April 16, 2015

Another Fed governor shows his true colors

Andrew Ross Sorkin & Alexandra Stevenson, NY Times - For eight years, Ben S. Bernanke, the former Federal Reserve chairman, was steward of the world’s largest economy. Now he has signed on to advise one of Wall Street’s biggest hedge funds.

Mr. Bernanke will become a senior adviser to Citadel, the $25 billion hedge fund founded by the billionaire Kenneth C. Griffin. He will offer his analysis of global economic and financial issues to Citadel’s investment committees. He will also meet with Citadel’s investors around the globe.

It is the latest and most prominent move by a Washington insider through the revolving door into the financial industry...

Mr. Bernanke joins a long parade of colleagues and peers to Wall Street and investment firms. After stepping down, Mr. Bernanke’s predecessor, Alan Greenspan, was recruited as a consultant for Deutsche Bank, the bond investment firm Pacific Investment Management Company and the hedge fund Paulson & Company.

Last month, Jeremy C. Stein, a former Fed governor, agreed to join the $20 billion hedge fund BlueMountain Capital Management, where he will advise managers on issues like financial regulation, risk and the implications of the Fed’s monetary policy. Mr. Stein resigned from the Fed last May to return to his tenured professorship at Harvard’s department of economics.

In an interview, Mr. Bernanke said he was sensitive to the public’s anxieties about the “revolving door” between Wall Street and Washington and chose to go to Citadel, in part, because it “is not regulated by the Federal Reserve and I won’t be doing lobbying of any sort.”

He added that he had been recruited by banks but declined their offers. “I wanted to avoid the appearance of a conflict of interest,” he said. “I ruled out any firm that was regulated by the Federal Reserve.”

After stepping down last year, Mr. Bernanke hit the speaking circuit, attending dinners and conferences for hedge fund managers like David A. Tepper of Appaloosa Management, private equity executives like Michael E. Novogratz of the Fortress Investment Group and other financial institutions. At the Fed, Mr. Bernanke made $200,000 a year, a sum he can now make in a single speaking engagement.

Some of Wall Street’s richest firms, including private equity and hedge funds, are hiring former central bankers, policy makers and regulators for top positions as they seek to gain an edge in an increasingly competitive and challenging market.

Last year, Timothy F. Geithner, the former Treasury secretary, joined the private equity firm Warburg Pincus. William M. Daley, a former White House chief of staff, joined the Swiss hedge fund Argentière Capital as a managing partner. In 2013, David H. Petraeus, the retired four-star general and former director of the Central Intelligence Agency, joined the private equity firm Kohlberg Kravis Roberts as chairman of its KKR Global Institute.

David H. McCormick, a former under secretary of the Treasury for international affairs in the Bush administration, is now co-president of Bridgewater Associates, the world’s largest hedge fund, with $150 billion of assets under management.

“It is inevitable, if you are a bright, knowledgeable, battle-trained regulator or top-level player,” said Erik Gordon, a professor at the Ross School of Business of the University of Michigan. “It takes a really unusual public servant to be able to decline the siren song of making a lot of money.”

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