
Revolving Door: Ex-Fed Chairman Ben Bernanke Takes Job with Hedge Fund Citadel - edward
http://www.theatlantic.com/business/archive/2015/04/ben-bernanke-isnt-the-problem-the-system-is-the-problem/390669/?single_page=true
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jim_greco
How is this a revolving door?

\- Bernanke has never worked in private industry before

\- The Fed doesn't regulate hedge funds or HFT firms (Citadel has both)

They're hiring him because he's going to be amazing in front of new LPs when
Griffin raises funds. How do you not give a global macro firm that employs Ben
money?

Not everything is a conspiracy.

~~~
crdb
OK: "Hi Ben, what are your views on rates?" Still OK: "Hi Ben, John Smith is
in your old seat, what do you think of him, what does it imply for our
strategy?" Less OK (I think, still legal in FICC although not in equities):
"Hi Ben, mind giving John a call before his morning press meet to check what
he's going to say" [1] Really bad (if somewhat unlikely): "Hi Ben, John's
going to be more bullish than expected, but we have a fairly large short on;
mind having lunch with him this week before the next meeting and try change
his mind?"

The Carlyle Group (headquartered in Washington, unlike, at the time, most of
the industry) is probably the most famous for hiring fresh-off-the-
administration politicians [2], and being "lucky" with portfolio companies and
defence contracts. Disclaimer: I'm of course not implying they are related in
any way; could just be that their better insider knowledge allowed them to
present a more appropriate offer in those cases.

[1]
[http://www.theguardian.com/business/2012/jan/04/switzerland-...](http://www.theguardian.com/business/2012/jan/04/switzerland-
central-bank-chief-insider-trading)

[2] [http://www.amazon.com/Iron-Triangle-Inside-Secret-
Carlyle/dp...](http://www.amazon.com/Iron-Triangle-Inside-Secret-
Carlyle/dp/0471660620/) \- although the book obviously has an agenda.

~~~
jim_greco
Yellen has worked at the Fed forever and knows how to speak to private
citizens. She's not going to leak her press conference material because her
old boss called her up.

Your two links are 1) Outright insider trading 2) An unrelated example where
perhaps you do want to look at revolving door rules.

~~~
crdb
That's not what I meant (e.g. Bernanke influencing Yellen), I guess I was not
clear enough or the subtleties were lost in translation. The examples are
simple, obvious cases of the more subtle fears one could have about public
officials moving to the private sector. Influence is not by phone calls asking
for things (unless you are really stupid, as Rajaratnam's circle seemed to be)
but by cautious alignment of interests and game theoretic considerations (a la
House of Cards). You don't ask the CFO how his company is doing; you have
someone in your team take him for frequent drinks and lunches and to clubs and
get to know him well, and then wait for "mosaic" pieces when he's had too much
to drink...

As a more subtle example, some Austrian economists argue (and I can't remember
the books off the top of my head) that Keynes' policies were influenced by
what politicians and the academic elite of his era wanted to hear; this
allegedly enabled Keynes to become the first "superstar" economist with
significant personal advantages, in exchange for providing backing for
policies that classical economists would not want to touch. (Others might
argue that Keynes, as an all-but-by-name Fabian, was thus inclined in the
first place and didn't need prompting.)

This is the real risk: when the interests of people close to government start
influencing government actions, not necessarily outright or implicitly, but
with the same effect on the stakeholders (the governed).

Without wanting to step into a hornet's nest, a more obvious recent example is
the way the interests of Mr. Cheney aligned so nicely with the case for war in
the Middle East a decade ago. Some argue that, even if the war was justified,
the lack of any kind of open bidding process for contracting during the period
would be concerning as regards the judicious use of taxpayer money.

From my relatively few and junior years in the global macro space, I didn't
get a feel that Bernanke would be a particularly egregious case of this; he
struck me as an honest man and competent academic (even if I'm not a fan of
his policies); as for what it's worth, seemed Trichet. But it's a discussion
worth having because not every departing civil servant is motivated by
academic immortality or policy legacy.

Well, I never had a particularly brilliant P&L and eventually left the
industry, so maybe my opinion is not worth much.

------
JonFish85
[Sarcasm] Imagine that: an economist takes a job in the finance industry. I,
for one, won't stand for it.

~~~
formulaT
While I don't hold strong opinions against the Fed's policies in general, I
think there is legitimate cause for concern here.

