- by Kevin Mathews
- October 1, 2014
- 6:00 am
It doesn’t take a psychic to perceive some kind of unspoken collusion between the nation’s largest financial institutions and the Fed, the government body charged with overseeing that these banks are on the up-and-up. Very rarely, however, do we get to actually hear what goes on behind the scenes. This past week, with help from ProPublica, whistleblower Carmen Segarra, a former Fed regulator of Goldman Sachs, released some disturbing tapes showcasing just how little the Fed does to keep banks in line.
Segarra didn’t start out taping her interactions with coworkers, but when she found a work environment that automatically took the banks’ side rather than doing the job they were set up to do, she thought keeping a record could one day be useful. Specifically, after being ordered by a superior to take an incriminating comment a Goldman exec made out of the official minutes of a meeting, she went to a spy store and purchased a keychain audio recorder.
Segarra encountered a culture at work where most Fed regulators befriended the large banks they were charged with watching. These Fed employees literally work in the offices of the banks they are assigned to and essentially become part of each bank’s team. After leaving the Fed, it’s fairly common for these regulators to take cushy jobs at the bank they were charged to keep honest. In the same way that politicians often become wealthy lobbyists for the banks and private industries they protected legislatively after leaving office, it’s difficult to believe that these types of relationships aren’t problematic.
Segarra notes that it’s not as if the Fed regulators were unaware of the problems that could potentially damage the economy. In fact, teams would meet to discuss possible problems. Afterwards, however, nothing was done with this information. She didn’t understand how so much evidence could be gathered on a topic while the Fed continued to choose the path of continuing fact-finding rather than taking any action.
After the 2008 economic crash, the U.S. government resolved to hire some rabble-rousers at the Fed who weren’t afraid to challenge the status quo of the banks. From the tapes, it’s evident that Segarra tried to be that kind of inquisitive investigator, unafraid to probe a bank for more information. Time and time again, her bosses discouraged her from doing things that might “offend” the Wall Street executives.
The issue that ultimately sent Segarra out the door at the Fed was her bringing attention to the fact that Goldman had no specific conflict of interest policy. She hoped the financial institution could write something concrete to keep Goldman more accountable, but she was met with resistance — from her own bosses, no less. They attempted to get her to drop this issue and dissuade her from writing up a formal report that would lead a paper trail that would look bad for Goldman. When Segarra put up a fight, she was terminated shortly thereafter.
Thus far, Goldman Sachs and the Fed have flatly denied the accusations and tried to discredit the story by assassinating Sergarra’s character. They say she was fired for poor job performance (although the tapes have her boss complimenting her work aside from questioning authority) and that she’s bitter toward Goldman Sachs because the company didn’t employ her when she sought employment there previously. Even if Sergarra were an awful employee, though, that doesn’t negate the terrifying things she clearly recorded her colleagues saying.
Although it seems like that this controversy will ultimately be glossed over with no real reform, at least two members of the Senate Banking Committee have expressed a desire for an investigation following these leaked tapes: Senators Sherrod Brown and Elizabeth Warren.
“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,” said Senator Warren. “When regulators care more about protecting big banks from accountability than they do about protecting the American people from risky behavior on Wall Street, it threatens our whole economy. We learned this the hard way in 2008.”
For more information, listen to a compelling podcast of Segarra’s story at This American Life.
Read more: http://www.care2.com/causes/whistleblower-reveals-that-the-fed-and-banks-are-best-friends.html#ixzz3G2F3kIup