Fed Whistleblower Carmen Segarra, Snowden, and the Closing of the Journalistic Mind

The financial press has been awash with coverage of This American Life’s broadcast of key section of 46 hours of tapes made in secret by former New York Fed bank examiner Carmen Segarra. The broadcast and related reporting at ProPublica show how utterly craven the central bank was when it came to matters Goldman.

One section covers when the Fed looks as if it might uncharacteristically assert its manhood. Goldman has done a complex derivatives deal with a bank, Santander, which is clearly intended to shore up its regulatory capital levels (even derivatives maven Matt Levine had trouble figuring it out). The transaction has already closed, yet the deal documents state that a condition of completing the deal was that Goldman notify the Fed prior to closing and get a “no objection” (form apparently not specified). Mike Silva, who was the senior member of the Fed team on site at Goldman, was concerned both that the Fed could be falsely depicted as having approved of the transaction if it ever went sour, plus Goldman had set a precedent of pretending the Fed had given tacit approval of a transaction by virtue of never having heard of it.

As an aside, the fact that the concern over this situation wasn’t escalated outside the Goldman team was already a proof of a too-cozy relationship. If Silva was taking this breach as seriously as he professed to have, he should have gone to the New York Fed’s general counsel’s office to get a reading as well as senior backing.

Instead, Silva and the team prep as if they are going to confront their Goldman counterparts….only to have the session start with technical questions, allowing Goldman to dominate the meeting. Silva finally asks about the “no objection” matter, but frames it as an oversight by Goldman, handing them their excuse. Silva emerges satisfied with what happened, as if he had no recollection of the pre-meeting discussions, while Segarra is gobsmacked and disappointed.

Now you might say, isn’t this media firestorm a great thing? It’s roused Elizabeth Warren and Sherrod Brown to demand hearing. The Fed has been toadying up to Wall Street for years. Shouldn’t we be pleased that the problem is finally being taken seriously?

Let’s look at this a tad more clinically. This press reaction is in fact proof that the financial media has been asleep at the switch and underreporting stories by whistleblowers and critics of regulators. The reason that this story is getting traction is the salaciousness of secret tape recordings, which also reduce the burden on reporters to do their job, namely, investigate. Michael Lewis alluded to that issue in his enthusiastic write up in Bloomberg on Friday:

Our financial regulatory system is obviously dysfunctional. But because the subject is so tedious, and the details so complicated, the public doesn’t pay it much attention.

That may very well change today, for today — Friday, Sept. 26 — the radio program “This American Life” will air a jaw-dropping story about Wall Street regulation, and the public will have no trouble at all understanding it.

I don’t buy that excuse, that finance is too HAARD for the pubic to understand, for a nanosecond. Lewis himself has made a side career of making finance, from bond trading (in Liar’s Poker) to CDOs (in The Big Short) to the Iceland meltdown (in Vanity Fair) accessible to laypeople. I have taken issue with some important conclusions he’s reached, but the ideas that a smart, articulate, and diligent journalist can’t present the workings of finance an engaging and reasonably accurate manner is greatly exaggerated. Remember, Lewis isn’t an expert; he admits he quit doing finance when he left Salomon in the 1980s.

That it has taken the release of secret tape recordings for the media to treat an obvious problem like Fed capture by banks as real is an indictment of the state of financial reporting. The fact that all financial regulators, save in some measure the FDIC, are deeply captured should be treated as dog bites man. Willem Buiter spoke forcefully about cognitive regulatory capture considerably before he told Fed officials to their face at Jackson Hole in 2008 (it didn’t go over very well). The OCC has long been even more bank-cronyistic, and the SEC has been systematically hamstrung over the last two decades.

In fact, Carmen Segarra’s story was well told a full year ago, in her whistleblower suit against the Fed and in ProPublica’s coverage of her case, based on interviews with her. And those accounts has further damning details that have been left on the cutting room floor by virtue of not being part of what Segarra captured in her recordings. An extract from our 2013 post Whistleblower Suit Confirms that the New York Fed is in the Goldman Protection Racket:

Segarra was an experienced attorney who had spent her entire career working in banking in the corporate counsel’s office of large financial firms, most recently as a senior counsel at Citi. In other words, she is not a naif or a theoretician. She was hired as part of an effort to increase bank examination functions to meet Dodd Frank requirements. But Segarra wound up on a collision course with the old guard at the New York Fed, which is particularly deeply tied into Goldman. For instance, the current president, William Dudley, had been Goldman’s chief economist) and has a bias to protect rather than regulate financial firms. The senior officer responsible for Goldman at the New York Fed was called a “relationship manager.” No, I am not making that up.

