that greeted him at the dawn of his young presidency that harkens back to an earlier figure of towering influence,  Franklin D. Roosevelt.

FDR’s massive social and financial reform programs—the creation of Social Security as part of the New Deal, the establishment of the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Company (FDIC)—helped restore confidence in the nation’s banking system coming out of the Great Depression. One could plausibly take major portions of FDR’s New Deal and substitute his name with President Obama’s.  The implementation of the $787-billion American Economic Recovery Act one month after Obama took office, coupled with his handling of the Troubled Asset Relief Program (TARP), which sought to strengthen the financial sector by buying up the assets and equity from troubled banks, has clearly helped the nation avoid further financial disaster and put the economy on the path to recovery.

And finally, turning again to the FDR playbook, Obama assembled a team of wise men and women, formidable economic and business minds, whose decisions are having a lasting effect on the role of the corporate director. Preeminent among them was the choice of Rahm Emanuel as chief of staff. Described as a veritable “influence machine,” within the Administration and Congress, the former Congressman from Obama’s home state of Illinois is known as a hard-charging, brutally candid, sometimes combative, acutely intelligent man who can get things done and knows the ways of the Capitol and the boardroom.

The Enforcers
Perhaps second only to Obama in terms of her influence on boards and corporate governance, career regulator Mary Schapiro heads up the 75-year-old SEC. Before the crisis, the agency’s very existence was in question: “Obsolete,” “out of touch,” and “behind the times” were just some of the many terms uttered by detractors. The Commission, under former chairman Christopher Cox, was pilloried for missing the Madoff scandal.

As former SEC chairman and Directorship 100 Hall of Famer, Arthur Levitt described her: “She has the skills, the intellect, and the character to be a superb SEC chair.” But Schapiro will face a new kind of challenge in the role, not just that of proving her own qualifications, but also instituting a significant remodeling of the SEC itself, as she works to bring it into the new regulatory era.

Moving swiftly to address regulatory concerns in the wake of the financial crisis, the SEC has rolled out a series of proposals that could embody the biggest change to the rules of the game for directors in some time. Schapiro, who is no stranger to the boardroom, having served on the boards of Duke Energy and Kraft Foods, has overseen proposed rule changes on proxy access, broker voting, say on pay, and new requirements for disclosure on executive compensation and director qualifications. It’s now up to her and fellow commissioners Kathleen Casey, Elisse Walter, Luis Aguilar, and Troy Paredes to determine the final regulations that emerge from the proposals.

Other key players Schapiro has brought into the SEC include Senior Advisor Kayla Gillan, Chief Accountant James Kroeker, and Director of Enforcement Robert Khuzami. Gillan was a founding board member of the Public Company Accounting Oversight Board (PCAOB) and former general counsel to CalPERS. Kroeker joined the SEC as deputy chief accountant in 2007 from Deloitte and Touche where he had been a partner in the firm’s national accounting services group. Kroeker recently said that the proposed road map for the convergence of International Financial Reporting Standards,pushed to the back burner amid the larger issues of market reform, would be restored as another top priority. Khuzami is a former federal prosecutor, has pledged to improve the SEC’s enforcement performance by creating specialized units to provide “structure and resources for staff to ‘get smart’ about certain products, markets, regulatory regimes, practices and transactions.”

TARP Overseers
Another example of Obama’s preference for brains over politics was his reappointment of Sheila Bair to chair the FDIC. Another fiscally conservative Republican, on Bair’s watch alone this year, 94 banks have failed, creating a new challenge:  how to replenish the fund. Bair has also been an integral part of the team overseeing TARP. Neil Barofsky is a former New York assistant attorney general confirmed by the Senate in December as special inspector general. Dubbed the “TARP Cop,” his job is to figure out how and where the $700-billion TARP funds are spent, reporting directly to the President and providing updates to the Congressional Oversight Panel chaired by bankruptcy expert and Harvard Law School professor, Elizabeth Warren. COP’s first report, released in February, casti-  gated then-Treasury Secretary Henry Paulson for his performance and lack of transparency, reporting that the Treasury Department  had overpaid by $78 billion for the assets it bought from banks.

Interestingly, while Obama sponsored and was a strong proponent of  “say on pay” legislation while a senator, since appointing Kenneth Feinberg special master of compensation, he has appeared unwilling to make the issue a top priority. Feinberg, who has immersed himself in some of the country’s most troublesome and high-profile cases, is considered a superb choice, both in terms of skill and temperament, by Capitol Hill insiders. His most noteworthy case was the 33 months of pro-bono work he did following the 2001 terrorist attacks to determine how much each victim would receive from the federal government’s September 11th Victim Compensation Fund.

Feinberg may in fact be perfectly suited for a job that most compensation specialists see as thankless, and possibly as a “no win” situation. As the Obama Administration’s comp expert, Feinberg was called on to monitor the compensation of executives in what were once some of America’s most prestigious corporations, now TARP recipients, including American International Group (AIG), Bank of America, Citibank, Chrysler, GMAC, and General Motors.

