By Pam Martens: September 28, 2014
William C. (Bill) Dudley, President of the Federal Reserve Bank of New York
If you missed our coverage in 2012 of the Lower Manhattan Security Coordination Center where Wall Street sleuths from those serially charged firms like Goldman Sachs and JPMorgan dunk donuts alongside New York’s finest in a $150 million spy center, keeping tabs on the comings and goings of their own Wall Street employees as well as innocent pedestrians, then you may not fully appreciate why Carmen Segarra has been celebrated all weekend for her temerity in taping her boss and colleagues at the New York Fed, as well as employees inside the cloistered bowels of Goldman Sachs.
While Wall Street was spying on everyone else in lower Manhattan in a high tech center funded by the taxpayer, Segarra strolled over to a Spy Store, plunked down a modest sum and walked out with a tiny tape recorder. She then proceeded to capture the essence of the quintessential captured regulators who didn’t see the 2008 crash coming and won’t see the next one coming either – because their job is not to see too much. (We called the Spy Store on Saturday to ask if they had experienced an upsurge in sales of the tiny recorder. We were informed that sales were brisk but not unusual.)
Segarra is a lawyer and former bank examiner at the Federal Reserve Bank of New York, one of Wall Street’s key regulators, who charged in a lawsuit filed in October 2013 that she was told to change her negative examination of Goldman Sachs by colleagues, who also obstructed and interfered with her investigation. According to her lawsuit, when she refused to alter her findings, she was terminated in retaliation and escorted from the Fed premises.
After having her case tossed by a Judge whose husband was representing Goldman Sachs, Segarra turned over her 46 hours of tape recordings to ProPublica’s Jake Bernstein and public radio’s This American Life. ProPublica and This American Life released their stories on the tapes this past Friday, creating a media frenzy.
The hubbub has reached the ears of the U.S. Senate, with Senators Elizabeth Warren and Sherrod Brown calling for Senate Banking hearings on the deeply conflicted New York Fed.
Over the years, Wall Street On Parade has written about a raft of conflicts of interests at the New York Fed that would not be tolerated at any other financial regulator. During 2007 and 2008, as Citigroup entered an intractable death spiral from off balance sheet debt bombs and obscene executive pay, New York Fed Chief Tim Geithner was busy hobnobbing – enjoying 29 breakfasts, lunches, dinners and other meetings with Citi execs.
On January 25, 2007, Geithner hosted former Citigroup Chairman and CEO, Sandy Weill, to lunch at the New York Fed. According to Geithner’s appointment calendar, Elise Geithner, his daughter, shared the chauffeured car to work with her father and then joined him at lunch with Sandy Weill.
Geithner went on to become Secretary of the Treasury and played a pivotal role in making sure that Citigroup was not allowed to fail but was instead bailed out by the taxpayer. Weill was one of Citigroup’s largest individual shareholders.
In early 2012, as JPMorgan was making wild bets with derivatives in London, using the insured deposits of its banking customers, its Chairman and CEO, Jamie Dimon, was sitting on the Board of Directors of the New York Fed. As the bank was being investigated by the New York Fed, Jamie Dimon continued to sit on its Board, serving out his two terms which ended in late 2012. The derivatives debacle became infamously known as the London Whale trades where JPMorgan admitted to losing $6.2 billion of its bank depositors’ money.
While the New York Fed was investigating JPMorgan, Bill Dudley was serving as the President of the New York Fed and his wife, Ann Darby, a former Vice President at JPMorgan, was receiving approximately $190,000 per year in deferred compensation from JPMorgan – an amount she is slated to receive until 2021 according to financial disclosure forms.
According to the New York Fed’s web site, its “employees are subject to the same conflict of interest statute that applies to federal government employees (18 U.S.C. Section 208).” Under that statute, a spouse’s conflicts become the conflicts of the employee.
Full blown hearings of the New York Fed and its jaded ways are long overdue.
