Goldman Sach ownership of the NY Fed

[David Guyatt]

I additionally recommend reading the linked pieces too.

That GS is de facto unregulated and can do what they please is clear beyond a doubt.

From ZeroHedge:

"I Am Putting Everything In Goldman Sachs Because These Guys Can Do Whatever The Hell They Want"



Submitted by Tyler Durden on 09/28/2014 19:18 -0400

• Davis Polk
  
• Elizabeth Warren
  
• Federal Reserve
  
• Goldman Sachs
  
• goldman sachs
  
• New York Fed
  
• Reuters
  

When we first covered the Carmen Segarra lawsuit alleging the capture of the NY Fed by Goldman Sachs back in October 2013, we didn't have much hope for justice to get done. We said that "while her allegations may be non-definitive, and her wrongful termination suit is ultimately dropped, there is hope this opens up an inquiry into the close relationship between Goldman and the NY Fed. Alas, since the judicial branch is also under the control of the two abovementioned entities, we very much doubt it."
Sure enough, the lawsuit was dropped (and no inquiry was opened) but not before it became clear that the very judge in charge of the case, U.S. District Judge Ronnie Abrams, was herself conflicted, after it was revealed that her husband, Greg Andres, a partner at Davis Polk & Wardwell, was representing Goldman in an advisory capacity. Curiously, before she assumed her current office in March 2013, back in 2008 Abrams returned to Davis Polk herself as Special Counsel for Pro Bono. She had previously worked at the firm from 1994 to 1998. For the full, and quite amazing, story of how the "Judge" steamrolled Segarra's objections reads this Reuters piece.
As a result of this fiasco, some wondered just how far do Goldman's tentacles stretch not only at the money-printing (i.e., NY Fed) level, not only at the legislative level (see "With Cantor Down, Which Other Politicians Has Goldman Invested In?"), but at the judicial as well.
And then, on Friday, the Segarra case against the Federal Reserve branch of Goldman Sachs got a second wind, when as a result of another disclosure, ProPublica revealed "How Goldman Controls The New York Fed in 47.5 Hours Of "The Secret Goldman Sachs Tapes." That is to say, nothing new was revealed per se, because as anyone who has read this website for the past 6 years knows just how vast Goldman's network is not only at the Fed, but in that all important other continent too, Europe.

Sadly, just like a year ago, so this time too, we are reluctant to say anything will change. In fact, there is too much at stake, for Goldman to drop the reins and disassociate from the NY Fed: for pete's sake,the president of the NY Fed is a former Goldman employee - does it get any more conflicted than that?!
But, wait, Goldman will do penance by "prohibiting its bankers from buying stocks"... the horror. Luckily at least purchasing politicians and Fed presidents is still perfectly allowed.
In fact, what has become clear to everyone is that aside from yet another dog and pony show (led by, you guessed, it the head dog and ponier herself, Elizabeth Warren), not only will nothing change, but in fact the best way to take advantage of a broken, corrupt, sinking system, is to join it. And the best summary of just that sentiment was released over the weekend by Nanex' Eric Hunsader as follows:
Curious what made up Eric's mind? Then fast forward to minute 24 to hear what it sounds like when a top Fed official "questions" Goldman Sachs:


But before we put this topic to bed, here is Raúl Ilargi Meijer explaining why "The US Has No Banking Regulation, And It Doesn't Want Any"
* * *
It is, let's say, exceedingly peculiar to begin with that a government in this case the American one, but that's just one example - in name of its people tasks a private institution with regulating not just any sector of its economy, but the richest and most politically powerful sector in the nation. Which also happens to be at least one of the major forces behind its latest, and ongoing, economical crisis.
That there is a very transparent, plain for everyone to see, over-sized revolving door between the regulator and the corporations in the sector only makes the government's choice for the Fed as regulator even more peculiar. Or, as it turns out, more logical. But it is still preposterous: regulating the financial sector is a mere illusion kept alive through lip service. Put differently: the American government doesn't regulate the banks. They effectively regulate themselves. Which inevitably means there is no regulation.
The newly found attention for ProPublica writer Jake Bernstein's series of articles, which date back almost one whole year, about the experiences of former Fed regulator Carmen Segarra, and the audio files she collected while trying to do her job, leaves no question about this.
What's going on is abundantly clear, because it is so simple. The intention of the New York Fed as an organization is not to properly regulate, but only to generate an appearance or illusion of proper regulation. That is to say, Goldman will accept regulation only up to the point where it would cut into either the company's profits or its political wherewithal.
What the Segarra Files' point out is that the New York Fed plays the game exactly the way Goldman wants it played. Ergo: there is no actual regulation taking place, and Goldman will comply only with those requests from the New York Fed that it feels like complying with.
In the articles, the term regulatory capture' pops up, which means individual regulators are co-opted' by the banks they are supposed to regulate. But the capture runs much larger and wider. It's not about individuals, it's a watertight and foolproof system wide capture.
The government picks a private regulator which has close ties to the banks. The government knows this. It also knows this means that its chosen regulator will always defer to the banks. And when individual regulators refuse to comply with the system, they are thrown out.
In one of the cases Segarra was involved in during her stint at the Fed, the Kinder Morgan-El Paso takeover deal, Goldman advises one party, has substantial stock holdings in the other, and appoints a lead counsel who personally has $340,000 in stock involved. Conflict of interest? Goldman says no, and the Fed complies (defers).
The lawsuit Segarra filed against the NY Fed and three of its executives was thrown out on technicalities by a judge whose husband was legal counsel for Goldman in the exact same case. No conflict of interest, the judge herself decides.
This is not regulation, it's a sick and perverted joke played on the American people, which it has been paying for it through the nose for years, and will for many years to come. Sure, Elizabeth Warren picks it up now and wants hearings on the topic in Congress, but she's a year late (it's been known since at least December 2013 that Segarra has audio recordings) and moreover, it was Congress itself that made the NY Fed the regulator of Wall Street. Warren has as much chance of getting anywhere as Segarra did (or does, she's appealing the case).
The story: In October 2011, Carmen Segarra was hired by New York Fed to be embedded at Goldman as a risk specialist, and in particular to investigate to what degree the company complied with a 2008 Fed Supervision and Regulation Letter, known as SR 08-08, which focuses on the requirement for firms like Goldman, engaged in many different activities, to have company-wide programs to manage business risks, in particular conflict-of-interest. Some people at Goldman admitted it did not have such a company-wide policy as of November 2011. Others, though, said it did.
Let's take it from there with quotes from the 5 articles Bernstein wrote on the topic over the past year. To listen to the Segarra files, please go to The Secret Recordings of Carmen Segarra at This American Life.
One last thing: Jake Bernstein's work is of high quality, but I can't really figure why he says things such as the audio files show: "a New York Fed that is at times reluctant to push hard against Goldman and struggling to define its authority". Through his work, and the files, it should be clear that just ain't so. Both the Fed's policy and authority are crystal clear and ironclad.

[Magda Hassan]

Sens. Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) want to investigate the Federal Reserve's relationships with the banks it oversees after the release of taped conversations between managers and a former bank examiner at the Fed.