Fed to the Rescue
To prevent American capitalism from spiraling deeper into the abyss, nine months after President Obama made his first Cabinet announcement, he re-nominated Ben Bernanke as Federal Reserve chairman. The former Princeton economics professor was selected by Bush in 2005 to succeed Alan Greenspan. In 2008 after the market crashed, Bernanke invoked emergency powers, slashed interest rates, and spent trillions of dollars to right the financial system. Just last month, he declared the recession “likely over.” Though he seldom gives interviews, Bernanke is never far from the public eye and has been a stalwart in the transition between presidential administrations and in the effort to stem the economic slide.

When then President-elect Obama named his economics team, it included players who, like Bernanke, were already steeped in the crisis details, demonstrated a studied understanding of Depression-era economics, or some combination of both. Enter Treasury Secretary Timothy Geithner and Chief White House Economic Advisor Lawrence H. Summers. Geithner, who is currently pushing legislation to provide more systematic regulation of financial institutions, including new limits on executive compensation, recently told one interviewer that he is optimistic major reforms will be passed.

Prior to his appointment replacing Henry Paulson, Geithner was president of the Federal Reserve Bank of New York and part of the team central to the critical negotiations that resulted in Bear Stearns being tucked into JPMorgan Chase, Merrill Lynch going to Bank of America, Lehman Bros. disappearing, and Citigroup and other struggling banks getting a lifeline.

Summers, the former Harvard University economist who became its president following his tenure as Treasury Secretary to President Clinton, is director of the Cabinet’s National Economic Council. The group was established in 1993 to coordinate and ensure that the President’s economic policy agenda is carried out.

Rounding out the team, Paul Volcker, the former Fed chief under Clinton, was selected to chair the president’s economic recovery advisory board. And Christina Romer, a former UC Berkeley economist, who administration sources suggest is well- regarded by both parties, chairs the Council of Economic Advisers. Her appointment was seen as a further triumph of brain over politics in Obama’s approach to talent recruitment.

Bernanke “has led the Fed through one of the worst financial crises that this nation and the world have ever faced,” Obama said during a press conference on the Vineyard along with Bernanke. “As an expert on the causes of the Great Depression, I’m sure Ben never imagined that he would be part of a team responsible for preventing another, but because of his background, his temperament, his courage, and his creativity, that’s exactly what he has helped to achieve.”

Bernanke’s nomination for a second four-year term starting January 31 requires Senate approval and was endorsed by Christopher Dodd, the head of the Banking Committee. The Fed chief will still face tough questioning from lawmakers who say he was slow to recognize the severity of the financial crisis.

Obama decided to reappoint Bernanke because he wanted to keep together the team that had weathered the crisis, an administration official said. The official said Treasury Secretary Timothy Geithner, Chief of Staff Rahm Emanuel and National Economic Council Chairman Larry Summers all recommended Bernanke be reappointed.

“From the beginning of the crisis the Fed (like other central banks) has provided large amounts of short-term liquidity to financial institutions. As I have discussed, it also provided backstop liquidity support for money market mutual funds and the commercial paper market and added significant liquidity to the system through purchases of longer-term securities. To be sure, the provision of liquidity alone can by no means solve the problems of credit risk and credit losses; but it can reduce liquidity premiums, help restore the confidence of investors, and thus promote stability. It is noteworthy that the use of Fed liquidity facilities has declined sharply since the beginning of the year–a clear market signal that liquidity pressures are easing and market conditions are normalizing.”

For the complete text of Bernanke’s remarks, click here.

The emails and documents subpoenaed from the Fed show that the regulator pressured BofA CEO Kenneth Lewis as the executive expressed his reluctance to take on the debt of the ailing Merrill. One exchange showed Bernanke accusing Lewis of using the threat of pulling out from the deal as a “bargaining chip,” saying that BofA’s arguments for doing so were “not credible.”

Another correspondence showed that Federal Reserve Bank of Richmond President Jeffrey Lacker told employees that Bernanke “intends to make it even more clear” that in the event of a deal backout, “management [would be] gone” should the bank apply for bailout funds.

The congressional investigation is being led by the House Committee on Oversight and Government Reform and Representative Edolphus Towns (D-NY). Lewis is expected to appear today before the Committee to detail BofA’s acquisition of Merrill, which concluded on January 1.

Federal Reserve Chairman Ben Bernanke said the stress tests performed on 19 major banks already appear to be helping banks gain access to private capital, at the Federal Reserve Bank of Atlanta 2009 Financial Markets Conference in Jekyll Island, Georgia.

Despite his optimistic outlook, Bernanke says it will be “some time” before it is possible to say whether the exams, which put bank’s portfolios through less than favorable circumstances, will fully re-establish investor confidence.

The Fed and other regulators announced last week that 10 of the 19 firms tested would nee to raise an additional $74.6 billion to be adequately buffered against the worst-case economic scenario, according to CNNMoney.com.

“We hope that in two or three years we will be able to reflect on the banking system’s return to health with a sharply diminished reliance on government capital,” he said.

