Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) are both calling for Congress to investigate the New York Federal Reserve Bank after recently released secret recordings show the central bank allegedly going light on firms it was supposed to regulate.
Warren and Brown, both members of the Senate Banking Committee, called for an investigation of the New York Fed after Carmen Segarra, a former examiner at the bank, released secretly recorded tapes that she claims show her superiors telling her to go easy on private banks. Segarra says that she was fired from her job in 2012 for refusing to overlook Goldman’s lack of a conflict of interest policy and other questionable practices that should have brought tougher regulatory scrutiny.
After Segarra made the tapes public in a joint report with ProPublica and This American Life on Friday, Warren was quick to call on Congress to take action.
“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,” Warren said in a statement on Friday. “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. We learned this the hard way in 2008.”
In an interview with This American Life and ProPublica, Segarra described numerous instances in which she said she alerted her bosses to questionable practices at Goldman. In one instance, she said she alerted a colleague that a senior compliance officer at Goldman had said that the bank's view was that “once clients became wealthy enough, certain consumer laws didn’t apply to them.” Segarra claims that her New York Fed colleagues asked her to ignore the remark and change meeting minutes she had taken, which contained evidence of what the Goldman executive said.
"These allegations deserve a full and thorough investigation, and American taxpayers deserve regulators who will fight each day on their behalf,” Brown said in a statement
This American Life and ProPublica also unearthed an internal study by the New York Fed in 2009, which found that the institution had a culture where regulators had gotten too cozy to the banks they were supposed to scrutinize and were discouraged from voicing their honest opinions.
In statements released in response to the This American Life and ProPublica report, both the New York Fed and Goldman Sachs denied any kind of wrongdoing.
“The New York Fed categorically rejects the allegations being made about the integrity of its supervision of financial institutions,” the Fed said in a lengthy statement on its website. "The decision to terminate Ms. Segarra’s employment with the New York Fed was based entirely on performance grounds, not because she raised concerns as a member of an examination team about any institution.” The bank added that it could not comment further on the tapes because Segarra is still pursuing a wrongful termination suit against it.
In its own statement, Goldman Sachs went after Segarra, saying that she applied for employment there multiple times and that it has long had a comprehensive conflict of interest policy.