2009 and its Financial Foibles
Ron DeLegge, Editor
December 28, 2009

SAN DIEGO (ETFguide.com) – How will 2009 be remembered? We could say it was a year characterized by a global resurgence in risky assets like emerging market stocks (NYSEArca: VWO), high yield bonds (NYSEArca: JNK) and commodity sector funds (NYSEArca: GDX).

We could also say that 2009 was a year of financial foibles or mishaps. And for many Americans, the $787 billion stimulus package that was passed into law tops the list.

Here’s a short list of other breathtaking foibles that none of us should soon forget:

“Bankers Are Doing God’s Work”
In a November interview, Lloyd Blankfein, CEO of Goldman Sachs (NYSE: GS) told The Sunday Times, “I’m just a banker doing God’s work.” I cannot speak for the masses, but I’m confident most gluttonous pagans would probably agree with Mr. Blankfein’s proclamation.  

With what’s perhaps one of the most blasphemous misstatements cataloged anywhere, Blankfein didn’t just baptize himself in fire, but he instantly became Lloyd “Blankbrain.” Not even the best public relations attempt by Goldman’s handlers could rescue him from himself.

Higher Education Turns Low
Want to know one reason why so many business/finance graduates have a deranged perspective? What happened earlier this year at the University Of Pennsylvania's Wharton School of Business sheds light on the matter.

Wharton’s administrators had the audacity to invite former Merrill Lynch CEO John Thain to its campus to lecture business students about the “American Dream.” Hey, wasn’t this the same guy who paid $1.2 million for an office remodel that was outfitted with a $35,000 toilet and $1,400 waste basket? And never mind in 2008 how Thain demanded a $10 million bonus from his former employer - a company that at the time was flailing. People like this should be banned from college campuses, not welcomed with open arms!

During the speech Thain made it his duty to criticize financial regulators and to defend his dead legacy. At the very least, Thain should’ve taught business students to always get at least three competing bids before hiring a general contractor!  

2009’s “Man of the Year”
Time Magazine’s declaration that Ben Bernanke, the sitting Federal Reserve Chairman, was 2009’s “Man of the Year” is laughable. That’s a pretty big title, especially for someone who told Congress roughly one-year earlier with millions watching that the sub-prime mortgage debacle was fully contained. Wow. How wrong was that?

And then too, there’s Ben’s total lack of presence - you know the kind we usually associate with greatness. Don’t you think to be “Man of the Year” of anything, at a bare minimum, your identity should be readily recognizable to the average citizen? If you surveyed pedestrians about Ben Bernanke’s identity, most of them probably couldn’t tell you who he is.  

Maybe what Time Magazine’s editors really meant is that Ben Bernanke was 2009’s “Least Offensive Banker of the Year.”

P.I.G.S. Have Rights Too
After doling out a $165 million in bonuses to employees, bailout kid extraordinaire A.I.G. (NYSE: AIG) created a national uproar. If this is price for corporate failure, what’s the reward for succeeding? The only explanation offered is that the employees responsible for destroying A.I.G. had already left the company and the $165 million was to reward the ones responsible for keeping it an operating concern.   

Not only was a $165 million bonus a bad public relations move, but it highlighted the ongoing inability of the U.S. government to curb Wall Street’s insatiable appetite for more. The once invincible insurance giant single handedly converted itself from A.I.G. into “P.I.G.”

S.E.C. Drops the Bomb…Again
A year doesn’t go by in which the Securities and Exchange Commission or S.E.C. threatens to revise a little know mutual fund rule called 12(b)-1 and 2009 was no different. Ever since it was invented (with the S.E.C.’s help) in the 1980s, the 12(b)-1 fee has been bombing fund investors. But while the S.E.C. talks a tough game about protecting investors from Wall Street, its gridlock and inaction are hallmarks of its existence.

In his just updated edition of “Common Sense on Mutual Funds”, author John Bogle estimates that 12(b)-1 fees sucked around $28 billion from mutual fund investors in 2009.

Here’s a regulatory suggestion: The S.E.C. should immediately rename 12(b)-1 fees to B-52 fees, because it better describes just how badly they bomb people’s investment portfolios. Heck, this one revision alone could easily save millions of mutual fund investors from going up in smoke.