And the revolving door goes around and around …

Ben Bernanke, who recently ended his tenure as chairman of the Federal Reserve, has become the latest figure to go from overseeing the financial sector to being part of it.

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.

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.

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.

Bernanke says that his role in the Federal Reserve did not require direct oversight of hedge funds and so this does not pose a conflict of interest. But there is an intricate network of links that connect all these financial entities on Wall Street and you cannot be part of one without being part of the whole.

Why are these things bad? Because when there is a widespread expectation that your stint in government is just a way-station on the road to a lucrative career in the financial sector, your decisions cannot help but be influenced by that expectation since you would not want to antagonize the very people who you expect to provide you with a future job. There does not have to be a direct quid pro quo.

The Wall Street lobbyist Jack Abramoff who went to prison for his crimes said that he would quietly let it drop to the aides of the congress people he was lobbying that he would be interested in hiring them once they left the government. He said that that alone was enough to get them to view his proposals more favorably.


  1. doublereed says

    In fairness to Bernanke:

    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.”

    But I might be cutting him slack because of his fantastic speech where he talks about the problems of meritocracies.

  2. says

    Corporations force their employees to sign non-competitition agreements, to prevent them from working for someone else in the same business for X number of years.

    Government officials should be forced to sign the same agreements to prevent conflict of interest.

  3. lorn says

    The upper fraction of the 1% take care of their own. They are never allowed, not even after legal disgrace and prison time, to fall too far. Seats on corporate boards, book deals, speaking engagements, and sweetheart sure-thing stock deals are handed out as patronage and services rendered. One of the rewards for public office and service is the selling of influence and name familiarity. No reasonable amount of delay, under five years, is likely to put a dent into the process.

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