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NY Fed's Bear Stearns hire draws fire

NEW YORK (Reuters) - The New York Fed has hired the former “chief risk officer” of fallen investment giant Bear Stearns as a top bank regulation adviser, prompting outrage among investors.

Numerous analysts say the government is effectively rewarding Michael Alix, an individual deeply involved in fomenting the worst credit crisis in generations, with a taxpayer-funded salary.

At Bear Stearns, the investment bank that collapsed in March and has become hallmark of the global credit crisis, Alix served as chief risk officer from 2006 to 2008 and global head of credit risk management from 1996 to 2006.

“It’s like putting the fox in charge of the hen house,” said Malcolm Polley, chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania.

The appointment goes to the heart of a growing problem that has cropped up along with the myriad rescue efforts aimed at reviving the financial system: few people actually know what was in the risky mortgage bonds that brought the system to a halt.

Analysts say this makes efforts at resolving the problems ripe for conflict of interests, or impropriety at the very least. This certainly seems to be the case in the New York Fed’s new hire.

The New York Fed declined to comment on Alix’s appointment.

The Fed made the announcement on Halloween, with little in the way of fanfare or alerts to the press. Alix will serve as a senior adviser to William Rutledge in the Bank Supervision Group. His appointment is effective Nov. 3.

Before working at Bear Stearns, Alix spent eight years at Merrill Lynch, the investment bank that faced massive losses and was subsequently purchased by Bank of America.

The Fed would not immediately disclose how much Alix would earn in his new post. But many investment strategists around the country said giving him even a single penny would be too much.

“He should at least do it pro bono,” said Beth Malloy, bond market analyst at Briefing.com in Chicago.

Reporting by Pedro Nicolaci da Costa; Editing by Dan Grebler

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