Bernanke shifted his focus to the dollar, saying that he believes the dollar will retain its value. “I think the dollar will be strong. I think it will be strong because the U.S. economy is strong. And it will also be strong because the Federal Reserve is committed to assuring that we have price stability,” he said at the conference.

He added that the Supervisory Capital Assessment Program will help regulators improve supervisory processes as well as accomplish a more “fine-grained view” of the health of the banking system. He believes that in two to three years, the U.S. banking system will be restored to health. He assured the public that banks have been evaluated thoroughly to ensure enough capital to withstand future losses should the recession be worse than anticipated.

The documents include personal testimony from Lewis as well as minutes from BofA board meetings, which demonstrate that former Treasury secretary Henry Paulson and Fed chairman Ben Bernanke pushed the deal in spite of misgivings about Merrill’s 2008 losses. The acquired investment bank revealed $15.8 billion in Q4 losses only after the deal had been approved by shareholders at both companies.

According to Cuomo’s letter, both Paulson and Bernanke attempted to prevent public disclosure of the losses resulting from the acquisition. “I was instructed that ‘We do not want a public disclosure,’” testified Lewis. The decision to disclose “wasn’t up to me.”

“What we have uncovered about the Bank of America acquisition of Merrill raises fundamental questions about the interaction of regulators and those they regulate, as well as important issues of corporate responsibility and shareholder rights,” said Cuomo.

“I am fundamentally optimistic about our economy,” read Bernanke’s prepared remarks for his speech today at Morehouse College. “Today’s economic conditions are difficult, but the foundations of our economy are strong, and we face no problems that cannot be overcome with insight, patience, and persistence.”

A Bloomberg survey of economists estimated that the pace of economic contraction in the U.S. has slowed in Q1 2009, down from the 6.3 percent deterioration experienced in the last three quarters of 2008. A set of retail sales figures released concurrently with Bernanke’s speech, however, showed a fall of 1.1 percent in March, compared to their encouraging 0.3 percent gain in February.

“Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, homebuilding, and consumer spending, including sales of new motor vehicles,” Bernanke said. “A leveling out of economic activity is the first step toward recovery.”

A major component of Bernanke’s speech was one that many economists and government officials have addressed in the past: the need for a federal risk regulator that would oversee the operations at firms considered “too big to fail.”

“[The recession] has revealed some rather shocking gaps in our regulatory oversight,” said Bernanke. “Who was overseeing the subprime lenders?…Who was overseeing AIG? There simply wasn’t enough adequate oversight in those cases.”

Bernanke also weighed in on the debate surrounding “fair-value” accounting standards, the “as is” asset valuation method that some blame for the massive write downs that have led to global losses. Bernanke rejected the elimination of fair-value, but conceded that certain assets would benefit from a more lenient accounting code.

Fair value, or “mark-to-market” accounting has come under fire from other government officials. “The mark-to-market rule has clearly got to be made better in its workings. There has to be more flexibility in its application,” said Chairman of the House Financial Committee Barney Frank. “There has to be discretion in what the consequences are.”

In his letter, Buffett says that he expects the economy to remain “in shambles throughout 2009.” Buffett supports Tim Geithner and the government’s action to prevent Bear Stearn’s failure, avoiding a financial collapse by chain reaction.

“This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone ‘all in.’ Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.

“Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly. Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.”

Despite the foreboding outlook, Buffett is quick to note that “our country has faced far worse travails in the past” with a dozen panics and recessions in the 20th century, “virulent inflation” in 1980 and, of course, the Great Depression in the 1930s.

“Without fail, however, we’ve overcome them,” he writes. “In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.”

Among the many other notable points in the letter:

• On homeownership, Buffett says the housing mess teaches that home purchases should require “an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrower’s income.” That income must be verified, of course. “Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition.”

• He says the lending operation of Clayton Homes, the largest player in the manufactured-home industry, is being threatened by having to compete with funders that have worse credit than Berkshire Hathaway. Firms that are backed by government guarantees—banks with FDIC support, issuers of commercial paper backed by the Fed, and others getting themselves under the government umbrella—have “minimal” money costs, Buffett says. Highly-rated firms such as AAA-rated Berkshire face record borrowing costs in relation to Treasury rates. At the same time, funds are “abundant” for government-backed borrowers but “scarce” for others. “This unprecedented ’spread’ in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with a favored status,” he writes. “Government is determining the ‘haves’ and ‘have-nots.’”

• We’re now in a world of overpricing risk rather than underpricing it, pushing yields up for municipal or corporate bonds and knocking them down to near zero for short-term government bonds “and no better than a pittance” for long-term government securities. “When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary. Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long.”

• Buffett railed against derivatives, which increased risks to the financial system and “made it almost impossible” to understand the largest commercial and investment banks. He devotes considerable attention to knocking Fannie Mae and Freddie Mac and how derivatives allowed the mortgage giants to misstate earnings for years. He takes repeated jabs at their regulator, then the Office of Federal Housing Enterprise Oversight (now the Federal Housing Finance Agency), for taking so long to recognize the problems at the firms.

Buffett compared the troubles entailed from settling derivatives contracts to venereal disease.

