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Ben Bernanke Joins Hedge Fund Specializing In Derivatives

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Ben Bernanke arguing before the financial crisis that there was no problem in the housing market.

Time to ring the cash register. Former Chairman of the Federal Reserve Ben Bernanke is set to begin working for the hedge fund Citadel Investment Group as a senior adviser. Bernanke will meet with potential investors and work with traders to leverage his relationships and experience from serving as chairman of the Fed.

As Fed chairman Bernanke undertook a massive, global, and in many cases secret program to counter the a financial crisis largely created by the Federal Reserve itself through promotion of deregulation and low interest rates. While part of the bank bailouts came in the form of direct money from taxpayers to Wall Street firms under TARP, the Federal Reserve embarked on a secret loan program totaling $1.2 trillion that was only revealed after a lawsuit by Bloomberg News. 

Thanks to the secret nature of the loans the Wall Street banks were able to keep $13 billion of profits secret which, along with the program itself, the Fed never told Congress about. Some members of Congress admitted they would have thought differently about how to respond to the crisis if they knew about the Fed’s secret program, possibly voting to break up banks that were in reality much more problematic than they knew at the time.

Citadel Investment Group is a hedge fund that specializes in derivatives and, like many firms, had considerable difficulty during the 2008 financial crisis. Presumably part of the reason the firm hired Bernanke was to help it avoid future problems by relying on his expertise and connections. Citadel reportedly has $24 billion under management.

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.”…

While Mr. Bernanke will remain a full-time fellow at the Brookings Institution, the new role represents his first somewhat regular job in the private sector since stepping down as Fed chairman in January 2014

And the incestuous Washington-Wall Street circle is complete. From secret loans to help Wall Street to consulting for Wall Street and advocating on their behalf at a neoliberal think tank. All is well that ends well.

Fortunately there is no danger that these political and financial connections could corrupt policy and lead to a crisis, right?

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Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.