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Review of the Year: View from the US saw a female hand on the Fed tiller, and two fine messes

 

Nikhil Kumar
Thursday 26 December 2013 01:57 GMT
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The taper

After months of deliberation, during which time world markets convulsed wildly as investors speculated about the direction of monetary policy in the world’s largest economy, the US Federal Reserve this month reduced the size of its bond-buying programme.

The cut, which will take effect from January, was small, at $10bn (£6.1bn) out of a programme worth $85bn. But it signalled the beginning of the end of the easy money regime that has been propping up the US since the crisis. Interest rates will remain low for some time to come. However, with the reduction, investors have been put on notice by the Fed: it’s time to start standing on your own feet.

Yellen/Summers controversy

Selecting Ben Bernanke’s successor was never going to be easy. The head of the Federal Reserve is arguably the single most influential economic policymaker on earth.

But the White House could not have anticipated just how controversial the process would become when it floated the name of Larry Summers, the former US Treasury Secretary known for his support of financial deregulation (and later for his resignation from Harvard University after seeming to suggest that men outperformed women in certain subjects because of biological differences).

In the end, President Obama opted for Janet Yellen, a well-respected economist and Mr Bernanke’s deputy. She will take his place early in 2014, becoming the first woman to lead the Fed in its 100-year history.

JP Morgan

It was the fine of the year. Months of negotiations between JP Morgan’s lawyers and officials from the Justice Department resulted in the bank agreeing to cough up $13bn to settle charges stemming from sales of mortgage securities in the run-up to the financial crisis, including deals involving Bear Stearns and Washington Mutual, both of which were taken over by JP Morgan. Although it generated scores of headlines around the world, the package – the biggest civil settlement with a single company in US history – did little to hurt the bottom line of America’s largest bank.

SAC Capital

SAC was one of the pioneers of the hedge fund business – and in time became one of the biggest outfits in the industry, managing $14bn in funds at the height of its powers. Its success made a billionaire out of its founder, Steve Cohen. But in November, SAC pleaded guilty and agreed to cough up $1.8bn in fines to settle charges stemming from an insider trading investigation.

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