Why Does the U.S. Senate Need a Petition Drive to Hold Hearings on the Secret Goldman Sachs’ Tapes

By Pam Martens: October 29, 2014

Traders at the New York Fed Have Speed Dials to Wall Street's Biggest Firms

Traders at the New York Fed Have Speed Dials to Wall Street’s Biggest Firms

It appears that Senators Elizabeth Warren and Sherrod Brown believe they may have a battle on their hands getting their colleagues on the Senate Banking Committee to agree to hold hearings on the now notorious tape recordings secretly made by former New York Fed bank examiner, Carmen Segarra, showing a cozy relationship between the regulator and Goldman Sachs.

Petitions have sprung up all over the internet, with more than 129,000 signatures as of this morning, demanding that Congress hold hearings to investigate whether the Federal Reserve System, and specifically the New York Fed, function as merely sycophantic fronts for Wall Street or if they serve any meaningful regulatory role.

In addition to petitions at Credo, MoveOn.org and Public Citizen, campaign sites for Senators Warren and Brown have also set up petitions, but those sites do not show how many signatures have been collected.

As of this morning, the Credo petition had 98,107 signatures out of a goal of 150,000. You can sign the petition here. The petition makes its case as follows:

“To Members of the U.S. Senate and House of Representatives:

“Regulators are supposed to protect Americans from wrongdoing on the part of big banks, not serve Wall Street’s interests. Congress must hold oversight hearings on the allegations of a deferential and broken regulatory culture at the Federal Reserve, as exposed in the recently released Goldman Sachs tapes…

“Based on 46 hours of secret audio recordings made by a former bank examiner who was fired for being too critical of the bank, it offers some of the first hard evidence of what we’ve known all along: Too many regulators serve the banks, not the people they are tasked with protecting…

“This story is not about Carmen Segarra – it is about an out-of-control banking sector that has seized control of our economy and our democracy. That’s why we need to back Senators Warren and Brown’s call for immediate hearings to investigate the Federal Reserve’s behavior.”

The battle to get fellow Senators to back the hearings even prompted Senator Warren to write an OpEd for the Boston Globe, titled “Primer for the Goldman Sachs Secret Tapes.”

As we have written on multiple occasions at Wall Street On Parade, so many Senators serving on Wall Street oversight committees or subcommittees are so afraid of losing Wall Street’s campaign financing spigot that they don’t even show up for hearings that might produce negative findings about Wall Street. If they showed up, they would be expected to ask tough questions and that might offend their big donors – so they just don’t show up.

On June 20, 2012, we reported on a hearing before the Senate Banking Committee’s Subcommittee on Securities, Insurance, and Investment that was going to examine if the American people are getting a fair shake in the way Wall Street handles Initial Public Offerings (IPOs) of stocks. Out of an 18 member subcommittee, one Senator, Jack Reed, showed up for the hearing.

The lack of prosecutions by the U.S. Justice Department, the deference shown to Wall Street by both Congress and the regulators, has darkened the public mood – as evidenced by the comments appended to the petition sites.

At Public Citizen’s petition to move hearings on the New York Fed forward, one commenter notes: “This ‘corporations are individuals’ nonsense has opened the door for this type of abuse. We need Elizabeth Warren and a 1000 more like her to get this country working for the people who live here.” Another says: “Hearings first. Special prosecutor next.” Another commenter gets quickly to the bottom line: “The regulators aren’t timid, but eyeing a future lucrative Wall Street job if they pander well.”

On October 1, Senator Warren was interviewed by NPR’s Steve Inskeep, who asked her how the tapes show the relationship between the New York Fed and Goldman Sachs is too “cozy.” Warren responds:

“Oh, golly. So, look — listen, though, to those tapes. For me, there were two things that jumped out. The first was just a basic lack of truthful reporting: Supervisors are actually telling examiners not to report accurately the damning things they heard from bank executives during meetings. I mean, wow. If there’s not even an accurate record of what’s going on, then the regulators can’t hope to do their jobs.

“And the second thing: Look at how the Fed emphasized talk instead of action. You know, the regulators seemed to think that it was a victory just to raise an issue, even if they took absolutely no action to address the issue. And that’s the kind of approach that allowed banks to take on massive risks before the financial crisis. You know, think about that: The regulators seemed to think that fussing at banks behind closed doors was their toughest sanction.

“Does anyone believe that Goldman Sachs is gonna give up a deal that would yield millions of dollars because someone fussed at them behind closed doors?”

Yesterday, Senator Brown told Bloomberg News that: “I’m willing to say there’ll be a hearing.” Senators Warren and Brown both sit on the Senate Banking Committee along with Wall Street’s good pal Senator Chuck Schumer. It remains to be seen whether Senate Banking will find the courage to hold the hearing or if it will be punted over to the body chaired by Senator Brown, the Financial Institutions and Consumer Protection Subcommittee.

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