This page has been archived and commenting is disabled.

Bill Dudley Explains Why The New York Fed Is Not A Subsidiary Of Goldman Sachs - Live Webcast

Tyler Durden's picture




 

Just days after the NY Fed ousted an employee for providing confidential information to a Goldman Sachs banker (who formerly worked at the NY Fed - and has since been fired by Goldman), Bill Dudley - the president of the NY Fed - will face a very skeptical Senate Banking Committee this morning investigating so-called "regulatory capture." Of course, their eyes were finally opened after Carmen Segarra, a former employee, leaked 47.5 hours of taped conversation (as we discussed in detail here), exposing the dismal reality of the relationship between the 'regulator' and the 'regulated' as New York regulators were deferential to Goldman bankers for a supposedly "shady" deal. Dudley's defense (not denial) so far:  "We understand the risks of doing our job poorly and of becoming too close to the firms we supervise. Of course, we are not perfect. We sometimes make mistakes."

 

Here is the NY Fed's most recent attempt to explain why it is not a subsidiary of Goldman Sachs:

As soon as we learned that Goldman Sachs suspected one of its employees may have inappropriately obtained confidential supervisory information, we alerted law enforcement authorities.  We have been working with law enforcement authorities since then. Because any public statement about the investigation could be prejudicial to a potential future criminal case, we are unable to comment on the specific facts that are under investigation.

 

As a general matter, we have detailed rules and controls protecting confidential information.  All employees with access to confidential supervisory information need to agree to safeguard that information appropriately, and not to disclose it without the necessary approval.  Employees receive training relating to the handling and protection of confidential supervisory information and other information security matters.   Employees are informed that a violation of these restrictions could lead to criminal prosecution.

 

Employees also receive ongoing ethics training and are required to do an annual certification that they understand and will adhere to the Bank’s Code of Conduct.  In addition, we use off-boarding procedures to confirm with departing employees that no confidential information may be taken.  With respect to all New York Fed staff, departing Officers may have no official contact with the Federal Reserve System for a period of one year.  In addition, all departing New York Fed employees may not have substantive business contacts with the New York Fed relating to any particular matter that he or she had worked on when employed by the New York Fed.  Further, with respect to employees departing from the financial institution supervision group, if the departing employee had served as a senior supervisory officer or central point of contact at a large and complex banking organization, that employee may not receive compensation from the supervised organization as an employee, officer, director or consultant for a period of one year.  Finally, the New York Fed has in place technology to help identify and prevent the forwarding of confidential information in violation of our rules. 

So did that 'technology' fail?

And here is the full "whistle-blower" tapes that throw Dudley and his cronies under the bus.

*  * *

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER PROTECTION will meet in OPEN SESSION to conduct a hearing entitled “Improving Financial Institution Supervision: Examining and Addressing Regulatory Capture”.

Live Feed (hearing is from 10ET to 12ET):

*  *  *

Witnesses

Panel 1

  • Mr. William C. Dudley
    President and CEO
    Federal Reserve Bank of New York

Panel 2

  • Mr. David O. Beim [view testimony]
    Professor of Professional Practice
    Columbia Business School
  • Mr. Robert C. Hockett [view testimony]
    Edward Cornell Professor of Law
    Cornell Law School
  • Dr. Norbert J. Michel [view testimony]
    Research Fellow in Financial Regulations
    Heritage Foundation

*  *  *

Bill Dudley's Full Testimony:

NY Fed Bill Dudley

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 11/21/2014 - 11:02 | 5473618 PartysOver
PartysOver's picture

And the Murican people will believe it.  All of it.

Fri, 11/21/2014 - 11:04 | 5473629 pedro314
pedro314's picture

face it...american are too dumb, fat and stupid to do anything!!!

 

the tribe control your country now...

Fri, 11/21/2014 - 11:06 | 5473640 freewolf7
freewolf7's picture

The lady doth protest too much, methinks.

Fri, 11/21/2014 - 11:11 | 5473650 NoDebt
NoDebt's picture

"When you're explaining, you're losing"  (old political axiom)

Why is he hunched over like a questionmark, talking into his own lap?  Looks like he's trying to lick his own... ah, nevermind.  

No eye-contact, poor posture, defensive body language.  That guy would rather be anywhere than there.

