Apr 28, 2008

Jeremy Grantham on Fed bailouts and $300,000 speaking engagements for former Fed chairmen

Even Fed chairmen get bullied and have their faces slapped if they stick to their guns, which will, not surprisingly, be rare since everyone values his career or does not want to be replaced à la Volcker. So, be as optimistic as possible, be nice to everyone, bail everyone out, and hope for the best. If all goes well after all, you will have a lot of grateful bailees who will happily hire you for $300,000 a pop. By the way, that such payments to prior Fed officials are in themselves a moral hazard and an obvious conflict of interest that could moderate their prior behavior, is apparently too crude an accusation even to have surfaced yet. Well it should surface. Selling services to financial interests whose fates have been in your hands should simply not be tolerated as acceptable or ethical behavior by a former Fed Chairman.

~ Jeremy Grantham, "Immoral Hazard," GMO Quarterly Letter, April 2008

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