U.S. Senator Elizabeth Warren has called for congressional hearings into allegations that the Federal Reserve Bank of New York has been too deferential to the firms it regulates.
A radio program about the regional Fed bank raised “disturbing issues” and “it’s our job to make sure our financial regulators are doing their jobs,” Warren, a Massachusetts Democrat and member of the Senate Banking Committee, said in a statement Friday.
The program “This American Life” released the transcript of a broadcast that includes excerpts of conversations it said were secretly recorded by Carmen Segarra, a former New York Fed bank examiner who was fired in 2012, with some of her colleagues and her supervisor.
In the transcript, Segarra described how she felt that her Fed colleagues were afraid of Goldman Sachs Group Inc. and handled it with kid gloves.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
“What I was sort of seeing and experiencing was this level of deference to the banks, this level of fear,” she said.
The New York Fed said it “categorically rejects” Segarra’s allegations.
“The New York Fed works diligently to execute its supervisory authority in a manner that is most effective in promoting the safety and soundness of the financial institutions it is charged with supervising,” it said in a statement posted on its website.
Senator Sherrod Brown, an Ohio Democrat who’s also on the banking committee, backed Warren’s call for a probe.
“These allegations deserve a full and thorough investigation, and American taxpayers deserve regulators who will fight each day on their behalf,” he said in a statement.
The Fed is already under fire from lawmakers who have called for it to be more closely audited. The central bank has aroused public anger over its involvement in the rescue of Wall Street banks during the financial crisis.
The transcript of the radio broadcast includes excerpts of discussions between Segarra and another official, Michael Silva, who was then a senior Fed supervisor with oversight responsibilities for Goldman Sachs. Segarra told Silva that Goldman Sachs had no policy governing conflicts of interest, while Silva said the bank did have such a policy.
Silva declined to comment. Segarra’s lawyer, Linda Stengle, said her client isn’t backing down.
Segarra sued the New York Fed last October, alleging she was fired in May 2012 after refusing to change her findings on the conflict-of-interest policy.
U.S. District Judge Ronnie Abrams in Manhattan dismissed the case in April, ruling that Segarra failed to make a legally sufficient claim under the whistle-blower protections of the Federal Deposit Insurance Act. Segarra is appealing the dismissal of her suit.
“Goldman Sachs has long had a comprehensive approach for addressing potential conflicts,” the New York-based bank said in a statement. It said a “quick Google search” shows “publicly available Goldman Sachs documents outlining the management of conflicts.”
In its statement, the New York Fed said Segarra had worked at the bank for less than seven months and had no previous experience as an examiner.
“Further, she demanded $7 million to settle her complaint,” according to the statement. “The decision to terminate Ms. Segarra’s employment with the New York Fed was based entirely on performance grounds, not because she raised concerns as a member of an examination team about any institution.”
The New York Fed is one of 12 regional banks that form the Federal Reserve System. Its examiners monitor large New York-based banks such as Goldman, Citigroup and JPMorgan Chase. The Richmond Fed supervises Charlotte-based Bank of America.
During the financial crisis, former New York Fed Chairman Tim Geithner was involved in the sale of Charlotte-based Wachovia as it verged on failure. Geithner supported a deal with Citigroup, but former Federal Deposit Insurance Corp. Chairman Sheila Bair backed a competing offer from Wells Fargo, which ultimately prevailed.