Fri, 11/21/2014 - 11:25 | 5473718 Richard Chesler
Richard Chesler's picture

Dudley worked at Goldman Sachs from 1986 to 2007

scumbag

Fri, 11/21/2014 - 11:30 | 5473734 SamAdams
SamAdams's picture

All in a day of doing G_d's work....

Fri, 11/21/2014 - 11:27 | 5473722 y3maxx
y3maxx's picture

Dudley is wearing a mask.

Who is the actual person under it?

Fri, 11/21/2014 - 11:35 | 5473753 SamAdams
SamAdams's picture

You left out Jolly... C'mon, get your stereotype correct!

Fri, 11/21/2014 - 11:07 | 5473635 philipat
philipat's picture

Yawn......

What we need is some real action, not more theatre and grandstanding. Unlikely with revolving doors, well, still revolving. Bread and circuses......

Fri, 11/21/2014 - 11:05 | 5473625 yogibear
yogibear's picture

LOL, A  Goldman Sach's  soldier denying he's helping Goldman out. That's laughable. 

William Dudley works closely with Goldman. Who is he kidding?

 

Fri, 11/21/2014 - 11:13 | 5473659 Government need...
Government needs you to pay taxes's picture

Just wait.  CNBC will spin it up, Cramer will talk about it, and the opiated masses will fall back into their stupor.

Fri, 11/21/2014 - 14:33 | 5474410 Big Brother
Big Brother's picture

Cramer also used to work for Goldman Sachs (1984 - 1987).  Interesting...

Fri, 11/21/2014 - 11:03 | 5473632 q99x2
q99x2's picture

Move in with swat teams, navey seals. Don't let them escape.

Fri, 11/21/2014 - 11:23 | 5473702 hangemhigh77
hangemhigh77's picture

They SWAT team the protesters, the cops WORK for the criminals.

Fri, 11/21/2014 - 11:05 | 5473638 eddiebe
eddiebe's picture

Mistakes???? You got to be shitting me.

Fri, 11/21/2014 - 11:11 | 5473645 Ignatius
Ignatius's picture

"Mistakes????"

The "incompetence defense" - never really worked at any job I ever had.

In the real world: incompetence = unemployed

Fri, 11/21/2014 - 11:05 | 5473639 williambanzai7
williambanzai7's picture

Fri, 11/21/2014 - 11:08 | 5473647 philipat
philipat's picture

William,

Looks more like an Octopus than a Squid?

Fri, 11/21/2014 - 11:11 | 5473651 q99x2
q99x2's picture

Move in with bulldosers. The whole damn lot of them are infected.

Fri, 11/21/2014 - 11:11 | 5473655 Government need...
Government needs you to pay taxes's picture

I'll know the bottom 20% have gotten smart when they form a lynch mob down @ 200 West.

Fri, 11/21/2014 - 11:11 | 5473656 hangemhigh77
hangemhigh77's picture

No Billy, you're FULLY aware of what's going on and you're actually NOT fooling anyone with your BULLSHIT, you're BRIBING and BLACKMAILING them. Lying scum.

Fri, 11/21/2014 - 11:14 | 5473663 Government need...
Government needs you to pay taxes's picture

Can we vote for him to experiment with a nail gun?

Fri, 11/21/2014 - 11:18 | 5473684 hangemhigh77
hangemhigh77's picture

Let's draw and quarter him in Times Square

Fri, 11/21/2014 - 11:12 | 5473660 Seasmoke
Seasmoke's picture

There is never one cockroach 

Fri, 11/21/2014 - 11:13 | 5473661 buzzsaw99
buzzsaw99's picture

i am not a squid and i'm not an alien lizard overlord. i'm a human being god dammit! my life has value! [/dudly do wrong]

Fri, 11/21/2014 - 11:15 | 5473670 hangemhigh77
hangemhigh77's picture

Why don't they all just STFU.  I missed the beginning part where they all thank each other, was it sickening??  Now would be a good time for Russia to drop a nuke, is everyone present and accounted for?  So now let the staged show beging where the bribed and blackmailed fully corrupt politicians pretend to ask questions of the criminals that have them in their back pockets. it's more a game of Charades. What a FUCKING JOKE. Why don't they all just STFU and quit blowing smoke up my ass and pissing down my neck telling me it's raining. Asstards.

