A small number of people have an outsize influence on the balance of your bank account, the fortunes of your investment portfolio, how you communicate and what you buy. They're not necessarily masters of the universe, but their thoughts, actions, and even their whims impact your bottom line. They also make up the Power 30 -- our annual list of the folks shifting and shaping economic currents in the U.S. and around the world.
- Global leaders and health-care reformers
Financial clout doesn't have a scorecard. No formula or algorithm determines what groups or individuals most have their fingers on the pulse of American pocketbooks or their thumbs on the scales. So our reporters and editors consulted with experts and analysts to assemble this year's list -- which ranges from the man trusted with steering the nation's economic recovery to the woman who just became the youngest Fortune 500 CEO. The roll call may not be scientific or comprehensive, but it highlights the thinkers and decision-makers worth paying close attention to in the coming year.
This group includes two women -- one public servant and one financial titan -- who together are making some of the most important and far-reaching decisions in the mutual-fund industry ," along with one mystery man who's poised to succeed the world's most famous investor.
- President, Americans for Tax Reform
For a man who holds no public office and heads no corporation, Grover Norquist wields enormous power over America's financial future. After all, he convinced 41 current U.S. Senators and 238 House members to sign a pledge committing to oppose all tax increases. The goal is to require Congress to reduce yearly budget deficits by slashing spending. Lawmakers who violate the pledge risk being reminded of it come re-election time.
Experts say this anti-tax commitment could impact the nation's economy for years to come. This month, U.S. debt reached grew to 73% of the nation's gross domestic product, according to the Congressional Budget Office. That's the highest level since 1950, and if current policies continue, debt will top 90% in a decade, the agency says. Beyond that critical threshold, debt can sap long-term growth and create financial instability, according to research by economists Carmen Reinhart and Kenneth Rogoff.
Norquist's opponents say federal tax receipts will be 16% of GDP this year, below the historical average of over 18%, and that debt-reduction measures should include a mix of tax increases and spending cuts, lest cuts to important government programs run too deep. Norquist's position: "There are no exceptions to the Pledge." Assuming pledge-signers remain loyal, political experts say he may do more than the upcoming Presidential election to decide the role of government in coming years.
- Chairman, Federal Reserve Board
On average over the past half century, $1 million of retirement savings invested in 10-year Treasury notes generated more than $60,000 a year in income. Recently it produced less than $18,000. For better or worse, experts say no one is more responsible for that state of affairs than Ben Bernanke, chairman of the Federal Reserve. Under his direction, the Fed has kept its core "Fed funds" interest rate near zero since late 2008, and has used bond purchases to drive down rates on mortgages and longer-term Treasurys. The moves are designed to spur economic growth by making it cheaper for businesses to borrow and invest.
The Fed chairman's critics point out that unemployment remains stubbornly high, and say meager bond yields have chased investors into stocks, fueling a massive rally but also stretching valuations. Supporters argue the economy would have been worse off without low rates and that the stock gains are a sign of recovery. Whatever one's view on Mr. Bernanke's performance, few people hold more sway over short-term changes in the value of investment portfolios.
- CEO and co-CIO of Pimco
Some say he's the heir apparent to Bill Gross, and indeed Pimco's Mohamed El-Erian's omnipresence as a talking head rivals that of the bond king. Yet El-Erian, 54, Pimco's CEO and co-chief investment officer with Gross, 68, waves off the notion that there's any baton passing in the works at the Newport Beach, Calif., firm. "Bill has no intention to retire," El-Erian said in an email. He did, however, add that the firm takes leadership continuity very seriously.
As well it should, industry observers say. El-Erian, the cosmopolitan son of an Egyptian diplomat who briefly managed Harvard's endowment, is respected more as a big-picture thinker than as a skilled trader. He faces two big challenges at Pimco's helm, says Larry Glazer, managing partner of Mayflower Advisors: He has to position the firm for its eventual post-Gross future, and for the end of the 30-year bond bull market. (While the firm launched stock and alternative funds in recent years, the majority of its $1.8 trillion of assets remain in bonds.) "It's not clear they've been able to do either of those things yet," says Glazer.
Warren Buffett's Successor
The Oracle of Omaha does not predict his own demise -- at least not in the short term. Warren Buffett says he is in good health, having completed treatments for prostate cancer, and he promises shareholders he is not going anywhere anytime soon. But he did let slip earlier this year that he has a successor in mind -- and even a few good backups.
Stepping into those shoes will be no small feat. But while it will be tough to match Buffett's investing smarts, the next CEO of Berkshire Hathaway, Buffett's holding company, may not have to, says longtime Berkshire investor David Rolfe, chief investment officer of Wedgewood Partners. Rolfe, says most of the investing responsibilities have already been handed over to Berkshire's portfolio managers Todd Combs and Ted Weschler. And many of the subsidiary companies owned by Berkshire, like Geico Auto Insurance and BNSF Railway, are autonomous and unlikely to need much guidance from the new CEO, whoever it is. "He has made it so that his replacement doesn't need to have some kind of superman type of qualities to get the job done," he says. One trait the new Buffett will need: thick skin. Everything he does -- Buffett has confirmed the possible successors he has in mind are men -- "will inevitably be compared to Warren Buffett," says Rolfe. "And that's hard."