The Fed and mainstream economists argued that they really didn't want to bail
out the entire finance industry in the global financial crisis, but they had
no choice. But how can they credibly make arguments like this if there is a
revolving door with the finance industry? There needs to be some evidence of
unbiasedness if the Fed and SEC are to be the enforcers of the deal by which
banks are regulated in exchange for this kind of bailout.

------
atmosx
The article makes a good point, but it assumes that Bernanke will somehow
exploit his former position. That might or might not be possible, depending on
multiple variables. If the article is on to something, then Bernanke's role
will most likely be lobbying and not risk analysis, etc.

The most prominent example or revolving door I've ever seen is Hennry Paulson.
For some context, see Felix Salmon[2]. IMHO Paulson should be in prison.

[2]
[http://economistsview.typepad.com/economistsview/2009/10/how...](http://economistsview.typepad.com/economistsview/2009/10/how-
paulson-gave-goldman-the-lehman-headsup.html)

------
wtn
The Federal Reserve System does not oversee hedge funds, so the premise of the
title is ridiculous.

~~~
kingkawn
The idea that this is not corrupt because of a regulatory formality about what
kind of financial institution he joins is more ridiculous.

~~~
bobcostas55
The whole problem with "revolving doors" is that people regulate the same
places they then work at. This creates bad incentives and corruption. If
Bernanke was in charge of HF regulation and made special rules that helped
Citadel and then went to work there..that's an issue. And it happens all the
time in certain industries.

I don't see the corruption angle here. Can you point to specific actions
Bernanke took as Fed Chairman that you think he is now being paid for?

~~~
kingkawn
You want me to point out a moment where Bernanke is corrupt, but I'm
suggesting that the setup itself is the corrupt part. The people who steward
the economy live and work alongside the people working their hardest to
exploit it. With his turn at the helm complete he seamlessly steps across the
boundary that never really was there in the first place.

------
jpmattia
Honestly, Citadel is getting exactly what they deserve: Ben Bernanke missed
the biggest economic event in three generations, despite having all the
resources of the Federal Reserve. If they think they're tapping into his
rolodex, do they think that everyone at the SEC or Fed has somehow missed this
point?

And the funny part is that he's probably being paid handsomely for that
talent.

~~~
dageshi
Realistically that was Greenspan, Bernanke was in the fed chairman role for
less than two years before SHTF. Greenspan exited at the very height of the
bubble just as things were starting to roll over. By the time he was Chairman
there was pretty much bugger all he could have done to stop things falling
apart, you don't build up a system so chronically imbalanced like that and
have it unwind safely.

~~~
jpmattia
While Greenspan certainly did his part to inflate the housing bubble, he had
little to do with the incredible slowness that Bernanke had recognizing the
problem. For example:

Bernanke: There's No Housing Bubble to Go Bust (2005)
[http://www.washingtonpost.com/wp-
dyn/content/article/2005/10...](http://www.washingtonpost.com/wp-
dyn/content/article/2005/10/26/AR2005102602255.html)

(2007 Testimony) "At this juncture, however, the impact on the broader economy
and financial markets of the problems in the subprime market seems likely to
be contained."
[http://www.federalreserve.gov/newsevents/testimony/bernanke2...](http://www.federalreserve.gov/newsevents/testimony/bernanke20070328a.htm)

------
solve
Team startups vs team finance. We hate them because HN tells us they're on the
other team.

~~~
bayesianhorse
In my opinion, "antifinancism", the hate of finance, is rather less ingrained
in startup culture than in the overall society.

------
boulos
I know that authors don't write the headlines, but the New York Times article
they linked to ([http://mobile.nytimes.com/2015/04/16/business/ben-
bernanke-w...](http://mobile.nytimes.com/2015/04/16/business/ben-bernanke-
will-work-with-citadel-a-hedge-fund-as-an-adviser.html?_r=1&referrer=)) is at
least accurate: Bernanke will be an _adviser_.

I clicked this link bait assuming he was leaving the Brookings Institution.

------
afarrell
Okay, so let's actually tackle the problem here: what sort of jobs should
people who have a high understanding of $technicalfield and policy making be
allowed to hold?

------
bayesianhorse
It almost sounds as if some people want Fed Chairmans which aren't highly
sought after in private industry...

------
raldi
Paging mods for title de-editorialization...

~~~
borgia
If you look at the tab title for the page, it's the same as the title of the
article here.

I presume the in-article title has been changed since?

~~~
raldi
Mods change bad titles even when they're the same as the article; see
[https://news.ycombinator.com/item?id=9399457](https://news.ycombinator.com/item?id=9399457)
for example.

