Ben Bernanke (like his peers) joins hedge fund
First things first: Ben Bernankes decision to start advising the giant hedge fund Citadel in no way tarnishes his historic and heroic stint of public service... (you can read the rest of the apple-polishing at the link)
Nor is Bernankes decision to work with a financial firm unprecedented. In fact, forget solar and hydroelectric powerengineers should harness the energy generated by the revolving door between Washington and Wall Street. Former US Treasury secretary Tim Geithner is now ensconced as president of private-equity company Warburg Pincus. Ex-Fed governor Jeremy Stein joined BlueMountain Capital, a hedge fund, earlier this year. Former SEC chair Mary Schapiro is now an executive at influential consultancy Promontory Group. US president Barack Obamas former head of the Office of Management and Budget works at Citigroups investment bank. And Obamas former chief of staff William M. Daley now works for a Swiss hedge fund. The list goes on. The reason? The pay, of course.
In a chat with the New York Times, Bernanke declined to say what hell make for his work at Citadel. But he stressed that he had been approached by banks before and had declined their offers. He said he ruled out working for any bank thats regulated by the Federal Reserve, and opted for Citadel because it isnt. I wanted to avoid the appearance of a conflict of interest, he told the Times.
Unfortunately, thats an impossible goal. By taking a lucrative Wall Street gig, Bernanke cant help but reinforce the paranoid positions of the worlds Zero Hedge readers, who argue that the Federal Reserve is really just an elaborate conspiracy aimed at enriching a financial plutocracy.
Moreover, the fact that Citadel isnt regulated by the Federal Reserve doesnt mean that it shouldnt be. The $25 billion hedge fund is a high-frequency trader, the kind of entity thats playing an increasingly important role in the functioning and stability of our most important financial markets. Just a couple days ago an executive at the Federal Reserve Bank of New York gave a speech noting that the rise of electronic and automated trading strategies has introduced new risks into the market for US government bonds, one of the largest and influential markets in the world. He pointed to last years so-called US Treasury flash crash as an example of the impact. What if a particularly disorderly bout of trading in the market for US government bonds fuels calls for more regulation of the type of firm that Bernanke is now joining?
In such a debate, Bernankes opinion would and should be discounted in light of his arrangement with Citadel. Indeed, even if questions about regulation dont center on his exact corner of the financial markets, his opinion will likely hold less sway. (Thats not to say his opinion has been purchased, but it should always be noted that he is now being paid to advise a private-sector firm.) Thats definitely a change for a man whose voice and thoughts on the markets have been incredibly influential in recent years. But when academics and policy makers move to Wall Street, thatsrightlythe cost they pay.
Such a great person. We should all look up to him with admiration.
than before, unemployment is still high, US GDP is higher than ever & labor's share is lower than ever.
Where's it all going?
To fuckers like Bernancke and their no-borders hedge funds.