The recordings were made surreptitiously by a former Fed employee named Carmen Segarra, who is trying to prove in court that she was fired in retaliation for her attempts to bring a cultural shift to the supervisory work of the powerful central bank. They include a reprimand from her boss that she is "arrogant," that she should "have a sense of humility" about her work, and should be guided more by the consensus within her working group than by her own instincts as a 10-year veteran of regulatory compliance work in the banking industry.
Segarra says she began making the tapes after her own colleagues tried on multiple occasions to cajole her into changing her notes from meetings with Goldman Sachs executives because they didn't want an official record of some of the executives' comments about the bank's willingness to bend the rules.
The tapes document the former examiner's experience pushing for a tougher approach to Goldman Sachs and being rebuffed by members of the team who had been there much longer. The audio recordings, published last week by This American Life and Pro Publica, appear to indicate that the Federal Reserve Bank of New York continues to have too cozy a relationship with the private bankers it is supposed to supervise despite an internal 2009 report that documented serious problems with how the Fed ran its oversight division in the run-up to the financial crisis.
While the Fed "categorically rejects" that depiction of its work to protect the economy from the most dangerous forms of risk-taking that the financial sector engages in, it declined to participate in the radio story beyond a written statement.
On Friday, Warren said the recordings require action from Capitol Hill. "Congress must hold oversight hearings on the disturbing issues raised by today's whistleblower report when it returns in November, because it's our job to make sure our financial regulators are doing their jobs," she said in a statement. "When regulators care more about protecting big banks from accountability than they do about protecting the American people from risky and illegal behavior on Wall Street, it threatens our whole economy."
Brown, who serves on the Senate Banking Committee with Warren, backed her request in a statement of his own. "These allegations deserve a full and thorough investigation, and American taxpayers deserve regulators who will fight each day on their behalf," the Ohio senator and frequent financial industry critic said.
Segarra's allegations and the 2009 internal report cited by This American Life and Pro Publica paint a picture of what's called "regulatory capture" at the Fed. That means that an independent oversight body has stopped acting on its intended motivations of protecting the public from misdeeds by the entities it regulates and started acting on behalf of those entities' own interests. Regulatory capture is a subtle thing defined less by concrete facts and figures and more by the tone of meetings and the way friendships between regulators and businesses color the regulators' actions and views. If capture takes hold and goes unchecked, the regulatory cops on the beat turn into enablers. In the radio segment based on Segarra's tapes, host Ira Glass compares captured regulators to "a watchdog who licks the face of an intruder, and plays catch with the intruder, instead of barking at him."
Regulatory capture is just one example of the many abstract cultural forces on Wall Street that create an environment where financial misdeeds can flourish, imperiling the real economy that employs everyone else in the business of making and selling goods and services. Surveys of industry insiders have repeatedly found worrying evidence of ethical lapses among people in the financial business, including outright disregard for the law. A quarter of those surveyed in 2013 said that they would knowingly break the law for financial gain. That number jumped to 38 percent for respondents who have worked in finance for less than a decade. The same survey also found that women are twice as likely to fear retaliation for whistleblowing as men.
Wall Street culture holds immense power over the world's economic fortunes. The products that firms were creating and trading and gambling on in the run-up to the financial crisis were widely understood to be unrealistic, according to white collar crime expert William Black, but there was a cultural understanding that everybody was going to get rich if they kept up the charade. Black and other experts use the acronym "IBGYBG" I'll Be Gone, You'll Be Gone to describe the dominant mentality among the highly skilled and technically savvy financial professionals who got rich trading pieces of paper that later proved to be valueless. These critics argue that Wall Street professionals knew they'd be able to cash out big bonuses and walk away before the crisis hit.
For outsiders, the consequences of that culture of greed are both massive and ongoing. More than five years after the Great Recession officially ended, earnings have rebounded for the wealthiest people in the country, business is booming for banks, and working Americans continue to face a bad job market and flat earnings despite increased productivity.
http://thinkprogress.org/economy/2014/09...n-hearing/

[David Guyatt]

We know where that proposed investigation is going to end up...

[Lauren Johnson]

We know where that proposed investigation is going to end up...

Having people around like Brown and Warren provide cover for stories such as this. The silence is deafening. Everybody knows this story goes away real fast.

[Drew Phipps]

So long as someone is up there banging the drum, there's a chance for change.

