The story may be long and complicated; but I expected more media coverage. Then it is the story that Goldman Sachs does NOT want you to read. So there may have been a few phone calls made.
I sure hope Fed Chair Janet Yellen reads “Inside the New York Fed: Secret Recordings and a Culture Clash” by Jake Bernstein published by ProPublica on September 26th and broadcasted by This American Life from WBEZ Chicago.
The story revolves around bank examiner Carmen Segarra, who filed a wrongful termination lawsuit in October 2013 alleging that the Federal Reserve Bank of New York fired her after she refused to go soft on Goldman Sachs. Now it turns out Segarra made a series of audio recordings which raise major questions about whether Goldman Sachs was missing a policy to handle conflicts of interest and had accomplished “regulatory capture” whereby banks co-opt regulators.
On October 1st, National Public Radio’s Steve Inskeep interviewed Sen. Elizabeth Warren about the audio tapes made by Segarra:
“Supervisors are actually telling examiners not to report accurately the damning things they heard from bank executives during meetings. I mean, wow. If there’s not even an accurate record of what’s going on, then the regulators can’t hope to do their jobs….
You know, the regulators seemed to think that it was a victory just to raise an issue, even if they took absolutely no action to address the issue. And that’s the kind of approach that allowed banks to take on massive risks before the financial crisis.
You know, think about that: The regulators seemed to think that fussing at banks behind closed doors was their toughest sanction. Does anyone believe that Goldman Sachs is gonna give up a deal that would yield millions of dollars because someone fussed at them behind closed doors?
We need regulators who understand that they work for the American people, not for the big banks.”
Over six years ago, in one of my early posts on SHELTERFORCE Rooflines, “Bush Legacy: Unregulated Speculation Destroying Economy and Communities,” I shared comments from Gretchen Morgenson’s July 13, 2008 New York Times column that unfortunately are still relevant today:
“It’s dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors.”
Yes, I looked up the definition: Sleepwalking then when awaken, not remembering what occurred during their “somnambulant” state.
No one listened then to the calls for outlawing predatory lending. No one wanted to consider that financial speculation was not a productive economic use of capital. Today, regulators still like to be friends with greedy bank executives.
Segarra is ringing the alarm. It’s time for the Fed to wake up from its sleepwalking and do its job.
The banker man grows fat, working man grows thin
It’s all happened before and it’ll happen again
It’ll happen again, yeah they’ll bet your life
“Jack Of All Trades”