 “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with. Sleeping around, to continue our metaphor, can actually be useful for large derivatives dealers because it assures them government aid if trouble hits. In other words, only companies having problems that can infect the entire neighborhood – I won’t mention names – are certain to become a concern of the state (an outcome, I’m sad to say, that is proper). From this irritating reality comes The First Law of Corporate Survival for ambitious CEOs who pile on leverage and run large and unfathomable derivatives books: Modest incompetence simply won’t do; it’s mindboggling screw-ups that are required.”

While President Obama’s challenges are very different, there are certainly some important lessons to be learned from that period in our history, and no doubt Obama has been reading up on the successes and failures of the 32nd President. In fact, there has been a boomlet in literature and discussion about the Great Depression—when unemployment soared to 25 percent and thousands of banks collapsed—and FDR’s response to it.

The newest entry into this genre is Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America by Adam Cohen, published in January. The author focuses on the handful of top advisors that FDR surrounded himself with as he embarked on the most ambitious “first 100 days” in presidential history. During this time, FDR pushed through Congress an impressive slate of legislation, including the Emergency Banking Bill, which reorganized and strengthened the solvent banks. During those first few months, FDR’s administration also created the Federal Emergency Relief Administration, the Civilian Conservation Corps, and the Tennessee Valley Authority. But these agencies proved no quick way out of the Depression, and Cohen points out FDR’s flawed balanced-budget approach, which bucked John Maynard Keynes’ recommendation to begin heavy deficit spending. Obama will not make the same mistake, of course, but the debate is now over just how much deficit spending we can endure.

One of the leading authorities on that subject is Paul Krugman, New York Times columnist and 2008 Nobel Prize winner. In 1999, Krugman wrote The Return of Depression Economics, about the crisis in Asia and Latin America, which he compared to a strain of bacteria that had become resistant to antibiotics. Now that the strain appears to be infecting the U.S. economy, Krugman has updated his book to address the current crisis. The left-leaning columnist lays the blame squarely on regulators, whom he says stood pat while the financial services industry ran “out of control.” Krugman’s fix? Deficit spending, and lots of it.

If the successes and failures of economic leaders during the Great Depression can indeed show us the way through this current crisis, it’s good that we have a Federal Reserve Chairman in Ben Bernanke, who just happens to be a Depression-era specialist. A writer for Dow Jones called him “the greatest living expert on that period.” In Essays on the Great Depression, published in 2004, Bernanke lays out the causes of the economic blight and contrasts the policy reactions of nations around the world. It is heavy on macroeconomic theory, but an incredibly insightful take on how the financial sector reacts to panic and the broader implications of knee-jerk economic policy.

One more text worth reading to gain a comprehensive understanding of the period and how it compares to today is Amity Shlaes’ The Forgotten Man: A New History of the Great Depression. Shlaes delves deep into monetary policy, and the crafters of the New Deal. Shlaes’ take is that Hoover and company were not as incompetent as history has made them out. She is less kind than most historians to FDR, and reminds us that many of Roosevelt’s “experiments” were failures. As we have watched our own economic leaders struggle with fits and starts to solutions for the many problems we face and the new President takes the helm with a bold and ambitious economic agenda, these are lessons worth rediscovering.

The Federal Reserve Board in Washington has cut America’s core lending rate from 5.25 percent in September of last year to nearly zero. That’s where Japanese interest rates were in the years 2001 to 2006, a level of interest rates we have never experienced before in this country. This is a record low.

In addition, [Federal Reserve Chairman] Ben Bernanke has been injecting hundreds of billions of dollars of liquidity into our financial system. Since August, the Federal Reserve balance sheet has grown from $800 billion to $2.3 trillion, and the best guess is that it could soon be at $3 trillion. This is unprecedented monetary expansion. We have never seen it before in our history.

Bernanke does not believe this huge monetary expansion poses an inflation risk because we are in the midst of a credit crunch. We are in the process of something called de-leveraging. And when you have de-leveraging combined with risk-aversion, and financial institutions that will not extend credit, then this kind of central-bank policy will not have, at least in the short term, any inflationary risks. Indeed, some could argue we now have a liquidity trap. We have liquidity piling up, but it’s not going anywhere.

Recently, the Fed has become even more active in what it’s doing with its money. The Fed has indicated it now may use its balance sheet to buy uninsured assets, like commercial paper or mortgage-backed securities. If the Fed or U.S. Treasury is aggressive in these areas, it might have an impact on the credit crunch by providing new sources of liquidity directly to the intermediaries that provide credit for real estate and consumer lending. The U.S. government is thought to be laying the groundwork for a second phase of its rescue attempt, with officials at the Treasury, Federal Reserve, and Federal Deposit Insurance Corp., in consultation with the incoming Obama administration, discussing a plan to create a government bank that would buy up the investment and loan losses that U.S. banks continue to report.

Tax Incentives to Buy a Bank
The Internal Revenue Service changed U.S. tax policy in mid-September that altered the terms under which a good bank can buy a bad bank. Under the new IRS rules, when a good bank buys a bad bank and writes off the troubled assets, [the acquirer] can immediately claim a huge tax credit. This explains the Wells Fargo takeover of Wachovia.