Fri, 11/21/2014 - 11:17 | 5473677 VWAndy
VWAndy's picture

Hang him

Blow him

Fri, 11/21/2014 - 11:16 | 5473678 hangemhigh77
hangemhigh77's picture

Oh GOD more thanking. Hey lady, thank you for FUCKING OFF!!!!!  Hey Warren you're full of shit and you're an Oboner worshipper and a fucking warmonger, FUCK OFF.

Fri, 11/21/2014 - 11:18 | 5473680 Calculus99
Calculus99's picture

If you look hard enough you can just see the horns on Dudley's head.

Fri, 11/21/2014 - 11:18 | 5473682 q99x2
q99x2's picture

I'm going to puke now.

Fri, 11/21/2014 - 11:19 | 5473693 Oro
Oro's picture

Is that Max Keiser to the left?

Fri, 11/21/2014 - 11:20 | 5473694 hangemhigh77
hangemhigh77's picture

Banker conduct??  That's like questioning WHY Satan kills people.  Bad behavior? How about RAMPANT CRIMINALITY.  Whwere's Maxwell's silver hammer when you need it?  I would like to punch every person who speaks at this joke meeting right in the mouth.

Fri, 11/21/2014 - 11:24 | 5473717 hangemhigh77
hangemhigh77's picture

Regulatory capture is a "serious issue"?  Ya think??? duuuuh.  But it's not really going on.  They are making progress. In orther words they are figuring out how to better not get caught in theire criminality.  OK, drop the nuke Russia, please liberate the American people.

Fri, 11/21/2014 - 11:27 | 5473720 yogibear
yogibear's picture

Just a Too Big To Fail dog and pony production.

Their way too nice to Dudley.

Dudley is just another squid man.

Fri, 11/21/2014 - 11:53 | 5473839 blindman
blindman's picture

merkley guts the fish dudley, look away ...

Fri, 11/21/2014 - 11:27 | 5473721 WTFUD
WTFUD's picture

Take away their S&P ( Shit und Piss ) and the naked truth is exposed.
3D = Death Darkness Despair

Fri, 11/21/2014 - 11:29 | 5473728 RaceToTheBottom
RaceToTheBottom's picture

"With respect to all New York Fed staff, departing Officers may have no official contact with the Federal Reserve System for a period of one year.  "

Ahhh, hmmm, do you think we should put some teeth into this rule Mr Dunderhead?  I mean you don't have to follow it but at least make a pretense of following your own rules.

Everyone else, if we had death penalties, this would no longer be a problem you, your kids, and your grand kids will have to pay for...

Fri, 11/21/2014 - 11:37 | 5473756 NoWayJose
NoWayJose's picture

"we sometimes make mistakes" - like not throwing someone off the roof, or not filling someone's head with nails, or not sliding a sharp knife against someone's neck --- "but we'll try harder in the future"

Fri, 11/21/2014 - 11:37 | 5473760 Mi Naem
Mi Naem's picture

I wonder if Jamie or someone(s) like that is behind this, or if this is just internal Squid politics playing itself out in the public theater? 

Fri, 11/21/2014 - 11:39 | 5473780 ejmoosa
ejmoosa's picture

It's clear that the Fed needs to be terminated.  The panel keeps referencing the American people.  We cannot end it directly.  Only Congress can.  Do it.

Fri, 11/21/2014 - 11:39 | 5473781 Utah_Get_Me_2
Utah_Get_Me_2's picture

At this point it is safe to assume at this point that at any given Congressional hearing on the major crimes of banksters, the individual being questioned is:

a.) knowingly and willingly lying

b.) complicit in the destruction of the fabric of the Constitution, the nation, the economy, etc...

c.) blackmailed  

d.) lining the pockets of those questioning them

e.) in dire need of a nail-gun lobotomy

Fri, 11/21/2014 - 11:45 | 5473793 New American Re...
New American Revolution's picture

 It's not cultural, its systemic.  The problem is with the system that they've built.  The only way out is to completely clean house of not only the personel, but the entire system.  electanewcongress.com electfawell.com scienceofliberty.us

Fri, 11/21/2014 - 11:45 | 5473811 hangemhigh77
hangemhigh77's picture

Clean house??!!  Ahahahahahahahaha, ABOLISH THE FED NOW!!!!!!  It's a CRIMINAL CABAL!!!!

