$400,000 for Ber­nanke’s Thoughts

In the speak­ing cir­cuit, he is be­ing paid by fi­nan­cial firms but not em­ployed by one

The Economic Times - - World View - Alexan­dra Steven­son

On Tues­day, Ben S Ber­nanke spoke in Abu Dhabi; on Wed­nes­day, he was in Jo­han­nes­burg. By Fri­day, he was in Hous­ton. That week in March was a par­tic­u­larly busy one for Ber­nanke, the for­mer chair­man of the US Federal Re­serve. Dur­ing his eight years as stew­ard of the world’s largest econ­omy, Ber­nanke’s salary was about $200,000 a year. Now he makes that in just a few hours speak­ing to bankers, hedge fund bil­lion­aires and lead­ers of in­dus­try. This year alone, he is poised to make mil­lions of dol­lars from speak­ing en­gage­ments. Ber­nanke is fol­low­ing a well­trod­den path that his pre­de­ces­sor, Alan S Greenspan, and other Wash­ing­ton pol­i­cy­mak­ers have taken. On the speak­ing cir­cuit, he is putting just one foot through the re­volv­ing door be­tween Wash­ing­ton and Wall Street, be­ing paid by fi­nan­cial firms but not em­ployed by one. In­vestors are deal­ing with an econ­omy that is in large part the crea­ture of Fed poli­cies un­der Ber­nanke, and they are will­ing to pay top dol­lar for his words of wis­dom as a re­sult. Ber­nanke has agreed to speak with a Mid­dle East­ern bank, pri­vate eq­uity firms and trade as­so­ci­a­tions, as well as at in­vest­ment bank get-to­geth­ers, charg­ing his hosts fees that range from $200,000 in the US and $400,000 for en­gage­ments in Asia. While he has dined with hedge fund man­agers at small events ar­ranged by in­vest­ment and bro­ker­age firms in­clud­ing JPMor­gan Chase, some Wall Street firms have balked at the high fees. “Chair­man Ber­nanke de­cided af­ter he left of­fice, like most good civil ser­vants, that he wanted to make a lit­tle bit of money and did the din­ner cir­cuit,” Michael E Novo­gratz, a prin­ci­pal of Fortress In­vest­ment Group, told an au­di­ence of wealth man­agers in Las Ve­gas last week.

At his first of sev­eral din­ners af­ter re­tir­ing from the Fed in March, Ber­nanke spoke to a group of hedge fund man­agers, in­clud­ing Novo­gratz, at Le Bernardin in Mid­town Man­hat­tan. The set­ting was so in­ti­mate that the group took up just one of the four-star restau­rant’s three pri­vate din­ing rooms. “At those din­ners he gave cre­dence to the idea that the Fed be­lieved in lower po­ten­tial GDP and lower po­ten­tial in­fla­tion,” Novo­gratz said. “I think that got through to the mar­ket and that was kind of the ac­cel­er­a­tor of this gi­ant trade in fixed in­come that has hap­pened,” he added, re­fer­ring to an un­ex­pected rally in govern­ment bonds. The mar- ket has ral­lied this year as in­vestors, con­cerned that the econ­omy will not grow as fast as ex­pected, have sought safer as­sets like Trea­sury se­cu­ri­ties. “I think that the mar­kets and in­vestors will put more cre­dence on what Ber­nanke says,” said David Rosen­berg, chief econ­o­mist and strate­gist at Gluskin Sh­eff. Re­fer­ring to Ber­nanke’s suc­ces­sor, Janet Yellen, Rosen­berg added, “There is a per­va­sive be­lief that Ber­nanke and Yellen are joined at the hip.” David A Tep­per, founder of the $20 bil­lion hedge fund Ap­paloosa Man­age­ment, who was also at the Le Bernardin din­ner, ex­pressed re­gret that he did not trade on Ber­nanke’s guid­ance at the din­ner. “He gave this stuff out, but I didn’t re­alise what he was say­ing at the time, so I didn’t do a great trade,” Tep­per said at the con­fer­ence in Las Ve­gas last week. For many in­vestors, the big ques­tion is when and how quickly in­ter­est rates will rise. Some Wall Street firms like BTIG, the in­sti­tu­tional bro­ker­age firm that or­gan­ised the Le Bernardin din­ner, of­fer their top clients pri­vate din­ners with im­por­tant for­mer of­fi­cials like Ber­nanke to try to dif­fer­en­ti­ate their of­fer­ings from those of their ri­vals. But oth­ers are con­sciously pass­ing up the op­por­tu­nity to hire Ber­nanke. UBS and Gold­man Sachs con­sid­ered his fees too high, say sources. Since his busy week jet­ting around the world in March, Ber­nanke has made sev­eral ap­pear­ances, in­clud­ing at a pri­vate eq­uity con­fer­ence hosted by the Black­stone Group a few weeks ago. He is sched­uled to speak in Penn­syl­va­nia at the Lan­caster Cham­ber of Com­merce’s an­nual event on May 28, where mem­bers will pay $225 for a ticket. Then things will pick up in the fall, when he is sched­uled to speak at the SALT hedge fund con­fer­ence in Sin­ga­pore. Mor­gan Stan­ley is in dis­cus­sions with Ber­nanke to have him also speak at a din­ner on the side­lines of the con­fer­ence. Though Ber­nanke has been busy trav­el­ling these days, he spends most of his time as a fel­low at the Brook­ings In­sti­tu­tion and is work­ing on a book about his time at the Fed. He also de­liv­ers pro bono speeches and does not al­ways pocket all the fees, a spokes­woman for Ber­nanke said. “He is also donat­ing hun­dreds of thou­sands to char­ity,” she added.

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