Welcome login | signup
Language en es fr
OccupyForum

Forum Post: Inside the New York Fed: Secret Recordings and a Culture Clash

Posted 3 years ago on Sept. 27, 2014, 4 p.m. EST by LeoYo (5909)
This content is user submitted and not an official statement

Inside the New York Fed: Secret Recordings and a Culture Clash

A confidential report and a fired examiner’s hidden recorder penetrate the cloistered world of Wall Street’s top regulator—and its history of deference to banks.

by Jake Bernstein ProPublica, Sep. 26, 2014, 5 a.m.

Carmen Segarra joined the New York Fed in late 2011 as part of a new wave of bank examiners. Seven months later, she was fired amid differences about her negative examination of Goldman Sachs. A supervisor told her, “I'm here to change the definition of what a good job is.” (Adam Lerner/AP for ProPublica)

Barely a year removed from the devastation of the 2008 financial crisis, the president of the Federal Reserve Bank of New York faced a crossroads. Congress had set its sights on reform. The biggest banks in the nation had shown that their failure could threaten the entire financial system. Lawmakers wanted new safeguards.

The Federal Reserve, and, by dint of its location off Wall Street, the New York Fed, was the logical choice to head the effort. Except it had failed miserably in catching the meltdown.

New York Fed President William Dudley had to answer two questions quickly: Why had his institution blown it, and how could it do better? So he called in an outsider, a Columbia University finance professor named David Beim, and granted him unlimited access to investigate. In exchange, the results would remain secret.

After interviews with dozens of New York Fed employees, Beim learned something that surprised even him. The most daunting obstacle the New York Fed faced in overseeing the nation's biggest financial institutions was its own culture. The New York Fed had become too risk-averse and deferential to the banks it supervised. Its examiners feared contradicting bosses, who too often forced their findings into an institutional consensus that watered down much of what they did.

The report didn't only highlight problems. Beim provided a path forward. He urged the New York Fed to hire expert examiners who were unafraid to speak up and then encourage them to do so. It was essential, he said, to preventing the next crisis.

A year later, Congress gave the Federal Reserve even more oversight authority. And the New York Fed started hiring specialized examiners to station inside the too-big-to fail institutions, those that posed the most risk to the financial system.

One of the expert examiners it chose was Carmen Segarra.

Segarra appeared to be exactly what Beim ordered. Passionate and direct, schooled in the Ivy League and at the Sorbonne, she was a lawyer with more than 13 years of experience in compliance – the specialty of helping banks satisfy rules and regulations. The New York Fed placed her inside one of the biggest and, at the time, most controversial banks in the country, Goldman Sachs.

It did not go well. She was fired after only seven months.

Listen to excerpts from the recordings Carmen Segarra captured at the Federal Reserve Bank of New York.

http://www.propublica.org/article/carmen-segarras-secret-recordings-from-inside-new-york-fed#

For more, listen to the radio version from This American Life. http://www.thisamericanlife.org/radio-archives/episode/536/the-secret-recordings-of-carmen-segarra

4 Comments

4 Comments


Read the Rules
[-] 2 points by trashyharry (3082) from Waterville, NY 3 years ago

One Black Swan-Alea Iacta Est.

[-] 1 points by grapes (4987) 3 years ago

Gold man Sex, New York, fed. Gay couple?

[-] -1 points by DKAtoday (33164) from Coon Rapids, MN 3 years ago

That = http://www.propublica.org/article/carmen-segarras-secret-recordings-from-inside-new-york-fed# - So totally pisses me off.

I went through almost exactly the same experience myself with my last employer - And I was doing the job the Employer gave me ( just like Carmen ) - the parameters were laid out A to Z as was required when our company got ISO certified to promote our company into the world wide marketplace.

Did I absolutely know those parameters? You bet - as I helped to put them down in black and white as we did the documentation of policies and procedures that was required for the ISO certification.

Then as I followed my responsibilities as laid out ( required performance to receive and maintain certification ) - I too experienced push back from my boss as well as from other department heads ( VP's ). And this was for the most part all about internal operations but also went to our interaction with contractors we had supplying materials as well as finished parts to us.

I also ended up getting the praise worthy performance reviews - that also had that derisive element that said I was difficult to get along with ( because I was doing the job as was required ).

This is nothing new in business - not in the public/government sector nor in the private sector. And is exactly why this country and it's economy is SO FUCKED UP as is the vast majority of of the rest of the world.

[-] 0 points by DKAtoday (33164) from Coon Rapids, MN 3 years ago

Had ta tweet that one too -

DKAtoday @DKAtoday · 1m 1 minute ago

On Public and Private Sector Business - https://occupywallst.org/forum/inside-the-new-york-fed-secret-recordings-and-a-cu/#comment-1049444 … - the all pervasive push back against meeting/fulfilling requirements!