The Great Revolving Door Between Washington and Wall Street
“The great revolving door between Washington and Wall Street keeps spinning,” said the San Francisco Chronicle in an editorial. The latest example of expolicymakers cashing in came last week, when former Federal Reserve Chairman Ben Bernanke announced that he was joining Citadel, a $25 billion New York City–based hedge fund, as a paid adviser. Bernanke won’t say how much Citadel is paying him for his expert economic analysis, but you can be sure it’s more than the $200,000 a year he made at the Fed. And even though “it’s hard to get too angry at Bernanke personally” for wanting to make a buck—the talented economist “couldn’t even refinance his mortgage last year”—that “doesn’t make it right.”
“It’s easy to see why Citadel wants Bernanke,” said James Kwak in Medium.com. He has an unparalleled knowledge of global markets and can get any policymaker in the world to answer his phone calls. Less clear is why Bernanke wants Citadel. Everyone assumes it’s for an outsize paycheck, but Bernanke already has “many ways of making money.” He commands $200,000 per speech, earns hundreds of thousands of dollars a year in textbook royalties, has a government pension and a seven-figure book advance, and could supplement it all with a cushy teaching gig anywhere of his choosing. Still, when like Bernanke you’ve spent years rubbing shoulders with billionaire bankers, it’s understandable that you’d want to “get a little of that for yourself,” said Matt O’Brien in WashingtonPost.com. “Who wants to be in the top 10 percent when everyone you know is in the top 1 percent?”
“If anyone deserves the big payday after sacrificing a significant chunk of prime-earnings years to public service, it’s Bernanke,” said Dunstan Prial in Fox Business.com. He almost single-handedly saved the global economy from spiraling into another Great Depression by launching “unprecedented and untested” lending and liquidity programs in the darkest days of the financial crisis. And he weathered “relentless criticism” that his interest-rate policies were setting the stage for runaway inflation. In other words, “the guy worked really, really hard for a number of years during which the stakes couldn’t possibly have been higher,” and he proved his critics dead wrong. “Whatever coin Bernanke is now banking,” he’s earned it.
But it should make all of us uncomfortable that so many former officials are moving “into ill-defined finance roles,” said Matthew Yglesias in Vox.com. Former Treasury Secretary Timothy Geithner has joined a private equity firm; former Office of Management and Budget chief Peter Orszag works for Citigroup; former director of the National Economic Council Larry Summers works for a multibillion-dollar hedge fund—and that’s just the short list. These officials’ swift embrace of Wall Street after exiting Washington does little to dispel the suspicion that there is some sort of “cozy, implicit” arrangement at play: “Run the country in a way that’s friendly to the interests of the financial sector writ large, and someone will set you up with a nice no-show job to pad out your retirement.”
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