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 Elizabeth Warren, a Democrat on the Senate Banking Committee, on
Friday called for hearings after portions of the recordings from
2011 and 2012 were made public. Fellow Democrat Sherrod Brown, also
a committee member, called for a "full and thorough investigation"
into the allegations they raised.
Carmen Segarra, a former New York Fed bank examiner who brought a
wrongful termination lawsuit against her former employer, recorded
the conversations and provided them to the investigative news outlet
ProPublica and the public radio show "This American Life" to
illustrate what she saw as an inappropriately close relationship
between regulator and bank.
The tapes appear to show an unwillingness among some Fed supervisors
to both demand specific information from Goldman about a transaction
with Banco Santander <SAN.MC> and to strongly criticize what Segarra
concluded was the lack of an appropriate conflict-of-interest policy
at Goldman.
Political interest in the recordings could feed suspicion among
Americans that little has changed on Wall Street since bank
regulators failed to identify and stop the risk-taking that led to
the 2007-2009 financial crisis and deep U.S. recession.
"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," Warren said in an emailed statement. "Congress must
hold oversight hearings on the disturbing issues raised by today's
whistleblower report when it returns in November."
Brown, in an email, said: "For too long, too many financial
regulators have been too cozy towards the very industry that they
are meant to police."
Segarra was fired after nearly seven months at the New York Fed as a
so-called embedded supervisor at Goldman. She later sued the branch
of the U.S. central bank for $7 million but the suit was dismissed
in April for failing to state a claim that merited whistleblower
protection, a decision she is appealing.
"The New York Fed categorically rejects the allegations being made
about the integrity of its supervision of financial institutions,"
it said in a statement on its website.
On Friday, Goldman tightened rules on investments its bankers can
make in individual stocks and bonds, a company spokesman told
Reuters.
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A source familiar with the situation said the bank's new
conflict-of-interest rules on Friday were in the works for some time
and were unrelated to the Segarra case.
Asked about the possibility of hearings, both the New York Fed and
Goldman Sachs declined to comment.
Segarra stands by her allegations against the Fed, said Linda
Stengle, her lawyer. "The audio on the tapes speaks for itself.
Regardless of whether our case proceeds on appeal, we are gratified
that Carmen is vindicated by the recorded words of employees of
Goldman Sachs and the New York Fed," she said.
Segarra filed the wrongful termination suit in October, claiming she
was fired after refusing to alter a critical examination of
Goldman's legal and compliance units. In claims she repeated in
Friday's media reports, she said superiors were too deferential to
the bank and they pressured her to back down.
Some 46 hours of meetings and conversations were recorded, according
to ProPublica.
In one conversation said to be among Fed examiners following a
meeting with Goldman officials, one participant appeared concerned
about pushing the bank too hard for details on the Santander deal.
"I think we don't want to discourage Goldman from disclosing these
types of things in the future, and therefore maybe you know some
comment that says don't mistake our inquisitiveness, and our desire
to understand more about the marketplace in general, as a criticism
of you as a firm necessarily," the unidentified examiner told his
colleagues, according to a transcript provided by This American
Life.
(Reporting by Jonathan Spicer and Emily Stephenson; Additional
reporting by Amrutha Gayathri in Bangalore and Lauren LaCapra in New
York; Editing by David Gregorio and Lisa Shumaker)
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