On Friday, some extremely disquieting information was made public thanks to a former New York Federal Reserve bank examiner who had been secretly recording conversations between herself and high-ranking members of both the Fed and investment banking titan Goldman Sachs. The conversations allege an unsettlingly close relationship between the bank and the federal employees hired to regulate it. Today, Democrats Elizabeth Warren and Sherrod Brown, both members of the Senate Banking Committee, are calling on Congress to launch oversight hearings when it returns in November.
Carmen Segarra, a former bank examiner for the Fed (who’s currently attempting to sue the U.S. Central bank for $7million), levelled these corruption allegations last Friday, backed by what she claims are more than 46 hours of taped conversations that feature executives from both the Fed and Goldman Sachs saying fun stuff like, “once clients became wealthy enough, certain consumer laws didn’t apply to them.” Less than a decade out from our last financial crisis, you can imagine these sentiments are pretty scary.
Perhaps most damning was Segarra’s claim that Goldman didn’t have a clearly defined conflict of interest policy, the absence of which, it is strongly inferred, would allow bankers and regulators to fudge the rules in their own self-interest. As anyone with an IQ above 15 is aware, playing by the rules has been something of an issue for Goldman Sachs in the past couple of years. This previous bad behavior mixed with these fresh allegations prompted Senator Warren to write over the weekend:
“Congress must hold oversight hearings on the disturbing issues raised by today’s whistleblower report when it returns in November, because it’s our job to make sure our financial regulators are doing their jobs … When regulators care more about protecting big banks from accountability than they do about protecting the American people from risky and illegal behavior on Wall Street, it threatens our whole economy.”
In a statement from Goldman Sachs posted by ProPublica, representatives from the firm indicate that Segarra is just a maligned bureaucrat who was turned down for a job at the firm and who was looking for revenge. They highlight the words of a Sr. Federal Reserve supervisor said when confronted with Segarra’s claims. According to the memo, the supervisor claimed to have found a clearly defined conflict of interest policy. The discovery of these apparently super well-defined terms (can’t say for myself; haven’t read them) threw Segarra’s professionalism into doubt:
“[These materials] have caused me to raise serious questions in my mind as to your judgment in reaching and communicating conclusions without a sound basis in the supervisory process and before the due diligence and vetting process is complete.”
While it remains to be seen as to whether the banks are culpable for another spat of wrongdoing, history is certainly not on their side. The real question, though, is whether or not we’ll be hearing about these concerns come November, after elections, or whether they’re just another electoral soap box designed to drum up votes from the anti-business crowd.