Reuters is reporting that former Fed Chairman Ben Bernanke is holding $250,000 speaking “dinners” where he gives hedge fund managers (and others willing to pay), the inside track on the Fed’s plan for interest rates.
It was only a couple of months ago that Bernanke was the Chairman of the world’s most powerful central bank. He undoubtedly has some insight on the Fed’s future plans and thinking on interest rates that hasn’t yet been shared with the public.
How can the regulators allow this? If Bernanke was a recently retired CEO he would have been locked up months ago for passing insider information. Companies can’t even talk about the future without issuing press releases putting all investors are on equal footing. Yet, the most powerful central banker in the world can share what amounts to insider information only months after stepping down?
What is the message that Dr. Bernanke is hawking at these dinners? Apparently Bernanke is telling attendees that easy money and low rates are here to stay. “At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the Federal funds rate, the Fed’s main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke’s lifetime.”
That may feel like a punch in the gut if you are retired or nearing retirement, but don’t forget who’s making that forecast. This is the man who told us that there was no nationwide real estate bubble at the peak of the market. That he was sanguine on derivatives that took down one of the largest Insurance companies in the world. That the sub-prime crisis was contained. That the Fed wasn’t forecasting a recession when one had already begun. And that Fannie Mae was in no danger of failing only weeks before it went toes up. If history is any guide, higher rates may be right around the corner.
Jeremy Jones, CFA
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