Back in mid-September, the government told Wachovia it was in trouble and would have to find a buyer over the weekend or be seized by the FDIC, wiping out the shareholders completely. Under government pressure, Wachovia agreed to sell itself to Citibank for a dollar a share—a miniscule price, given the size and the scope of that bank just a few months ago. But when the IRS tax change occurred, Wells Fargo came in to compete and offered $8 a share.

Under the deal Wells Fargo struck, it spent $15 billion to buy Wachovia and get a huge tax refund. The IRS, in effect, subsidized the transaction. And a few days after that deal, PNC took over City National Bank in Cleveland, again for a few billion dollars, and will get a $7 or $8 billion tax refund. There will be far more bank-merger activity because of these tax allowances.

Global Power Shift
What we are seeing overall is a change in the global balance of power. For the last 10 years, the world economy’s dominant growth engine has been the American consumer. The American consumer spends $10 trillion a year. Nobody can come close to rivaling that. But now we’re looking at several quarters in which American consumption will decline. We have to find alternatives. And the good news is some countries are rising to the challenge of providing an alternative.

The Chinese government recently announced a $600 billion infrastructure program, a sum equal to 15 percent of its GDP, to occur over the next two years, to prevent China’s growth rate from going below 8 percent. China is very, very sensitive to its rate of economic growth, in order to maintain a high level of employment correction. The legitimacy of the Communist Party in China, over the last generation, has come to depend on a high rate of economic growth. And China can maintain political and social stability only if it can guarantee a high rate of economic growth for its citizens. This is all part of a much larger long-term shift in the global balance of power. And it will not be a one-year phenomenon; it will be a multi-year phenomenon. Right now, it centers on China compensating for the loss of the American consumer with a lot more infrastructure spending.

Economic Mystery Tour
So, we’re on a kind of economic mystery tour. The recession will run for at least six or maybe nine more months. There will be a massive policy stimulus from the Obama administration. The Federal Reserve Board will keep injecting liquidity. These actions should, at some point, set the stage for a recovery next summer or autumn. We have had very dramatic action all over in the world to try and contain this crisis. And the result is, it would be fair to say, in the year ahead there will be no more Lehman Brothers, no more major bank failures.

Investors right now are focused solely on the recession and the possibility of deflation that could worsen, intensifying the financial crisis. At some point this year, the psychology could change. Right now, we can’t predict that scenario because of credit shocks, the credit crunch, and this whole process we call deleveraging. Deflation does lurk in the background as a possible danger.

So, we are very much in an exciting time—a very interesting time. And all we can do is watch and see what happens with the new administration. If they can move effectively to address the U.S. residential real estate market, if they can provide, through Fannie Mae and Freddie Mac, effective liquidity to try and limit that decline in home prices, and at some point, if they can set the stage for a recovery in housing prices, that would then help to end this financial crisis and the trauma we’ve experienced in the markets over the last six or seven months.

Under the bailout, the government can renegotiate the terms of the mortgages it now owns, which includes stipulations on interest, term, and default status, provided such renegotiation has improved long-term returns for the taxpayer.

Bernanke in the past has pressed for loan-holders to reduce the borrower’s principal, as an “effective means of avoiding delinquency and foreclosure.” Lenders, however, have been reluctant to do so.

Bernanke’s efforts to renegotiate individual mortgages have followed similar sentiment as comments made by Treasury Secretary Tim Geithner and President Barack Obama in recent weeks. The idea has been cast as a populist “homeowner-first” method of using bailout funds, though a decline in home foreclosures would certainly spread its positive effects throughout a financial system so weighted towards mortgage-related securities.

Oil Tax Cut

First let me add up this oil tax cut for you. I will give you the answer first: This is the largest oil tax cut in the history of the human race. Here is what I mean. It wasn’t that long ago that oil was approaching $150 a barrel. According to the US Department of Energy, daily gasoline demand in the United States in barrels is 9.3 million barrels daily. At $150 a barrel that’s $1.395 billion dollars a day. But with my so-called oil tax cut, with oil at $65 a barrel, we only spend $604.5 million dollars a day. That’s an oil tax cut of $790.5 million dollars a day. Multiply that by 365 days in a year and we have an annualized oil tax cut of $288.5 billion. This is an immediate oil tax cut that goes straight to the consumer without filling out any forms or waiting for any rebate checks. So far that’s $288.5 Billion.

There is currently $3.4 trillion dollars sitting in money market mutualfunds, according to the Investment Company Institute. This is nervousmoney sitting on the sidelines. If you ever wondered what a buyers’strike for our stock market would look like, this would be it.

