The Revolving Door Will Keep Revolving Until We Stop It
Just last year, Ben Bernanke was still serving as the head of the Federal Reserve—the most powerful central banking position in the world. Now, he's going to work for a hedge fund. Is it possible—just possible—that we have a systemic problem?
The "revolving door" between powerful governmental (or quasi-governmental, in the case of central bankers) positions and private companies that hire recently departed officials for lavish salaries is frequently discussed, but we do not do shit about it. Why not? Because the people who benefit from this dynamic tend to be the same people in position to regulate it. They're not very enthusiastic about that. Still, let us call the revolving door what it is: the purchase of public power by private interests. It is the process of "public servants" using the connections and influence they accrued during their "public service" to make themselves very rich. They sell their influence to private companies, or firms, or hedge funds, that use that influence to help themselves. The "public servants" get paid. The private companies get power. The public itself gets nothing. Actually, less than nothing—the power and influence that could be helping the public at large is sold off to the highest bidder.
The Dealbook story on Bernanke's move includes a laundry list of high level officials who have made similar moves recently. Just a few examples:
Last year, Timothy F. Geithner, the former Treasury secretary, joined the private equity firm Warburg Pincus. William M. Daley, a former White House chief of staff, joined the Swiss hedge fund Argentière Capital as a managing partner. In 2013, David H. Petraeus, the retired four-star general and former director of the Central Intelligence Agency, joined the private equity firm Kohlberg Kravis Roberts as chairman of its KKR Global Institute.
David H. McCormick, a former under secretary of the Treasury for international affairs in the Bush administration, is now co-president of Bridgewater Associates, the world’s largest hedge fund, with $150 billion of assets under management.
This does not even touch on the elected officials like members of Congress who go to work for Washington power broker firms as soon as possible after they leave their positions in "public service." The real question is whether we want to live in a nation that encourages public service, or a nation that encourages "public $$$ervice," with a wink and a cigar. If we would like to encourage the true idea of public service, now is a good time to bring up Nassim Taleb's proposal, which we have mentioned before:
"A simple solution, but quite drastic: anyone who goes into public service should not be allowed to subsequently earn more from any commercial activity than the income of the highest paid civil servant. It is like a voluntary cap (it would prevent people from using public office as a credential-building temporary accommodation, then going to Wall Street to earn several million dollars). This would get priestly people into office."
Public servants in public service. Allow the power and connections accrued during public service to benefit the public, rather than hedge fund managers. I know it seems un-American, but it would help Americans.