Segarra was tasked to assess whether Goldman’s conflicts of interest policies were adequate in three separate cases: Solyndra, the El Paso/Morgan Kindler acquisition, and a bank acquisition by Santander. What is stunning if you read the complaint, which we’ve embedded below, is how high-handed Goldman was in its responses to Segarra’s inquiries. It’s not hard to imagine that they viewed this as a pro forma exercise that given their cozy relationship with the New York Fed, would go nowhere. They didn’t just stonewall, they told egregious lies. That sort of cover-up usually winds up being worse than the crime, but not if you are in a privileged class like Goldman. When Segarra (and initially, the other members of her team) kept pressing Goldman for answers and making clear that what they were getting was problematic, Goldman then started giving credulity-straining responses.

As the exam moved forward, Segarra came under pressure from the Goldman relationship manager, Michael Silva, who was also senior to her at the bank (this is how you can tell the new regulatory push is all optics: the examiners are subordinate to the established “don’t ruffle the banks” incumbents). Silva, who had been chief of staff to Geithner before becoming “relationship manager” to Goldman, appears, unlike Segarra, not to have had real world financial services experience (he looks to have joined the New York Fed as a law clerk in 1992 and stayed with the bank).

Segarra was fired abruptly after refusing to change her recommendations and destroy supporting documents, which was in violation of regulatory policy (bank examiners are not “fire at will” employees; they need to be put on notice and given the opportunity to correct deficiencies in their performance before they can be dismissed).

I’ve read other wrongful termination suits and Segarra’s looks very strong. It’s going to be awfully hard for the New York Fed to talk its way out of this one.

What is particularly damning for the Fed and Goldman is Goldman’s intransigence during the examination process and the howlers the New York Fed staffers used to justify treating the bank with kid gloves.

Back to the current post. I was dead wrong about Segarra’s suit. It was dismissed last April by Federal judge Ronnie Abrams, who failed to recuse herself even though her husband, Davis Polk partner Greg Andres, was representing Goldman. As Pam Martens wrote:

The unfairness of the proceeding was heightened when just 20 days before the Judge issued her written decision on April 23, she convened a phone conference with both sides to make a shocking announcement: “it had just come to her attention that her husband…was representing Goldman Sachs in an advisory capacity” according to the telephone conference transcript.

Judge Abrams’ husband is Greg Andres, a partner at law firm Davis Polk & Wardwell LLP who previously worked under Lanny Breuer in the Criminal Division of the U.S. Department of Justice. (Breuer announced his resignation one day after the PBS Frontline program reported that “when it came to Wall Street, there were no investigations going on. There were no subpoenas, no document reviews, no wiretaps.”) To date, not one key executive at any Wall Street bank that played a role in the financial collapse has been indicted.

Following that telephone conference, Segarra’s lawyer, Linda Stengle, filed a letter with the court asking for a more complete disclosure of the Judge’s husband’s relationship with Goldman Sachs. The New York Fed responded with its own letter, writing: “Plaintiff’s request for additional disclosures raises concerns about the appearance of a different sort of impropriety: forum shopping…Under these circumstances, the Court should deny Plaintiffs request for additional disclosures and proceed with the case.” (See FRBNY Response to Segarra Request for Filing Amended Complaint.)

Judge Abrams bought this line of reasoning in its entirety and accused Stengle of “judge-shopping” in her written decision tossing out the case — a bizarre allegation since Stengle had not asked the Judge to recuse herself.

Since the April 23 decision came down, Wall Street On Parade has researched this matter and found a great number of roads leading back to the law firm Davis Polk & Wardwell:

Judge Abrams worked at Davis Polk just prior to taking the bench;

Judge Abrams’ husband, Greg Andres, is a partner at Davis Polk;

U.S. Senator Kirsten Gillibrand, who recommended Abrams to Obama for the Judgeship and spoke on her behalf at her confirmation hearing, also previously worked at Davis Polk;

Davis Polk was the second largest contributor to Gillibrand’s 2012 Senate race, according to the Center for Responsive Politics, with its lawyers, employees and/or PACS contributing $333,100;

One of the lawyers representing the New York Fed in the Segarra matter, Thomas Noone, previously worked at Davis Polk and his employment there overlapped with that of Judge Abrams;

Davis Polk previously represented the New York Fed in significant matters;

Davis Polk was a registered lobbyist for Wall Street’s trade association, SIFMA, from at least 2009 through 2013, collecting over $400,000 in lobby fees;

How big a retainer the Judge’s husband has received from Goldman Sachs and when he received it is a side issue. The larger issue is that Goldman Sachs is a huge, long term client at Davis Polk and the Judge’s husband is a partner at the firm. Per the sampling below, deals totaling over $9 billion have been handled by Davis Polk on behalf of Goldman Sachs in just the past two years.