Rescue Plan and Bailout Multiplier

Second, let me add up the impact of the Troubled Asset Relief Program (T.A.R.P.). Congress has approved a $700 billion rescue for our financial banking system. The problem with this number, from my perspective, is that it underestimates the impact of this $700 billion. You see, in economic circles it is estimated that every dollar that goes into the banking system has a multiplier effect. Because that bank in turn lends that dollar out to someone else who uses that dollar to go to the store to buy something from a company that will use that same dollar to hire more people and so on and so forth. It is currently estimated that there is a 10x multiplier for every dollar the government puts into the banking system. That would mean that this is not simply a $700 billion dollar bank bail out. It’s the equivalent of a $7 Trillion Dollar ($700 billion x 10) rescue plan. So now that’s $7 Trillion on top of the $288.5 Billion Oil tax cut which gives me $7 Trillion, 288.5 Billion dollars.

And remember, that $7 Trillion is just T.A.R.P.; I didn’t include the bail-out of A.I.G. Insurance or the bail-out of Bear Stearns or the Fed’s Commercial Paper Funding Facility or CPFF. My calculation also doesn’t include all of the global responses we’ve seen. Just last week, both Korea and the Netherlands became the latest to provide banking sector guarantees. Korea alone provide $130 billion, including insuring foreign currency liabilities of its financial institutions.

“When others are fearful be greedy, and when others are greedy, be fearful.”  –Warren Buffett

Money On The Sidelines

Third let’s add up all the retail money sitting on the sidelines. There is currently $3.4 trillion dollars sitting in money market mutual funds, according to the Investment Company Institute. This is nervous money sitting on the sidelines. If you ever wondered what a buyers’ strike for our stock market would look like, this would be it. So that’s another $3.4 trillion to go along with my $7 trillion and my $288.5 billion. Now I have passed the $10 trillion mark at $10.688 trillion dollars.

Why does no one else see this enormous silver lining?

I think I know why. There will always be times when fear and panic trump fundamentals and in those times nothing seems to make sense or add up.

Japan’s Sell-Off

In closing – talk about something not making sense or adding up – just take a look at Japan. The Nikkei is all the way down to levels last seen on October 7th, 1982 when the Nikkei was at 7,162.90. That was 26 years ago. To give you some frame of reference, at that time, the Dow was below 1,000 at 965. This is what it looks like when panic sets in. Things just don’t add up. Do you really think Japan is no better off today than it was in 1982? That the world is no better off today than 1982? I don’t believe that for a second and neither should you.

Buffett Buy

One thing that we can “count on” is when there is blood in the street, Warren Buffett will be buying, just like he is right now. Need something to count on? How about the best long-term investment advice I have ever heard from the world’s greatest investor Warren Buffett who said, “When others are fearful be greedy, and when others are greedy, be fearful.” If you take the time to add things up you too will realize that now is the time to be greedy and not the time to be fearful. I just gave you 10 Trillion reasons why.

Have a great day, keep a positive attitude and please join me in resolving to remain a long term investor in a short term world.

NOTE: The opinions and forecasts expressed are those of Robert J. Froehlich and not necessarily those of DWS Investments. All opinions and claims are based upon data at the time of the publication of this article, October 20, 2008, and may not actually come to pass. This information is subject to change at any time, based on economic, market and other conditions and should not be construed as a recommendation. All investments involve risk, including the possible loss of principal.

Robert J. Froehlich is vice chairman and chief investments strategist at DWS Investments, Deutsche Bank Group.

Roger Ailes, Fox News

Sharon Allen, Deloitte & Touche

Herbert M. Allison Jr., Director

Gavin Anderson, GMI

Philip A. Armstrong, GCGF

Norman R. Augustine, Director

Stephen Bainbridge, UCLA

Maria Bartiromo, CNBC

David Batchelder, Relational Investors

Lucian A. Bebchuk, Harvard Law

Irv Becker, Hay Group

Beverly Behan, Hay Group

Richard Bennett, The Corporate Library

Robert S. Bennett, Skadden Arps

Dennis R. Beresford, U. of Georgia

Ethan Berman, RiskMetrics Group

Ben Bernanke, The Federal Reserve

John Biggs, Director

Leon Black, Apollo

Lloyd C. Blankfein, Goldman Sachs

Richard Blumenthal, State of Conn.

Magnus Bocker, Nasdaq OMX

John C. Bogle, Hall of Fame

Richard Breeden, Breeden Partners

Catherine L. Bromilow, PwC

Beth A. Brooke, E&Y

Warren Buffett, Berkshire Hathaway

Peter Butler, Governance for Owners

Marshall Carter, NYSE Euronext

Martha Carter, RiskMetrics Group

John J. Castellani, Business Roundtable

William B. Chandler III, Chancery Court

Ram Charan, Charan Associates

Peter Clapman, Governance for Owners

John C. Coffee, Columbia Law School

Frederic W. Cook, Frederic W. Cook & Co.

J. Michael Cook, Director

Christopher Cox, SEC

Jim Cramer, TheStreet.com

Andrew Cuomo, State of New York

Kenneth Daly, NACD

Julie Hembrock Daum, Spencer Stuart

George L. Davis, Egon Zehnder Intl.