Fri, 11/21/2014 - 11:44 | 5473798 hangemhigh77
hangemhigh77's picture

Be careful or you'll look like JFK

Fri, 11/21/2014 - 11:48 | 5473815 hangemhigh77
hangemhigh77's picture

If a pig lives in your house it will shit on the floor.  If the Fed exists it will ROB and LIE. PERIOD

Fri, 11/21/2014 - 11:48 | 5473816 Utah_Get_Me_2
Utah_Get_Me_2's picture

Look at that smug shithead with the red-tie. Good God I would love to storm into that room with an aluminium bat, lock the doors and just go fucking apeshit.

Fri, 11/21/2014 - 11:49 | 5473823 hangemhigh77
hangemhigh77's picture

I'll bring a 38 ounce and help you.

Fri, 11/21/2014 - 11:53 | 5473838 Utah_Get_Me_2
Utah_Get_Me_2's picture

Look at him! Fucking twitching and tweaking! Fucking coked out of his mind. Stupid fucking red tie dipshit. I want to destroy him.

Fri, 11/21/2014 - 11:48 | 5473818 theyjustcantstop
theyjustcantstop's picture

i made a mistake at work also, but my employer didn't get enriched billions of dollars, of course i don't get a 6 figure salary, maybe if i made more mistakes and my employer made billions, maybe they would give me a raise.

i wouldn't be surprised after all these fortunate mistakes my employer might give me a raise, and transfer me to another branch of the co., so i could make more mistakes, (ie ny fed, to goldmans).

a drunk airline pilot killing 300 passengers is a mistake also.

if the pilot lived, he'd pay dearly for his mistake, the co. would also.

if the fed. was anything close to being an american, or earthly entity, with any responsibilities there would be a class-action suit, and i'm sure they would be held liable for 100's of thousands of deaths, and trillions in damage.

 

 

Fri, 11/21/2014 - 11:52 | 5473830 hangemhigh77
hangemhigh77's picture

Look at the ugly bitch sitting there. You KNOW she didn't blow any one to get up there. Probably a carpet licking specialist.

Fri, 11/21/2014 - 12:43 | 5474011 Manipuflation
Manipuflation's picture

Yes, I did notice her as well as a bunch of other folks who appear to be doing nothing at all.  The Dudley drones on talking about leverage ratios but but no one knows wha the fuck he is actually saying but he isn't saying anything at all other than bullshit.  Did you notice the Dudley's teeth are all fucked up.  With all of the bullshit lies that have come through that asshole's mouth I am surprised that he even has any teeth at all.  They should all have been knocked out ny now.

I wasted a bunch of time watching this dog and pony show and came to the conclusion that we need Ron Paul to go in there and ask a few questions rather than this softball-fest.  No one is addressing the real issue here at all.  And the Dudley will be probably handing out some freshly printed cash to the senators after this whole proceeding is over.  You would think that at least someone could flip the bird in a discreet way like by rubbing their eye or tousling their hair. 

Fri, 11/21/2014 - 11:51 | 5473834 Consuelo
Consuelo's picture

Trot out the Goy...

 

 

Fri, 11/21/2014 - 11:55 | 5473844 hangemhigh77
hangemhigh77's picture

Just CUT THE SHIT< STAND UP AND YELL, "WE'RE FUCKING CRIMINALS!!!  FUCK YOU!!  BWAHAHAHA".

Fri, 11/21/2014 - 11:59 | 5473863 Ricky Roma
Ricky Roma's picture

The arrogance makes me feel so much better.

Fri, 11/21/2014 - 12:02 | 5473876 Ricky Roma
Ricky Roma's picture

What a Gomer Pile.

Fri, 11/21/2014 - 12:37 | 5473988 A82EBA
A82EBA's picture

Fixing the problem starts with the Senate not the 'watchdog'

Fri, 11/21/2014 - 12:39 | 5473995 Ariadne
Ariadne's picture

Fixing starts with reciprocity.

Fri, 11/21/2014 - 12:38 | 5473992 Ariadne
Ariadne's picture

Nothing up my left tentacle. Nothing up my right. Now watch closely as I disappear all your wealth with my magic ink! Watch it reappear behind my armies! 