Yves again. Despite the fact that all of this information is available with a minimal amount of reading and Googling, it is almost entirely absent from major media accounts. They’ve largely framed it around the Fed’s “culture,” which includes that the New York Fed kinda-sorta knew this was a problem and hired a consultant to suggest organizational changes.* That means they’ve omitted an element that was much more prominent in Segarra’s filing and the earlier reporting: Goldman’s role as victimizer in this relationship, and almost all accounts fail to mention her whistleblower case and court loss.

But the really damning part as far as the media is concerned is the barrier that is in place for critics. Vitally important stories are either not picked up by major outlets on a timetable when they could have real political impact or not at all. Look at the bar that is now in place for whistleblowers. In the days of Watergate, all it took was a piece of paper handed over in a parking garage. By contrast, a series of NSA whistleblowers pre Snowden were shunted to the netherworlds of reporting. It took Snowden’s mass hoovering of documents and the international manhunt for him for a NSA detractor to get a serious hearing.

Look, for instance, how Bill Black is relegated to the Hallin sphere of deviance. Midway through the Treasury’s two-month-long stress tests, Black stated on Bill Moyers, a show heavily watched by journalists, we had reported on Black’s conclusions even earlier, when the stress tests procedures were announced). He has told me that no journalist called him to include him in “balanced” reporting on that exercise. Another reporting failure: with all the public consternation about the failure to prosecute individual bankers, only now are some fingers being pointed at lame duck Attorney General Eric Holder. Why the lack of agency until now? Why the failure to name and shame when it mattered?

It’s not hard to see that the lap-doggishness of the Fed is mirrored by an undue deference to authority by reporters. A key section from a recent study by Indiana University of Journalism:

One of the most surprising developments over that period over the past ten years, is the steep decline in the percentage of journalists who say that using confidential documents without permission “may be justified.” That number has plummeted from about 78 percent in 2002 to just 58 percent in 2013. In 1992, it was over 80 percent.

That’s even more notable given that the survey took place from August to December of last year, not long after Edward Snowden became a household name for stealing classified documents that revealed the extent of NSA surveillance.

Ironically, the report also showed that only a minority approved of using hidden camera or microphones to get information, the precise approach Segarra used to protect herself, even though in many states, like New York, it is legal to record your own conversations without notifying other parties.

In other words, most journalists are afraid to rock the access journalism boat and do real sleuthing, and to make up for that, they’ll pile onto a story where someone else has taken the risk, in this case Segarra by making her tapes public. And while their release proves Segarra to be as credible as she appeared to be from her court filings, it remains to be seen whether she can really come out a winner. Reputable institutions close their ranks against people who refuse to knuckle under to pressure to conform, and Segarra has made it clear she has way more grit than most. I hope she’s able to use the media tailwinds to reinvent herself.

* So as not to overegg this pudding, as an aside it is obvious that the Fed was never serious about its engagement with the consultant it hired, an ex-investment banker, now Columbia professor, David Beim. First, for an institution with an ego of the Fed, a report as a stand-alone document, would never be taken seriously unless it came from a firm of the stature of a McKinsey or a Peter Drucker level guru (and mind you, that would be a necessary but far from sufficient condition; the big name consultant could readily decide to pander to the client rather than give hard-hitting advice. Beim does deserve credit for giving what looks to be an unvarnished diagnosis). The only way a consultant could overcome considerable institutional inertia would be if the consultant continued to work with the client in a catalytic role over a period of time. But even in that capacity, he would need clear backing from the very top of the firm, in this case, New York Fed President and ex-Goldmanite William Dudley.

Instead, the assignment was effectively terminated at the diagnosis phase. Although Beim looks to have done a fine job as far as he got, his recommendations on cultural change are at the 50,000 foot level. Even if the executive team embraced them, they’d need at a minimum more detail and likely more reinforcement to keep them from falling back into old habits. Instead, as Beim reports, Dudley took his draft and filed it in his drawer.