Stephen M. Davis, Millstein Center

James L. Dimon, JPMorgan

Samuel A. DiPiazza, Jr., PwC

Christopher Dodd, U.S. Senate

Amy Domini, Domini Social Investments

William H. Donaldson, Hall of Fame

Thomas J. Donohue, Chamber of Commerce

Ed Durkin, United Brotherhood of Carpenters

Theodore L. Dysart, Heidrick & Struggles

Jay Eisenhofer, Grant & Eisenhofer

Charles Elson, U. of Delaware

John Engler, NAM

Richard Ferlauto, AFSCME

Timothy Flynn, KPMG

Margaret “Peggy” Foran, Sara Lee

Cynthia M. Fornelli, CAQ

Barney Frank, U.S. Congress

William F. Galvin, State of Mass.

William W. George, Harvard Business School

Kayla Gillan, RiskMetrics Group

Robert J. Giuffra, Jr., Sullivan & Cromwell

Scott Goebel, Fidelity

Holly Gregory, Weil, Gotshal & Manges

Robert Greifeld, Nasdaq OMX

Joseph Grundfest, Stanford Law School

Steven Hall, Steven Hall & Partners

Robert Hallagan, Korn/Ferry Intl.

Laurence P. Hazell, Standard & Poor’s

Edward Herlihy, Wachtell Lipton

Robert Herz, FASB

John A. Hill, Putnam

Paul Hodgson, The Corporate Library

Christopher Hohn, TCI

Michele J. Hooper, Director

Anthony J. Horan, JP Morgan

Carl Icahn, Icahn Investments

Ray R. Irani, Occidental Petroleum

Edward Kangas, Director

Adam Kanzer, Domini Social Investments

Henry Keizer, KPMG

Donald Keough, Director

Joe Kernen, CNBC

Richard Ketchum, FINRA

Charles King, Korn/Ferry Intl.

Catherine Kinney, NYSE Euronext

Jannice L. Koors, Pearl Meyer & Partners

Richard H. Koppes, Jones Day

Henry Kravis, KKR

Frederick J. Krebs, ACC

John A. Krol, Director

Robert Kueppers, Deloitte & Touche

Arthur Levitt, Hall of Fame

Martin Lipton, Wachtell Lipton

Jay W. Lorsch, Harvard Business School

Joann Lublin, Wall Street Journal

Steve Mader, Korn/Ferry Intl.

Ken Marzion, CalPERS

Mary Pat McCarthy, KPMG

Bill McCollum, State of Florida

Robert McCormick, Glass Lewis

Blythe J. McGarvie, Director

William McGuinness, Fried Frank

Patrick McGurn, RiskMetrics Group

W. James McNerney, Jr. Boeing

James P. Melican, PGI

Pearl Meyer, Steven Hall & Partners

Bill Miller, Legg Mason

Ira Millstein, Hall of Fame

Nell Minow, The Corporate Library

Robert A.G. Monks, author, Corpocracy

Peter Montagnon, ABI

Gretchen Morgenson, New York Times

Anne Mulcahy, Xerox

Anne Mule, Sunoco

Rupert Murdoch, News Corp.

Alan Murray, Wall Street Journal

Jim Naughton, Corporate Governance Blog

Thomas Neff, Spencer Stuart

Duncan Niederauer, NYSE Euronext

Joseph Nocera, New York Times

Floyd Norris, New York Times

Mark Olson, PCAOB

James Owens, Caterpillar

Michael Oxley, Hall of Fame

William Patterson, CtW

Henry M. Paulson, Jr. U.S. Treasury

Harry Pearce, Director

Harvey L. Pitt, Kalorama Partners

Becky Quick, CNBC

Carl Quintanilla, CNBC

David Rubenstein, Carlyle Group

Paul Sarbanes, Hall of Fame

Charles E. Schumer, U.S. Senate

Stephen A. Schwarzman, Blackstone

Mary Shapiro, FINRA

Damon Silvers, AFL-CIO

David W. Smith, SCSGP

Michael Smith, AIG

Jeffrey A. Sonnenfeld, Yale School of Management

Larry W. Sonsini, Wilson Sonsini

Andrew Ross Sorkin, New York Times

Myron T. Steele, Delaware Supreme Court

Leo E. Strine, Chancery Court

David N. Swinford, Pearl Meyer & Partners

John Thain, Merrill Lynch

Andrew Tuch, Corporate Governance Blog

James S. Turley, E&Y

E. Norman Veasey, Weil Gotshal & Manges

Stephen Wagner, Deloitte & Touche

Carol Ward, Kraft Foods

Henry Waxman, U.S. Congress

Ralph Whitworth, Relational Investors

John Wilcox, TIAA-CREF

Note: More than 100 individuals are named because some listings contain more than one person at the same company or in the same industry.

For the complete 2008 Directorship 100 article, click HERE.

The integration is being pushed by SEC Chairman Christopher Cox. Massachusetts Congressman Michael Capuano, a member of the House Financial Services Committee, believes that the timing of the integration is poor. Capuano is particularly concerned that the transition of accounting standards is occurring at a time when the financial markets are fickle.

Paulson emphasized the need to help foreign companies conduct business in the U.S. Paulson told CFO, “There are different accounting regimes with different standards and different requirements. That doesn’t make them worse than ours. We’ve had plenty of issues with our accounting regime.” Paulson disagrees with Capuano, saying that convergence should also be thought of as outsourcing American standards.

