By Pam Martens and Russ Martens: September 8, 2022 ~
Lorie Logan, Former Head of Trading at the New York Fed; Now Dallas Fed President
Bailing out the Wall Street megabanks that are serially fined and hit with felony counts appears to be catching on as a major career advancement strategy at the New York Fed.
On August 22, Lorie Logan began her big promotion as President of the Dallas Fed, a position that paid $440,700 at the end of 2020. That’s $40,700 more than the salary of the President of the United States. Prior to joining the Dallas Fed, Logan was the Manager of the System Open Market Account (SOMA) at the New York Fed, effectively the Fed’s trading floor.
As part of her job, Logan oversaw the trillions of dollars that were electronically created at the New York Fed to bail out Wall Street trading houses in the fall of 2019 and through the middle of 2020. (See our related report The Fed Appears to Have Violated the Dodd-Frank Act in the Second Quarter of 2020, Giving $455 Billion in Loans to Citigroup.) Logan had worked at the New York Fed since graduating college in 1999.
Logan is not the first to see her resume enhanced after funneling trillions of dollars to Wall Street trading houses in below-market-rate loans.
When Tim Geithner was President of the New York Fed during the 2007 to 2009 financial crisis, it secretly sluiced the bulk of $16.1 trillion in cumulative loans to trading houses on Wall Street, including $1.56 trillion to the London trading desks of Citigroup, Goldman Sachs, Morgan Stanley and Merrill Lynch. That information comes from the congressionally-mandated audit of the Fed by the Government Accountability Office.
Geithner was amply rewarded by the incoming Obama administration. Geithner was quickly confirmed and sworn in as U.S. Treasury Secretary on January 26, 2009, just six days after Obama took office.
According to Geithner’s appointment calendar at the New York Fed, in the leadup to Citigroup’s massive bailout – the largest in U.S. history – Geithner had been hobnobbing with Citigroup executives, holding 29 breakfasts, lunches, dinners and other meetings.
On January 25, 2007, Geithner not only hosted Sandy Weill, the former Chairman and CEO of Citigroup and one of its largest shareholders, to lunch at the New York Fed, but Geithner brought his teenage daughter to the lunch. Geithner’s appointment calendar shows his daughter sharing his chauffeured car to work with her father and then joining him at lunch with Sandy Weill. Take Your Daughters and Sons to Work Day was April 26 that year, not the day of this luncheon. A few months later, on May 17, 2007, Geithner joined Weill for breakfast at the expensive Four Seasons.
In an article by Jo Becker and Gretchen Morgenson, published by the New York Times on April 26, 2009, Geithner admits that Sandy Weill spoke with him about becoming Citigroup’s CEO, raising the question as to whether Geithner’s many trips to Citigroup were actually job auditions. Geithner turned down the job offer and went on to become U.S. Treasury Secretary where his advocacy for Citigroup’s survival played a far more important role than he could have as its CEO.
The Non Profit Organization, Code Pink, Appeared on Multiple Occasions Holding Protest Signs Behind Tim Geithner as he Appeared Before Congress to Explain the Massive Bailouts of the Banks
In Ron Suskind’s book, Confidence Men, Geithner is said to have ignored a direct order from President Obama to wind down Citigroup. (Geithner denied the report.) In Neil Barofsky’s Bailout, Geithner is portrayed as heartless in his assessment of what the Home Affordable Modification Program (HAMP) was created to do, viewing it as a way to “foam the runways” for the banks, slowing down the foreclosure stream so the banks could stay afloat, with no sincere intention of helping struggling families stay in their homes. The former FDIC Chair, Sheila Bair, wrote in her book, Bull by the Horns, that “…virtually no meaningful supervisory measures had been taken against the bank [Citigroup] by either the OCC or the NY Fed…Instead, the OCC and the NY Fed stood by as that sick bank continued to pay major dividends and pretended that it was healthy.”
The cronyism at the New York Fed is structurally baked in the cake. While the Federal Reserve Board of Governors is a federal agency, the 12 regional Federal Reserve Banks, including the New York Fed, are actually owned by the commercial banks in their region. In the case of the New York Fed, its largest shareholders include global banks JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley – which have turned bailouts from the New York Fed into an art form.
In 2018, one of the New York Fed’s own former bank examiners, an attorney named Carmen Segarra, wrote a whistleblower’s account of how the New York Fed operates. Her book, Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street, describes the culture inside the New York Fed as follows:
“…nothing I had seen during my decade of legal work had prepared me for what I witnessed in just a few short months at the New York Fed.
“In those months I discovered a disorienting world full of hidden clues, where people said one thing but meant another. Beneath the public face of the Fed laid a web of incompetence, corruption, rampant mismanagement, secrets, and lies. In the ‘fake work’ culture of the Fed, where supervision was a job title, not a job, the most important thing was to control the process to serve the ultimate master. The New York Fed was not simply failing to stop the banks; it was actually enabling their bad behavior.”
Just what the Dallas Fed needs right now is a new top executive coming in from a corrupt culture while it is attempting to crawl out from under the corrupted culture left by its last top executive. (See our report: Robert Kaplan Was Trading Like a Hedge Fund Kingpin for Five Years while President of the Dallas Fed; a Dozen Legal Safeguards Failed to Stop Him.)
The Senate Banking Committee oversees both the Fed and the megabanks on Wall Street. On July 13 Senator Sherrod Brown, the Chair of the Senate Banking Committee, along with two of his fellow Senators on that Committee (Jon Ossoff and Raphael Warnock) and two additional Senators who do not serve on that Committee (Jeff Merkley and Kirsten Gillibrand) sent a stunning letter to Federal Reserve Chairman Jerome Powell.
The letter suggests that the Fed has attempted to quiet public outrage over the Fed’s trading scandal by issuing new trading conduct rules for Fed officials but has failed to put the force of law behind those rules or set up a proper chain of command.
The letter also suggests that Fed Chair Powell is actually hampering the investigation of the trading scandal, which was referred by Powell to the Federal Reserve’s Inspector General, which reports to the Fed’s Board of Governors, rather than referring the investigation to the Securities and Exchange Commission or the Department of Justice, which would normally be involved in any serious insider trading investigation.
The Senators write: “Additionally, we are disappointed that the Federal Reserve has refused to provide additional information regarding the full scope of the trading scandal…” They continue: “…we also repeat our request for your cooperation with members of Congress and the Federal Reserve’s Office of the Inspector General as we seek to understand the full depth of the Fed’s trading scandal.”
Senator Elizabeth Warren, a long-time member of the Senate Banking Committee and a former Harvard Law professor has called Powell “a dangerous man” and took the dramatic step of voting against his confirmation for a second term as Fed Chair.
Wall Street On Parade would go a few steps further: Allowing the New York Fed to supervise the megabanks on Wall Street while also being owned by them and regularly bailing them out is the stuff of banana republics. It’s not only dangerous to the financial stability of the United States, it’s insane.