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  1. Jim Haygood

    What still rankles is how Goldman Sachs and Morgan Stanley were given waivers in 2008 to morph themselves into ‘commercial banks’ (and thus access to ZIRP free money), despite having no significant consumer deposit-taking business.

    They have never given out a single toaster.

    This makes six years of looting by two privileged white-shoe investment banks which have no reasonable case to offer for publicly-subsidized backstopping. Kick out the Fed floorboard, and let ’em twist slowly, slowly in the wind.

    1. MikeNY

      Yes, because they couldn’t float paper in the debt markets. And we all know that MS and GS supply the miraculous blood for America’s economic body, which is the envy of the world! Can’t have that blood supply blocked now, can we?

      What’s good for Goldman is good for the world.


    2. Teejay

      Do you (or any other NCer) know which “banks” were given “discount window” privleges as a result of the crash and do they still have them?

    1. fresnodan

      “To think that these banks exist for any other reason than to serve their Wall Street masters is complete folly. It has never been so and it will never be so – as long as the current system remains intact – despite what Segarra captured her bosses talking about on tape, without their knowledge.”

      By objective criteria, the amount of the economy devoted to “finance” has been increasing for 40 years. During this time, wage earners and pretty much the entire 99% have been getting a lesser share. This has been across parties. All the special convoluted tax breaks and tax avoidance rules, the lip service to competition while the monopoly power of business grows bigger and bigger. The very design of the society to enable economic rents, rents, and more rents – and a bought up media that does not know, and appears not to care, to even broach how the 1% strangle the rest.
      A change may not come in my lifetime, but it can’t continue with the most getting less and less, and those with big mouths and big bribery budgets getting more and more….

    2. reslez

      (Adding my comment, however late, because Yves has mentioned some attention is paid to how many people respond to a post.) As far as Bill Cohen’s “pooh pooh, everyone knew” B.S., this is pulled from the standard scandal minimization playbook they all follow. They try to make whistleblowers appear irrelevant by saying everyone knew!, when the reality is they always hid themselves behind the fact nothing had been confirmed. So this is yet another case of wanting it both ways. They did the same to Snowden: Oh, we always knew they were spying. No, not really. Not to this extent.

      The Fed should be burned to the ground in a regulatory blaze. Pas de replâtrage, la structure est pourrie.

  2. drb48

    “Despite the fact that all of this information is available with a minimal amount of reading and Googling, it is almost entirely absent from major media accounts.”

    That’s a feature not a bug. The days of the media telling the public what they need to know instead of what the owners want them know are long gone. If indeed they ever existed.

    1. RUKidding

      No kidding. Was visiting an elderly friend over the weekend. She complained that the main thing on tv lately is endless stories about Chelsea Clinton’s baby, and my friend was bored and frustrated with this doggerel. From my limited exposure, all tv seems to be is endless boring distractions with no substantive value whatsoever, but apparently keeps the bulk of the populace out to lunch.

      1. Banger

        I’d rather people not pay attention to the news and I recommend that people who aren’t clued into the scam to ignore the media–I tell them it’s all lies and I believe that is essentially true. I read the propaganda organs to read between the lines to see the current power-alignments. Better to focus on the Clintons and the British royals.

      2. Carla

        “all tv seems to be is endless boring distractions with no substantive value whatsoever, but apparently keeps the bulk of the populace out to lunch.”

        That is the entire point of TV. (Ever heard of George Carlin, BTW? He’s pretty brilliant on this topic.) There was a marvelous study in the 90s that showed that the more TV news people watched, the less they actually knew about local, national or world events.

        At that time, of course, newspapers were marginally better than they are now.

    2. proximity1

      “The days of the media telling the public what they need to know instead of what the owners want them know are long gone. If indeed they ever existed.”

      … If they ever existed.

      They existed to such an extent that, today, a professional journalist, looking back at how the mighty U.S. government actually feared the power of the press–because there was no alternative to it–should feel genuine shame. If one was, for example, a mid-to-late teenager reading the New York Times every day during from the autumn of 1972 through the spring of 1974, he or she would have read of serial dramas in which the major U.S. dailies faced off with powerful executive branch officials who, in both public and private, tried to bully newspapers’ reporters and editors into self-censorship–asking that the papers shelve plans to publish in instance after instance. Often, the private threats were promptly reported and became an integral part of the story–as did the court filings when the government tried to use the courts to shut down stories it did not want to see come to light.