- Assistant secretary of the Labor Department
At a time when many Washington regulators seem to be struggling to write new rules just look at the SEC's attempts to reform money market funds -- small investors have gotten a big assist from one power player who's not necessarily a household name among the CNBC crowd: Labor Department Assistant Secretary Phyllis Borzi. In 2012, Borzi, who oversees Labor's employee benefits arm, rolled out a new set of 401(k) disclosure rules that many insiders credit with helping boost transparency and squeeze the plan costs ultimately borne by retirement savers. Borzi has had her share of defeats, however: An attempt to push more advisers to adopt tougher ethical standards stalled after industry lobbyists rallied lawmakers against the change. (A parallel effort by the SEC is also mired in the doldrums.) Borzi recently said she plans to try again in 2013.
- CEO of JPMorgan Chase
We picked Jamie Dimon as a member of its Power 30 last year for steering JPMorgan adeptly through the financial crisis. His blunt voice, as much as any other, also shaped the slew of regulatory reforms emanating from Washington. A year later Dimon's star is somewhat diminished. The public was treated to the rare spectacle of a mea culpa from the Great Man after a mysterious trader known as the 'London Whale' lost billions this spring. In October, the company was hit with a lawsuit over alleged investment fraud committed by Bear Stearns before its collapse during the financial crisis. (No contrition this time: Dimon was quoted saying he did regulators "a favor" by buying the investment bank in 2008.) Despite these misadventures, it would be hard to leave Dimon off any list of power players. After all, Washington is still struggling to implement complex new reforms like the Volcker rule, and banks are again making ungodly sums of money. Dimon's bank made nearly $6 billion in the third quarter.
- Director of investor protection at the Consumer Federation of America
When it comes to financial regulation, the devil is in the details. That's a big problem for Main Street investors because the nitty-gritty of financial rules is almost always the exclusive terrain of industry "experts" -- consultants, lawyers and trade groups all vying to create fine print and loopholes that benefit their clients' interests. That's what makes the (often lonely) voice of Barbara Roper, director of investor protection at the Consumer Federation of America, so important. Roper doesn't win them all or even most of them. She made headlines this year when she abandoned her long-standing opposition to letting investment advisers regulate themselves. "We were being realistic," she says. But when it comes to public opinion, Roper has scored some big victories too, like helping gradually build support for the notion that stock brokers should act in clients' best interests, a principal now embraced even by organizations like the Securities Industry and Financial Markets Association, Wall Street's main trade group. "It's an issue that I've been working on for 25 years," she says. "I am taking the long view."
- President of Fidelity Financial Services
There's a good chance she has more influence over the health of your retirement nest egg than any single person other than you. At the same time, she's heiress to one of the largest fortunes in America, making it highly unlikely she herself has ever worried about how much she contributes to her 401(k). Her name is Abigail Johnson, and in August Fidelity -- which oversees roughly $900 billion in retirement assets, three times that of its nearest rivals promoted her to a post just one rung below that held by her father, Chief Executive Ned Johnson. She is notoriously press-shy, so don't expect to see her making pronouncements about the state of America's retirement system on television. She also has her work cut out for her. Experts say that while Fidelity was early to champion some 401(k) improvements like target-date funds, it has long resisted moves that could hurt its bottom line, such as emphasizing low-cost index funds and ETFs. Johnson will have to find a way to cope with these trends if she wants to build a legacy to match her father's.
- U.S. District Judge for the Southern District of New York
Many people looked at the financial crisis and thought, "How on earth did nobody take the blame for this?" Jed Rakoff had the same thought. The difference between Rakoff and everyone else: He sits on the federal bench in Southern District of New York Grand Central for financial shenanigans. Rakoff has already overseen high-profile cases involving WorldCom and Bernard Madoff, among others. But one recent ruling has the potential to reshape the way Washington cops like the Securities and Exchange Commission police Wall Street, legal experts say. At issue: Whether companies can continue to settle charges by coughing up a fine but not actually acknowledging they did anything wrong. The formula, which typically involves a statement that the accused "neither admits nor denies the allegations," is popular with regulators that don't want to waste precious resources on costly and difficult court fights. But Rakoff, who rejected the approach in a surprise 2011 ruling involving Citigroup, argues it allows big-name companies to view regulatory dust ups as "a cost of doing business." Rakoff's ruling is currently being appealed. But even if he's overturned, the dustup could mean tougher policing in the future, according to Wake Forest law professor Alan Palmiter. "The SEC's lawyers will think twice" from now on, he says. "Nobody wants to expose a settlement to this kind of criticism."
- Acting director, Federal Housing Finance Agency
As head of the FHFA, the federal regulator of Fannie Mae and Freddie Mac, DeMarco holds one of a small number of positions that directly impact the housing recovery. Last October, his agency revamped a refinancing program geared toward borrowers who owe more on their home than it's worth. This year, it announced new guidelines to make it easier for homeowners to sell their home in a short sale -- and thereby avoid foreclosure.
Some housing experts question DeMarco's decisions. Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California, Los Angeles, says the agency delayed actions and struck down debt relief programs that could have helped many homeowners. In July, DeMarco announced that the FHFA would not permit principal reductions for borrowers who owed more than the value of the home. An agency spokeswoman says fewer than 250,000 borrowers would have been eligible, implementation would have taken at least a year, and the costs of this program would have been passed on to taxpayers. The FHFA has helped more than 2.4 million borrowers avoid foreclosure in total and more than 1.6 million refinance through HARP, she says.