Fri, 11/21/2014 - 12:56 | 5474054 Manipuflation
Manipuflation's picture

So who is the asshole sitting behind the glass of ice with no drink in it?  He keeps looking at everyone in the room while trying to not make it obvious by turning his head.  Someone should get that guy a Nazi SS deathhead armband.   

Fri, 11/21/2014 - 13:04 | 5474089 blindman
blindman's picture

"Jake Bernstein: Maybe Goldman was doing nothing wrong. But this is a big part of a
bank examiner’s job: to follow up on leads like this. And after that meeting, Carmen sat
down with examiners who’d been there from the Fed, but also from the FDIC and the
New York State banking authority. Carmen told them she wanted to follow up on that
comment. And then a Fed examiner piped up.
.
Carmen Segarra: This colleague at the Fed basically said, you know, “oh that
point? Oh you didn’t hear that.” And, you know, I looked over at the New York
bank examiner and the FDIC bank examiner and we sort of looked at each other
we said “yes we did. We did hear that!”
.
Jake Bernstein: One of the other people in this conversation confirmed this for me. The
Fed examiner responded, “well, he – the Goldman executive – he didn’t mean it.”
.
Carmen Segarra: I was floored. It was the moment when I realized oh, so this is
what, this is what pushback looks like.
.
Jake Bernstein: Carmen says this wasn’t an isolated incident. In December –not even
two months into her job –a business line specialist came to Carmen and told her that her
minutes from a key meeting with Goldman executives were wrong, that people didn’t say
some of the things Carmen noted in the minutes. The business line specialist wanted her
to change them. Carmen didn’t.
That same day, Carmen was called into the office of a guy named Mike Silva. Silva had
worked at the Fed for almost twenty years. He was now the senior Fed official stationed
inside Goldman. What Mike Silva said to Carmen made her very uncomfortable. She
scribbled notes as he talked to her.
.
Carmen Segarra: Even looking at my own meeting minutes, I see the
handwriting is like nervous handwriting. It’s like you can tell. He started off by
talking about he wanted to give me some mentoring feedback. And then he started
talking about the importance of credibility. And he said, you know, credibility at
the Fed is about subtleties and about perceptions, as opposed to reality.
.
Brian Reed: Wait he said that?
.
Carmen Segarra: Yes.
.
Brian Reed: What does that even mean?
.
Carmen Segarra: I found it to be completely incredible. For somebody to tell
me that credibility is about perception as opposed to reality? I mean, I come from
the world of legal and compliance, we deal with hard evidence. It’s like, we don’t
deal with, you know, perceptions.
.
Jake Bernstein: What else did he say?
.
Carmen Segarra: It was interesting because he said the Fed takes most seriously
those employees which are the most quiet ones. And that it was important
essentially that I understand this because otherwise I would be frozen out.
.
Jake Bernstein: Mike Silva would go on to play a big part in Carmen’s tenure at the
Fed. We reached out to him several times but he didn’t want to take part in this story,
because of the fact that Carmen’s suing, because there’s a regulation that makes the Fed’s
dealings with Goldman confidential. So it’s impossible to know his side of this. Though,
remember, this isn’t a story about a personnel dispute between Carmen and her superiors.
It’s about what she did next and what that reveals about how the New York Fed works.
Carmen says she was so shaken by these incidents –someone telling her she didn’t hear
something she knew she heard, another colleague asking to alter minutes that Carmen
believed were accurate, and then the Fed’s top guy at Goldman telling her that
perceptions are more important than reality –she says it was like reality itself was being
questioned at the Fed. She realized she wanted a clear record of what was really
happening in case there were ever any disputes about it. So she went to the Spy Store,
bought a tiny audio recorder, put it on her keychain, and started switching it on secretly at important meetings.
.
Carmen Segarra: Um, Mike had called me into his office…
.
Jake Bernstein: This is one of the first recordings she made. It’s with her supervisor.
His name is Johnathan Kim. She’s talking to him about the meeting that she had with
Mike Silva and how upset she was by what he’d told her.
.
Carmen Segarra: … credibility at the Fed is about subtleties, perceptions as
opposed to realities...
.
Jake Bernstein: Kim had done Carmen’s job before her, and told her he’d experienced
opposition from the same people. Kim’s advice was to be patient. The Fed was trying to