      Today, The New York Times and the Washington Post are, by contrast with the picture just presented, insipid. That term applies as well to the so-called journalism that is on offer in Britain, with the BBC so shockingly bad that a viewer’s imagination is actually put to the test of its limits for disgust and disbelief. The present and the past 25 years have been a mini-Dark Ages of journalism. Newspaper after newspaper, and, among magazines, weekly after weekly, monthly after monthly either folded outright or fell into a hardly-imaginable level of cheap consumer dreck.

      It was during these times that the powerful inside government and business appreciated that in effect, for the general public, “the lights were out,” nobody effective was watching what they were doing or going to do, and thus they could loot and plunder with impunity and knock the living daylights out of civic society’s mainstays.

      Now, the government is merely annoyed and would be outraged at the very idea that it ought to have to live and work in fear of what the press, an independent force, could and would do about scandalous corruption.

  3. Brindle

    I visited the official sites for senators Warren and Brown and couldn’t find anything there on Carmen Segarra’s Whistleblowing.
    Apparently both senators made their statements via email, hopefully in the next few days they will flesh-out their intentions with more than emails.

    “Now you might say, isn’t this media firestorm a great thing? It’s roused Elizabeth Warren and Sherrod Brown to demand hearing. The Fed has been toadying up to Wall Street for years. Shouldn’t we be pleased that the problem is finally being taken seriously?”

      1. jrs

        Yea to think the Fed is regulators (and yes it is supposed to on paper be one of their responsibilities) that can be captured seems hopelessly naive.

        Ok the EPA is regulators that can be captured as they were designed to be regulators, closer to home the SEC were designed to be regulators (that can be captured). Some may argue that many a regulator was designed from day 1 to be captured, however I still think there is at least a hairs difference between them and the FED. The Fed was never really designed wtih even the pretense of being a regulator. There’s whole books on it being formed by banksters (Creature from Jekyl Island etc.).

        To think the Fed is our govenrment (which has been capturued) is also bound to start an endless debate on “no the Fed is a private corporation”, “no it’s a private public partnership”, etc., it does have public input (via confirmations etc. and being created by law etc.), however one can argue the private aspects have their hands more heavily on that scale.

  4. curlydan

    A organization formed by mega-banks to supervise bankers (This American Life pointed out that these are supervisors, not regulators, before switching to call them regulators for the rest of the show)…what could go wrong? Only if some independent-minded lady (you know what other adjective to insert here) lawyer starts getting in the way. But we know what to do with those types!

    Thank you, Carmen, for continuing the fight!

  5. Frances

    Best coverage of the Carmen Segarra story, Yves. The financial press may be awash with coverage of the tapes, but the NY Times sure isn’t. The tapes were mentioned (some would say buried) in a Sept. 25th William D. Cohen article, while Cohen wrote a piece for Politico dated the next day, Sept. 26th. The subhead stated, “Poor Carmen Segarra. She thought she was dropping the goods on Wall Street, but no one cares.”


    1. Banger

      Indeed–no one cares because Goldman wields real power. If they want to bury the story it will stay buried. I think most of us have figured out that the finance oligarchs are not subject the law because they are part of the government.

    2. Mark P.

      ‘The financial press may be awash with coverage of the tapes, but the NY Times sure isn’t.’

      Yeah. The ‘paper of record’ has been remarkably abstemious when it comes to not mentioning the Segarra tapes. I noted only the Cohan semi op-ed, too, and it was a way of burying it (since Cohan’s role at the NY Times is essentially to be the establishment contrarian there when it comes to writing about Wall Street).

  6. Bill Frank

    Financial system is corrupt, check. Regulatory system is corrupt, check. Media is corrupt, check. Etc., etc., etc. What’s really sad about all of this? This isn’t news. We’ve known this for YEARS! Put this revelation on top of the teetering pile of previous revelations about corruption in America. Soon, the staggering pile will fall, all will be forgotten and we will blissfully meld with our shiny, new devices.

    1. Banger

      I think people have learned to accept the corruption and though they know most people I speak to pretty much know something is way off–they’re willing to live with it and concern themselves with their own troubles and take comfort from the happy talk and lying camera jockeys. I blame this fatalism on the left which consistently refuses to engage in the political area with any show of strength.

      1. Oregoncharles

        “the left which consistently refuses to engage in the political area with any show of strength.”
        Borderline offensive, Banger. We’re here, and a lot of us are deadly serious. We don’t “refuse” anything: other people don’t f’ing show up, or chicken out at the last minute, or fall for the “lesser evil” BS over and over.

