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Ben Bernanke’s top excuse for working at a hedge fund actually makes it worse

Getting paid.
Getting paid.
Chip Somodevilla/Getty Images

After cooling his feet for a number of months at the Brookings Institution, former Federal Reserve Chair Ben Bernanke is going to cash in by working at the hedge fund Citadel. But rest assured, he told the New York Times's Andrew Ross Sorkin and Alexandra Stevenson, Citadel isn't regulated by the Fed — though Federal Reserve policy decisions certainly impact their business — and he "won’t be doing lobbying of any sort."

In a world where lobbying functions as a sort of dirty word, that's meant to make you feel better about the situation. But it shouldn't. The truth of the matter is that lobbying and related advocacy work are more straightforward, and even honorable, ways to cash in than what Bernanke is doing.

A person who's been working in the politics and policy world and who wants to enhance his salary by working for a for-profit business can lobby on behalf of a for-profit business whose policy agenda he or she believes in, and then everyone knows what he or she is doing, and why. The truly threatening revolving door is the one Bernanke just stepped through, where a distinguished public servant moves into a high-paying private-sector job in which his actual scope of responsibilities is completely mysterious.

Doing it right — David Plouffe goes to Uber

For an example of someone cashing in the right way, consider David Plouffe leveraging his renown as Obama's campaign mastermind to become senior vice president for policy and strategy at Uber.

Plouffe made this move, presumably, because he likes money. But I'm also quite confident he made the move because he genuinely believes Uber is mostly right in its various regulatory and policy disputes with industry incumbents. If Plouffe thought Uber was mostly wrong, he could have sought work with the taxi industry association. He could have lobbied for hospitals on behalf of Medicaid expansion, or for Tesla on behalf of higher gas taxes and against car dealership franchise laws.

It's a real problem in American life that big money has such an influence on the policy process. The great political scientist E. E. Schattschneider observed, "The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent." In other words, nobody's lobbying for the poor.

But within the strictures of a flawed system, any given individual needs to make choices. If you make the choice to go get paid, the right way to do it is to emulate Plouffe. There are lots of companies and trade associations out there lobbying for lots of different things. Find one whose goals you agree with, and go do lobbying or strategic communications on their behalf. Everyone is clear that on some level you're a paid spokesperson and on some level you're talking your employer's book — but everyone is also clear that top talent has some choice of employers, and you presumably went to go work for someone whose book you're comfortable with.

Ben Bernanke's mystery job is problematic

The great thing about lobbying and advocacy work is that people know what it is and what it looks like. The terrible thing about Bernanke's job at Citadel — and similar moves in which former government officials move on to ill-defined jobs at financial services companies — is that nobody knows what the job actually is.

In part, surely, Bernanke is serving as a celebrity rainmaker. The hedge fund industry is in large part a sales industry — it's at least as much about ripping off the clients as anything else — and having a former Fed chair on staff helps with sales.

In part, he'll be an adviser on strategic moves. And why not? He's a smart guy.

But the line here between "smart guy offers smart advice" and "former Fed chair offers inside information" seems awfully thin. There have been instances of clearly illegal leaks of inside info from the Fed to private business, but there's also a large gray area here. Bernanke presumably has better insight into how the Fed thinks and works than the average person does. He also presumably knows lots of people who still work there and can keep in touch and stay abreast of their thinking. He has personal knowledge of the global community of central bankers and bank regulators and can provide insight into their notions.

When Bernanke offers these kind of insights to the public on his blog, he performs a public service. When he offers a higher-end version of these insights to his employer, a deeply interested party, he skews the playing field.

Lobbyists do real work

One nice thing about lobbying is that lobbyists do real work, and everyone pretty much knows what it is.

If Citigroup hires you as a lobbyist and wants you to convince members of Congress to vote to repeal the swaps pushout rule, then you have to get up in the morning and make the phone calls, and everyone getting your phone calls knows why you're making them.

But having large numbers of former officials move into ill-defined finance roles (think not just Bernanke, but Peter Orszag at Citigroup, Tim Geithner at a private equity firm, and Larry Summers at D.E. Shaw) raises the suspicion that there's just a cozy implicit arrangement here. 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.

Make too many enemies in the industry and … well … you might be stuck working in a public policy school somewhere.

Of course, not everyone necessarily shares my taste for lobbying as a vocation. Perhaps Ben Bernanke really finds the idea repugnant. But if that's the case, then the best solution is to genuinely opt out of the influence game.

Bernanke is 61 years old, the Fed has a pension plan, he had a nice-sounding gig as an economics blogger for Brookings, he's got a book coming out, he's a highly paid speaker, and he had a pretty good career as an academic macroeconomist before he got into the public policy game. If he doesn't want to work on behalf of private interests, in other words, he's got plenty of options. But if he wants to leverage his policy work into a big payday, the honest way to do it is by openly and legitimately advocating on behalf of some monied interest's policy agenda.

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