Blowing the Whistle on the New York Fed and Goldman Sachs

By Pam Martens: October 15, 2013

Law Professor and Former Wall Street Veteran, Frank Partnoy, Turns Lyricist To Serenade Goldman Sachs With His Muppet Song

There are a number of interesting aspects to the lawsuit filed by Carmen M. Segarra against the Federal Reserve Bank of New York and three of its employees. Segarra was a bank examiner at the New York Fed who is charging in her lawsuit that she was told to change her negative review of Goldman Sachs and when she refused to do so, she was terminated in retaliation and escorted from the Fed premises.

The first notable aspect of this saga is that Segarra has hired a lawyer, Linda Stengle, whose office is in Boyertown, Pennsylvania. (It is fairly safe to assume that the number of lawyers working in Manhattan who want to take on the New York Fed and Goldman Sachs runs in the single digits, if they exist at all.) This hunt for legal representation may explain why Segarra is filing her lawsuit more than 16 months after she was rudely escorted out the door on Liberty Street – a particularly ironic location for an institution that failed to report the Libor rigging transgressions in a timely fashion; refused to turn over documents to let the public know how many trillions of dollars in loans it had sluiced into domestic and foreign banks during the crash until it lost a protracted court battle; and is now charged by one of its own bank examiners with putting its “relationship” with Goldman Sachs ahead of the integrity of its examinations.

We were expecting to read that Mayor Michael Bloomberg dashed right down to Goldman Sachs when the news of this lawsuit broke last week to give a pep talk to the Goldman traders and then grab some burgers with CEO Lloyd Blankfein. (That was the reaction of the Mayor when Greg Smith resigned from Goldman Sachs via a blistering OpEd in the New York Times.)

Greg Smith, a former VP at Goldman, tendered his resignation after 12 years with the firm on March 14, 2012. Smith famously lamented on “how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets.’ ” The muppets’ phrase travelled like wildfire into comedic internet memes, like this catchy reworking of lyrics by former Wall Street veteran and law professor Frank Partnoy. Smith backed up his assertions in a convincing interview on 60 Minutes.

The New York Times ran an article on the lawsuit last week. The anger and hostility that spilled out from the public toward Goldman in the more than 200 comments shows just how deeply the New York Fed has failed through its perverted convergence of “relationship” managers obstructing the work of bank examiners.

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