If anyone deserves a seven-figure sinecure, it's Ben Bernanke.
The former Fed Chair put his academic work on the Great Depression to the best possible use when he saved the financial system in 2008, and then went further than any other central banker to try to bring unemployment down. But now he's putting that expertise to the best possible financial use by signing on to advise the $25 billion hedge fund Citadel. Now Bernanke hasn't disclosed the terms of his compensation, but it's safe to say that if hedge funders are willing to pay him $200,000 just to dispense his wisdom over dinner, they'd be willing to pay him a lot more to do so on a regular basis.
It's yet another example of the revolving door between Wall Street and Washington. Just to name a few, former Treasury Secretary Timothy Geithner has joined the private equity firm Warburg Pincus, former Fed governor Jeremy Stein has enlisted with the hedge fund BlueMountain Capital Management, and former Office of Management and Budget chief Peter Orszag has jumped on board with Citigroup. There's a metronomic quality to it. Anytime a public official leaves office, they write a book, maybe take a fellowship somewhere, and then, after a suitable amount of time has passed, take a job on Wall Street—preferably somewhere that they hadn't regulated to avoid the appearance of impropriety.
That's exactly what Bernanke has done, and it's hard to blame him. All he's going to be doing is telling Citadel what he thinks about the economy, and rubbing shoulders with their clients. So it's even more about boosting Citadel's prestige as it is about boosting their bottom line—although, after it came out that one of their traders lost $1 billion betting on bonds, Bernanke might be able to help them with that too.
At the same time, though, it's a little disappointing that everyone who goes into public service ends up trading in on that to Wall Street. It's disappointing in the same way it is when elite college grads decide that their true passion is becoming an Excel jockey for a big bank. Disappointing, but understandable. That's because, even though we take it for granted now, it's worth reminding ourselves how disconnected Wall Street is from any kind of normal economic reality. Indeed, it's been a long time since Michael Lewis, fresh off a stint on Salomon Brothers' bond desk, wondered how it was that investment banking could "pay so many people with so little experience so much money." Well, the answer hasn't changed in the last 26 years: because, as he put it, "the money was just there." There's so much of it, in fact, that, as Mike Konczal points out, it explains 60 percent of the increasing share of income going to the top 1 percent. So if you're a 22 year-old with a lot of student loans to pay off, why not go to Wall Street—just for a few years, you tell yourself—and make more in your first year than you could after 20 of being, say, a teacher? Or if you're a policymaker who's made a very good living, but nothing like the dynastic wealth the finance guys you get to know have racked up, why not get a little of that for yourself?
Wall Street, psychologically-speaking, is like a never-ending bubble. Just like people felt stupid for staying out of the markets when they saw their neighbors striking tech gold in 1999, these elite college grads and policymakers feel the same for not going to Wall Street like all their friends.
Who wants to be in the top 10 percent when everyone you know is in the top 1 percent?