Goldman Sachs has been found to have very close ties with the Federal Reserve Bank of New York following secret recordings leaked by a former regulator, reported The New York Times.
The revolving door consists of former government employees, specifically those who work in financial regulation, being hired by the Wall Street banks that they were once charged with overseeing. A two-way street, former bankers also go work for the Fed. This relationship created a conduit by which banks can obtain confidential information held by the Fed, information that banks were never supposed to see.
“The Fed possesses an inherent responsibility to ensure that financial regulations are upheld and obeyed,” said Peter Mougey, securities attorney with Levin, Papantonio P.A. “Any amount of slack in regulation stands a good chance of being exploited by Wall Street bankers.”
According to the leaked recordings, taken and released by former regulator Carmen Segarra, there are apparent “blurred lines” between Wall Street and regulators, creating an array of conflicts of interest. The Fed’s insights were now in the hands of Goldman Sachs and the documents were possibly being used to advise Goldman Sachs.
During Segarra’s short time as a legal compliance examiner stationed at Goldman Sachs, she came across something in the company’s policies that was disturbing. She discovered that Goldman Sachs did not have a company-wide conflict-of-interest policy which could have made the relationship between Goldman and the Fed less cozy.
However, when Segarra brought this fact to the attention of her supervisor, Dianne Dobbeck, Segarra was instructed to leave the issue alone. Segarra remained steadfast, refusing to keep quiet, but was fired after only seven months as a compliance examiner.
Wall Street banks and the Fed have developed a cozy relationship that’s “decades in the making,” according to the NYT. William Dudley, the New York Fed’s current president, once worked for Goldman Sachs as the bank’s chief economist. Dudley went on the defensive last month, shortly after the initial release of Segarra’s recording.
“I don’t think anyone should question our motives or what we are attempting to accomplish,” said Dudley.
What’s even more suspicious is that in September when ProPublica and This American Life first reported on the leaks, Goldman Sachs went on a firing spree. Goldman Sachs ceased an unrelated leak of confidential Fed records, fired a banker and a supervisor. The Fed fired an employee thought to be sharing confidential Fed information with the bank.
The revolving door between corporate America and the U.S. government is vast and wide-reaching. Bankers become regulators, regulators become bankers, Wall Street executives appointed as policy advisers; it all points to one thing. Banks and corporations have a stranglehold on our government.