Danger #10: Secret Tapes Showing Oversight of Goldman Sachs Hit Wall Street

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Possibly part of Danger #10 of the Ten Dangers of Investing

There is an ongoing investigation after Carmen Segarraa exposed 45 hours of recorded evidence of  an alleged way too comfortable relationship between the New York Federal Reserve Bank and the financial institutions it is supposed to regulate. In this case we are talking about Goldman Sachs.

“This American Life,” and ProPublica obtained the tapes and has made them available for the world to listen. Much of it allegedly  exposes the lack of transparency between Goldman Sachs and previous Fed regulators that were supposed to be doing a full investigation.

Michael Lewis, best-selling author of “Moneyball: The Art of Winning an Unfair Game” and “Liar’s Poker,” said after listening to the tapes: “The Ray Rice video for the financial sector has arrived.”

Carmen Segarraa is a former NY Fed worker, who recorded former co-workers, whose job was to keep banks like Goldman Sachs in line being unwilling to take action against them and instead being extremely passive.  In the tapes, Segarra comments on their fear of ticking off Goldman Sachs and there should be no reason to be afraid.  She says they seemed a little bit concerned about who they were working for.

Other sections of the recording we hear a New York Fed supervisor tell Carmen Segarra how an examiner should talk and act to be successful at the Fed. We hear about possible flaws and lack of proper conflict of interest policies at Goldman Sachs.  And we hear what happens to Carmen when she does exactly what Columbia professor David Beim’s confidential 2009 report told the New York Fed  it needed to encourage its examiners to do in order to spot the next financial crisis.

Segarra, was hired by the NY Fed in October 2011.  Her first and ironically last job at the Fed was to help toughen up their oversight.    She claimed she was fired after refusing to change her findings after she tried to get Goldman to toe the line on regulations. At least that’s what she claims in a lawsuit.  Segarra sued saying she conducted an examination of Goldman Sachs’s legal and compliance divisions in late 2011 and early 2012 and found they lacked a firm-wide conflict of interest policy

Goldman and the NY Fed, as an answer to her lawsuit, have denied the charges.

U.S. District Judge Ronnie Abrams dismissed the case, ruling that Segarra failed to make a legally sufficient claim under the whistle-blower protections of the Federal Deposit Insurance Act.

To listen to The Secret Recordings of Carmen Segarra  are available at http://www.thisamericanlife.org/radio-archives/episode/536/the-secret-recordings-of-carmen-segarra

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Leslie Michael Jr. was born and raised on the Westcoast of British Columbia, Canada. He is a lecturer of Money Uncensored, a series of presentations designed for North Americans and people from around the globe to better understand the financial direction this world is headed and what they can do to protect themselves financially.

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