change, and moving the Fed, he said, in an unfortunate metaphor, was slow like moving
the Titanic.
Meanwhile in those early months, Carmen started looking at one deal that had caught the
attention of the Fed’s team at Goldman. It’s a deal that gave her a chance to really see the Fed in action, to see what the Fed did when faced with a situation where Goldman had
done something regulators thought was questionable. Carmen remembers the moment she
first learned about the deal.
.
Carmen Segarra: Friday Jan 6th, at 3:54 PM we get an email from Goldman,
sort of alerting us to this transaction that they’re planning to close.
.
Jake Bernstein: The email said that Goldman wanted to notify the Fed about a fastmoving
negotiation between it and a large Spanish bank. The Spanish bank has
operations all over the world; it’s called Banco Santander. Santander and Goldman both
declined to comment about the deal for our story.
This email raised questions for Carmen. First of all, an alert like this was unusual.
Goldman had employees conducting deals all over the world every day, and hardly ever
wrote emails to the Fed about them. And then there was the timing, late in the afternoon
on Friday, January 6th –a date which may not mean anything to you, but Carmen knew
that it was Three Kings Day, one of the biggest national holidays in Spain.
.
Carmen Segarra: My first reaction was why are we getting this email? And then
my second thought was Banco Santander, closing a deal on the equivalent of
Christmas Eve in Spain? That’s interesting.
So you know we get back to work after the weekend, and Mike Silva is quite
upset about this transaction.
.
Jake Bernstein: Mike Silva, remember, was the Fed’s top official inside Goldman –the
one who talked to Carmen about perceptions versus reality. It’s helpful to know a bit
about Mike Silva before you hear how the Fed reacted to this deal. From everything we
can tell, he seems like a regulator who’s trying to do a good job. In the tapes, Silva talks about the Fed’s duty to serve the public. He’d been in the Navy, volunteered with
disabled veterans, and he’d gone to Iraq after the invasion to help get the country’s
national bank on its feet. And at a staff meeting once, he told his employees a story from
the darkest days of the financial crisis about what motivated him as a regulator.
.
Mike Silva: I have to tell you that night that the reserve fund broke the buck and
we got that word…
.
Jake Bernstein: It was a moment when it looked like the financial system was going to
come crashing down. Big firms were frantically calling the Fed, terrified that economic
Armageddon had arrived. When this happened, Silva was chief of staff for Tim Geithner
who, at the time, was president of the New York Fed.
.
Mike Silva: And when I realized that nobody had any idea how to respond to
that, I went into the bathroom and threw up. Because I realized this is it, it’s just
this small group of people, and right now at this moment we have no clue. I never
want to get close to that moment again.
.
Jake Bernstein: Silva told his staff that this was a very powerful experience that still
influenced his thinking. And you could hear that in the recordings after the unusual deal
came down late that Friday afternoon involving the overseas bank, Banco Santander.
What upset Mike Silva about it was that it seemed like the entire purpose of the
transaction was for Goldman Sachs to help Banco Santander appear healthier than it
actually was.
All banks have to keep some capital on hand. The more deals and loans they do, the more
capital they have to keep around, as a safety cushion, in case things go bad. Santander
was under pressure from its own regulators back in Europe to hold more capital. And this
deal with Goldman Sachs helped solve the problem for Santander. Not by giving
Santander more capital, but by taking stuff off their books, and putting it onto Goldman’s
books. Having less stuff meant Santander needed less capital. Mission accomplished.
One Fed employee likened it to Goldman getting paid to hold onto a briefcase. And as
best as they could tell, Goldman was paid a lot: at least $40 million with the potential to
make hundreds of millions in the end. Mike Silva referred to the deal this way.
.
Mike Silva: It’s pretty apparent when you think this thing through that it’s
basically window dressing that’s designed to help Banco Santander artificially
enhance its capital.
.
Jake Bernstein: To be clear, the deal appeared to be perfectly legal. Silva knew that. But
still, he wondered, did they want banks doing these sorts of transactions in the future? If
this kind of deal took off and became more popular, could it be a problem?
And in a sense, this is what you’d hope a Fed manager would be doing in the aftermath of