[Magda Hassan]

[Magda Hassan]

The NY Fed's Attempt To Explain That It Is Not A Subsidiary Of Goldman Sachs

Submitted by Tyler Durden on 11/20/2014 15:18 -0500

• Fail
  
• Federal Reserve
  
• Goldman Sachs
  
• goldman sachs
  
• New York Fed
  

The most shocking, if already completely buried, news of the day was that - in yet another confirmation that Goldman Sachs is in charge of the New York Fed - a NY Fed staffer was colluding and leaking confidential, material information to a 29-year-old Goldman vice president, himself a former Federal Reserve employee. This only happened because on the day Carmen Segarra disclosed her 47 hours of "secret Goldman tapes" on This American Life, Goldman executives asked the former Fed staffer where he had gotten what appeared to be confidential information from. To nobody's surprise the answer was: The New York Fed.
So as the latter, also known as the biggest hedge fund of the western world with $2.7 trillion in AUM, is scrambling to once again prove it is shocked, shocked, that it has become merely the latest subsidiary of Goldman Sachs, Inc., it released the following statement explaining what "really" happened.
From the NY Fed:

As soon as we learned that Goldman Sachs suspected one of its employees may have inappropriately obtained confidential supervisory information, we alerted law enforcement authorities. We have been working with law enforcement authorities since then. Because any public statement about the investigation could be prejudicial to a potential future criminal case, we are unable to comment on the specific facts that are under investigation.

As a general matter, we have detailed rules and controls protecting confidential information. All employees with access to confidential supervisory information need to agree to safeguard that information appropriately, and not to disclose it without the necessary approval. Employees receive training relating to the handling and protection of confidential supervisory information and other information security matters. Employees are informed that a violation of these restrictions could lead to criminal prosecution.

Employees also receive ongoing ethics training and are required to do an annual certification that they understand and will adhere to the Bank's Code of Conduct. In addition, we use off-boarding procedures to confirm with departing employees that no confidential information may be taken. With respect to all New York Fed staff, departing Officers may have no official contact with the Federal Reserve System for a period of one year. In addition, all departing New York Fed employees may not have substantive business contacts with the New York Fed relating to any particular matter that he or she had worked on when employed by the New York Fed. Further, with respect to employees departing from the financial institution supervision group, if the departing employee had served as a senior supervisory officer or central point of contact at a large and complex banking organization, that employee may not receive compensation from the supervised organization as an employee, officer, director or consultant for a period of one year. Finally, the New York Fed has in place technology to help identify and prevent the forwarding of confidential information in violation of our rules.

So did this technology fail? Or is Goldman simply one of the exempted parties?

The New York Fed understands that it is entrusted with the most sensitive information relating to the financial sector. If such information is disclosed, it could be market moving or it might interfere with an important governmental program. For these reasons, we have many different controls to safeguard such information, and a record of zero tolerance for those who do not adhere to them. Of course, we also know that we are not perfect, that information today is more difficult to safeguard, and we are resolute to learn from our experiences.

And then the NY Fed released this:

The Federal Reserve Board on Thursday announced two separate reviews that are underway at the Federal Reserve System to ensure that the examinations of large banking organizations are consistent, sound, and supported by all relevant information.

At the request of the Board, its Inspector General is examining two aspects of the Federal Reserve System's examination program for large banking organizations:

• Whether there are adequate methods for decision-makers at the relevant Reserve Banks and at the Board to obtain all necessary information to make supervisory assessments and determinations;
  
• And whether channels exist for decision-makers to be aware of divergent views among an examination team regarding material issues.
  

Additionally, the Board is conducting its own review of the supervision of the largest, most systemically important financial institutions in the United States. This review will focus on:

• Whether the decision-makers at the Board receive the information needed to ensure consistent and sound supervisory decisions regarding the supervision of the largest, most complex banking organizations;
  
• And whether adequate methods are in place for those decision-makers to be aware of material matters that required reconciliation of divergent views related to supervision of those firms.
  

Attachment (PDF)

At this point one can only laugh as the entire corrupt system careens to its inevitable reset.


http://www.zerohedge.com/news/2014-11-20...dman-sachs