Ben S. Bernanke – An Unused and Effective Tool

Ben Bernanke could indeed be one of the great fed chairman if he implements a few simple programs and takes a tough lesson from George Bush Senior.

The problem is that he will have to take on his predecessor, Alan Greenspan. Greenspan, at 81, is now collecting large fees working for speculative hedge funds in addition to Germany’s largest bank, Deutsche Bank. Frankly, I find that most surprising, that one of your nations most influential public servants would go to work for a foreign bank, whose interests clearly compete with those of our own nation.

In any event, Ben Bernanke should forget about interest rates and instead focus on one accounting rule that was put forth by Bush Sr., FASB 115, and apply it to hedge and private equity funds. This rule is simple in that it requires financial companies to mark the value of their portfolios to market on a quarterly basis and disclose the related impact on their capital ratios. This disclosure should be made to the SEC.

Requiring this disclosure should be easy given that the largest source of hedge fund and private equity assets is non profit foundations, endowments and public pensions. The IRS could propose a rule that requires such disclosure to maintain tax exempt status.

This rule was bitterly contested by the financial industry yet it turned out to be a key catalyst to sustained growth for years as confidence in banking was restored and the economy began a long period of expansion.

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