Bernanke stressed that the Financial Accounting Standards Board and the International Accounting Standards Board have made efforts to allow foreign companies to operate in the U.S. without having to meld together two separate accounting methods. “I don’t think it causes any major problems with our accounting system or regulatory system,” Bernanke told CFO.

]]> http://www.directorship.com/bernanke-paulson-support-ifrs/feed/ 0 http://www.directorship.com/the-fed-sec-seek-to-share-information/ http://www.directorship.com/the-fed-sec-seek-to-share-information/#comments Thu, 01 Jan 1970 00:00:00 +0000 Joseph McCafferty http://www.directorship.com/?p=2471 The Federal Reserve and the Securities and Exchange Commission are finalizing an information-sharing agreement that will begin to redraw how Wall Street is regulated. The efforts come in response to the near collapse of Bear Stearns. The SEC is also working toward possibly allowing more U.S. firms to switch to international financial reporting standards (IFRS), according to various reports.

Treasury Secretary Henry Paulson recently proposed that the Fed’s role be expanded to provide oversight of risk throughout the financial system, according to The Wall Street Journal. The Fed and SEC agreement is expected to fill gaps in regulatory oversight and increase cooperation and information-sharing between the central bank and SEC.

“The information-sharing accord is designed to facilitate our joint efforts to fulfill our respective regulatory functions in a post-Bear environment,” SEC Chairman Christopher Cox told the WSJ. Both the Fed and SEC want to adopt new measures to avoid another Bear Stearns situation.

Since mid-March, the Fed has placed staff inside the four largest investment banks to assess their risk. While on-site presence has decreased from six to one or two examiners, the SEC continues to conduct its supervision over the phone and with visits. Paulson, Cox, and Federal Chairman Ben Bernanke have kept close contact during the negotiations.

Another concern of the SEC is whether to allow U.S. firms to phase into IFRS. Conrad Hewitt, the SEC chief accountant, noted that the SEC’s goals are for an eventual IFRS mandate, according to Financial Week.

Experts believe that private companies would be allowed a five- to 10-year period to transition to IFRS. Early adoption could serve as a test of how a full-scale transition could work. The full adoption could take place by 2013.

The Financial Accounting Standards Board and the International Accounting Standards Board plan to send out letters detailing further steps to converge IFRS with U.S. GAAP, according to FW.

The Federal Reserve will almost certainly cut the target federal funds rate a quarter point to two percent on Wednesday. Fed watchers will be looking at the policy statement for clues as to whether the Fed will pause after cutting rates 3.25 percentage points since June.
The Fed may like to stop cutting rates. So far, rate cuts have aided homeowners with adjustable-rate mortgages and other borrowers with loans indexed to domestic interest rates; however, those cuts have not substantially increased bank lending.

“Until Bernanke challenges Treasury on trade and exchange rate policies, the trade deficit will pose a similar constraint on the economy.” –Peter Morici, University of Maryland, School of Business

Simply, no matter the prevailing interest rate environment, banks are frozen out of the bond market, where they have increasingly raised funds, over the last two decades, by bundling loans into securities. Having been sold loan-backed securities that were more risky and worth less than the banks represented during the subprime boom, the insurance companies, pension funds, and other fixed income investors don’t trust the banks.

Despite changes in the leadership at some major financial houses, banks have done little to win back trust. Similarly, the bond rating agencies seem wedded to cozy relationships with banks, accepting payments from banks to rate securities the banks create.

The trade deficit—in particular, the rising oil import bill and stubborn deficit with China on consumer goods—is a drag on domestic demand equal to 5 percent of GDP. The falling dollar against the euro and other market-determined currencies has helped; however, oil is priced in dollars, and the dollar continues 40 percent, or more, overvalued against the yuan and several other Asian currencies.

Until Bernanke addresses structural problems in bank participation in securities markets—something Treasury and G7 proposals for financial market reform little address—adequate bank credit to power an economic recovery will not be forthcoming, and unemployment will rise.

Until Bernanke challenges Treasury on trade and exchange rate policies, the trade deficit will pose a similar constraint on the economy. In this decade, as the trade deficit grew, consumers cut savings and borrowed more through the banks to shore up domestic demand. Essentially, Americans spent 105 percent of what they earned to keep the economy growing but that house of cards has now collapsed.

Bernanke must take on genuine banking reform and currency and trade policies, or his job is impossible. The latter are outside his portfolio, but past Federal Reserve Chairman have voiced concerns about federal budgets, entitlements, and other policies that made their stewardship more difficult.

For now, Bernanke seems more comfortable courting Congressional Democrats by focusing on consumer lending practices—abuses by mortgage brokers, appraisers and credit card companies. This enhances the likelihood of reappointment by a Democratic President. However, if he continues this tact, he will ultimately find his name inscribed in history, not along side Paul Volcker and Alan Greenspan who conquered inflation and facilitated great prosperity, but rather along side the likes of Arthur Burns and G. William Miller, who, though politically adroit, gave us The Great Inflation and economic malaise.

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.