the financial crisis. Mike Silva learned about this new kind of deal that had come into the
world –one with potential risks that they didn’t fully understand yet. And he set his team
to work scrutinizing it.
Carmen and the others began to pore over documents for this complex transaction, which
had tentacles in Brazil, Spain, the US and the Middle East. And one of the things that
caught Carmen’s eye was a short paragraph that the banks had written into the agreement.
It said that Goldman had to notify the Fed about the Santander deal and obtain a, quote,
“no objection.” In other words, it looked like Goldman was required to get the Fed to
officially sign off on the deal, before it could close. Maybe because Goldman and
Santander worried that regulators might find this new kind of transaction hard to
swallow. But now the two banks had closed the deal. Did Goldman satisfy that part of the
contract? Here’s what Mike Silva had to say about it.
.
Mike Silva: The one thing I know as a lawyer that they never got from me was a
no objection.
.
Woman: Right
Woman: Oh ok. So you literally have to say I do not object?
.
Mike Silva: Exactly, give them some sort of.
.
Carmen Segarra: Mmm hm. Mmm hm.
.
Woman: And to Carmen’s point…
.
Jake Bernstein: The fact that Goldman didn’t get this approval from the Fed didn’t
endanger the financial system or Goldman itself. It’s a small thing. But later if the deal
ever went bad, it would look like the Fed had approved it. It’s right there in the
paperwork. They could get dragged into the mess.
The Fed team called a big meeting with Goldman executives to question them about the
Santander deal. Before they went in, they held a prep session. And Silva told Carmen and
the team this was one of the things he wanted to ask Goldman about .
.
Mike Silva: I never gave you a no objection. What happened? So that’ll be
interesting.
.
Carmen Segarra: He was excited about it and he was the one who wanted to
ask that particular question. He sort of said can I be the one who asks it, and I said
“sure!”
.
Jake Bernstein: So Mike Silva was rallying his team. Goldman had embarked on this
new kind of deal, and there was a lot of interest in it from different parts of the Fed, he
said. They needed to understand it better and he wanted Goldman to know that the Fed
was paying close attention
.
Mike Silva: My own personal thinking right now is that we’re looking at a
transaction that’s legal but shady. I want to put a big shot across their bow on that.
Poking at it, maybe we find something even shadier than we already know. So
let’s poke at this thing, let’s poke at it with our usual poker faces, you know. I’d
like these guys to come away from this meeting confused as to what we think
about it. I want to keep then nervous.
.
Several people: Ok.
.
Mike Silva: Does that make sense?
.
Woman: Yeah yeah, it does.
.
Jake Bernstein: People are amped, they’re excited about this.
.
Carmen Segarra: Yeah, his team was definitely excited. They thought “oh,
we’re definitely going to do something here!” This is, it felt like this was action
for them, you know?
.
Jake Bernstein: Let’s regulate!
.
Carmen Segarra: Yeah, let’s regulate.10
.
Woman: This is fun.
.
Carmen Segarra: Yeah, well I think that hhe’s gonna have a lot of fun.
Jake Bernstein This is what Carmen and her colleagues said to each other as they
marched over to the conference room. They dialed up more people on the phone…
[Sound of phone dialing]
.
Jake Bernstein: and the meeting began. And this, this is something we never get to hear:
Federal Reserve examiners going mano a mano with a bank. Goldman executives kicked
it off with a summary about the Santander deal and the examiners started asking
questions. Some of them specific and technical, others quite broad, touching on the big
issue Mike Silva had raised about whether banks should be doing deals like this at all.
Thirty minutes went by…
.
Man: Were there any similar transactions?
.
Jake Bernstein: Forty-five minutes…
.
Man: What risks do you see to Goldman?
.
Jake Bernstein: And still Mike Silva had not hit Goldman with the question he’d been
so eager to ask about the requirement that Goldman was supposed to get the Fed to okay
the deal before it went through. In their presentation, Goldman executives had briefly
brought it up on their own. They claimed that the clause didn’t actually require them to
get Fed approval. It just seemed that way.
Silva wasn’t satisfied. Finally, after more than an hour he went for it. It’s the only time in
the whole meeting he brings it up. We play it now, not because this is an important piece
of financial policy, but to give you a chance to hear what it sounds like – at least on this
one day – when the top Fed official onsite at Goldman Sachs questions Goldman Sachs.
