NEW YORK/BOSTON: In a series of quarter-million-dollar dinners with wealthy private investors, Ben Bernanke has been clearer than he ever was as chairman of the Federal Reserve on his expectations that easy-money policies and below-normal interest rates are here for a long time to come, according to some of those in attendance.
Bernanke, who retired from the US central bank in January, has predicted the Fed will only very slowly move to raise rates, and probably do so later than many forecast because the labour market still has a lot more room to recover from the financial crisis and recession.
The accounts of the discussions come from attendees as well as those who heard second-hand what was said at the dinners, where hedge fund managers and others willing to foot the roughly $250,000 bill for each event asked the former Fed chairman questions in a free-flowing round-table fashion over recent weeks.
Bernanke has no constraints on expressing his views in public or private, providing he does not talk about confidential Fed matters. He declined to comment on any of his remarks at the private events.
The demand for Bernanke’s time shows that many of Wall Street’s highest-profile brokers and investors see him as holding rare insight on how the Fed will react in the months and years ahead — and are prepared to pay big bucks to get private access to those views.
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, one source who had spoken to the guest said.
Under his direction, the Fed took the fed funds rate, its key policy lever, to near zero in late 2008 as the financial crisis raged. The central bank has held it there ever since in a bid to stimulate a stronger rebound in the world’s largest economy.
Another dinner guest was moved when Bernanke said the Fed aims to hit its 2 percent inflation target at all times, and that it is not necessarily a ceiling.
“Shocking when he said this,” the guest scribbled in his notes. “Is that really true?” he scribbled at another point, according to the notes reviewed.
The sources requested anonymity because the dinners were private and they were not authorised to discuss the material publicly.
The Washington Speakers Bureau, which organizes the events and advertises the former chairman’s availability on its website did not return calls.
Since leaving the Fed at the end of January after serving eight years as chairman, Bernanke has taken a position as a distinguished fellow at the Brookings Institution, a think tank in Washington.
He kept a low profile for the first month after his departure, delivering his first public remarks to a banking conference in Abu Dhabi on March 4 and earning a $250,000 speaker’s fee. His annual paycheck from the Fed was $199,700 last year — an amount that he would have already exceeded many times over from the fees he has earned in the past couple of months.
By contrast, his predecessor at the Fed, Alan Greenspan, waited only a week after his departure before addressing a private dinner hosted by Lehman Brothers, the investment bank whose collapse in 2008 sent the financial crisis into high gear. That also brought in a reported $250,000, while a private telechat with investors in Japan that same day in 2006 was worth about half of that, each drawing criticism for giving high-paying investors a leg up on others who didn’t have access to Greenspan.
Bernanke’s private dinners began near the end of March, roughly two months after his retirement. “It’s not atypical for what other former Washington big shots do,” said Jan Baran, a partner and head of the election law and government ethics group at law firm Wiley Rein LLP.
“He’s being paid ... for sharing his wisdom and predictions, and presumably not to exert his influence on the Fed,” he added.
This will go on “until he’s proven to not be all that clairvoyant.”
The baseline fee for a private get together is $250,000, and more if Bernanke needs to travel from his home in Washington, though the price has dropped some as he has done more events, the sources said. The size of that decline could not be immediately learned.
He is known to be close with his successor, Janet Yellen, adding to perceptions that he should know what the thinking is at the Fed months after his departure. It is a particularly sensitive time as Yellen works to reverse the biggest monetary stimulus experiment ever — and investors who understand how the Fed is going to proceed have an advantage over those who don’t.
Hedge fund attendees have included Paul Tudor Jones of Tudor Investment Corp and David Einhorn of Greenlight Capital. Others have included Michael Novogratz of Fortress Investment Group, and Larry Robbins of Glenview Capital, as previously reported in other media. All declined to comment.
David Tepper, the hedge fund manager who earned $3.5bn in 2013 to rank as the industry’s best paid investor, said at an industry conference this week that he attended the first private dinner and peppered Bernanke with questions. But Tepper said he didn’t make the best use of the information, a lapse he now regrets. “I screwed up that trade,” he said.
At the same conference, Novogratz from Fortress said many hedge funds that bet on big interest rate and currency movements missed a hint from Bernanke at the dinner and failed to buy long duration Treasuries.