.
Mike Silva: Just to button up one point. I know the term sheet called for a notice
to your regulator. The original term sheet also called for expression of nonobjection,
sounds like that dropped out at some point, or...?
.
Jake Bernstein: That’s everything he says on the topic in this meeting. Here it is again:
.
Mike Silva: ...sounds like that dropped out at some point, or...?
.
Jake Bernstein: That’s it? That’s him poking Goldman on this?
.
Carmen Segarra: [sighs] Yeah, that’s what passes for poking. That’s what passes
for poking at the Fed. 11
.
Jake Bernstein: I mean I can’t imagine that making them very nervous.
.
Carmen Segarra: Yeah, it come…yeah. It’s just not the way that I would have
asked it.
.
Jake Bernstein: In that moment, Carmen says, she saw clearly that when some of her
colleagues talked about holding Goldman to account they meant something very different
than what she thought it should mean.
.
Carmen Segarra: You acknowledge that these are facts. Fact, this was required.
Fact, I didn’t give it. And then you ask, you know, “What are the consequences?”
.
Jake Bernstein: After the meeting, the Fed team went back to their floor and Mike Silva
called a debrief.
.
Mike Silva: Why don’t we have a quick pow-wow right here?
.
Jake Bernstein: This was just the regulators, nobody from Goldman. So they could be
frank. So Carmen was puzzled when one of her colleagues said how impressed he was
with Goldman.
.
Unidentified Man: I would just say that from a process perspective, I think
there’s a lot to be said for the thoroughness of the process that they engaged in.
.
Jake Bernstein: This surprised Carmen because it seemed premature. They were only at
the beginning of their factfinding. They’d requested documents and minutes of meetings
that Goldman still had to give them. They were federal regulators. Their job was to ask
questions and demand answers...and yet these colleagues sounded almost apologetic
about it.
.
Unidentified man: I would add to his comments in that 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. Like I don’t want to, I don’t
want to hit them on the bat with the head, and they say screw it we’re not gonna
disclose it again, we don’t need to.
.
Jake Bernstein: Wait a second, you guys are the Federal Reserve, doesn’t
Goldman have to give you what you ask for?
.
Carmen Segarra: Absolutely.
.
Jake Bernstein: So where’s he coming from?
.
Carmen Segarra: A place of fear.
.
Jake Bernstein: Fear of ticking off Goldman. Though Carmen couldn’t imagine why
anyone at the Fed would be afraid.
.
Carmen Segarra: The Fed has both the power to get the information and the
ability to punish the bank if it chooses to withhold it. And some of these powers
involve criminal action. So there’s no reason to be afraid.
.
Brian Reed: Did you get the sense that other people around you were taken
aback by that comment at the time, or did that seem like not such a strange
comment for someone to make?
.
Carmen Segarra: No, I think business line specialists were very much in
agreement with that comment.
.
Unidentified man: 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.
.
Carmen Segarra: I mean, they were all sort of afraid of Goldman and I think
they were a little bit confused as to who they were working for.
What I was sort of seeing and experiencing was this level of deference to the
banks. This level of fear. And just not really showing a lot of interest in putting
two and two together. It’s not like we would walk out of a meeting and they
would be like “Oh my God, when they said that, what did that mean? Let’s go
research it.” It was like “Oh well, next meeting.”
.
Brian Reed: I mean the obvious question from what you’re describing is: is that
regulatory capture?
.
Carmen Segarra: You know, if that isn’t I don’t know what is." ....
http://www.thisamericanlife.org/sites/default/files/TAL536_transcript.pdf
.
and then there is political and monetary capture, oh boy .....

Fri, 11/21/2014 - 13:16 | 5474121 RealityCheque
RealityCheque's picture

And this way, nothing will change.

Burn all of it, the institutions and the people in them, and start again. It's the only way we have left.

Fri, 11/21/2014 - 13:19 | 5474140 Hamm Jamm
Hamm Jamm's picture
The New York Fed Is Not A Subsidiary Of Goldman Sachs

 

Hahahahahahahahahahahaha ......    Hahahahahahahahahahahahaha

 

LULZ

 

Fri, 11/21/2014 - 13:21 | 5474151 moneybots
moneybots's picture

"Bill Dudley Explains Why The New York Fed Is Not A Subsidiary Of Goldman Sachs"

 

Two words.  Jonathan Gruber.

Fri, 11/21/2014 - 13:26 | 5474167 Ned Zeppelin
Ned Zeppelin's picture

All carefully choregraphed kabuki theater.  

Do NOT follow this link or you will be banned from the site!