        Are YOU actively engaged in left-wing politics where you are?

        And where’s that book you promised us? Hell, I’ll promise to buy it. Advertise it on nc; I’ll personally organize promo appearances in Oregon for you. You can contact me via the website, http://www.pacificgreens.org. Ask for Charles, it’ll reach me.

        1. hunkerdown

          Unfortunately, the center-right have taken the term as their own in order to keep the Overton window nice and righty-tighty. I agree that people should be more careful about qualifying which left or “left” they’re talking about.

    2. Ernesto Lyon

      Everything is corrupt except for the vaccines. All good citizens will show up hygienic injections when prompted.

    3. jgordon

      It’s only a big deal if you have the misconception that history is linear and on an upward trajectory. If you take a slightly wider view and see the present era as merely another turn of the wheel, it’s not so bad. Fighting against the fall of civilizations and societies is like swimming against the tide; most people who try are swept out to see, and even those that make it to the shore… well the tide still goes out 12 hours later anyway. Acknowledging and working with the cyclical nature of human society, rather than bemoaning it and “fighting” it, would allow us to achieve better outcomes.

      1. lambert strether

        The owl of Minerva flies only at dusk. In other words, I don’t see how you can know what phase of the cycle you are in, until the phase long past. So I see this as a sophisticated counsel of despair.

        1. proximity1

          I don’t even see it as that. It’s kind of, sort of, a weird mix of hopefulness which pins itself to, of all things, a fatalistic acceptance. I rarely see people find, in fatalism, a reason to expect better things as “the wheel turns”–apparently without rhyme or reason.

  7. Banger

    So far the story has no legs and will be buried unless somebody powerful speaks up. Warren and Brown are not enough–they have little power.

  8. steelhead23

    This is frightening. Everyone can see that politics is corrupt and it is primarily corrupted by Wall Street money. We then tilt our heads toward Justice – the judiciary can ferret this out and set our course – after the miscreants are jailed and their prosecutors and regulators cheered. But alas, Mssrs. Obama and Holder preferred to look forward, not back, virtually no one was prosecuted, and thanks to the Fed’s largesse, the greatest criminals were again rewarded. Leaving us with only the fourth estate to ferret out the truth, engender public outrage, and perhaps embarrass the pols and judiciary to do the right thing. In this single case, we see all these failures in one frightening stew. What is left? If we take to the streets to voice our outrage, the police, those bullies of the haves, will pummel us to submission. Damn.

    1. Ulysses

      “If we take to the streets to voice our outrage, the police, those bullies of the haves, will pummel us to submission.” As one who has been pummeled, jailed, surveilled and all the rest of it, I can promise you that taking to the streets, while personally risky, is still the best option we have for raising consciousness on issues the kleptocrats would prefer not discussed. To give just one example, Fracking would already be going on full tilt all over the southern tier of NYS– if everybody had been so scared that they just stayed home.

  9. Oregoncharles

    Did anyone seriously think the vampire squid did NOT control the government? After 2008? It’s a given, a cliche.

    Proof from an insider is nice, of course, but if we can’t trust the meaning of the obvious course of events, we can’t function in public affairs at all.

    The real value of these tapes is political: they rip the respectability out from under the Fed. They’re crooked, as well as mis-designed,. It’s a big opportunity to take them down. Otherwise, they go on sabotaging the economy for the plutocracy.

  10. Ecomonics

    Criticizing the US financial sector is likely to gather little sympathy — except in the church of un-believers. Criticizing the system that feeds you and provides you the newest iPhone is subject to the Law of the Leaky Boat. Without alternative transportation you aren’t likely to abandon your boat, much less criticize it, despite having to work hard to bail the water coming in.

    Here at NakedCap we criticize, demand changes, and want punishments but non-NakedCappers aren’t likely to take this side. They may complain about the apparent corruption and inequities and greed but also know well that this leaky boat somehow carries them forward, leaks, bails and all. As long as more benefit in some way than see themselves losing the boat will plod along.

    Of course the boat will keep going forward — until it can’t. Then we will have a very different situation.

    But we’re not there yet.

  11. TheCatSaid

    What, if anything, has Santander had to say about this recent disclosure?
    Has any reporter pushed them to comment?

    Is the contract on the deal valid, seeing as the required Fed sign-off never occurred?
    If not, what is the potential downside to both parties?

    Which side (GS or Santander) inserted the requirement that the Fed document its lack of objection in order for the contract to be completed?

    1. Carla

      What’s the matter? You think there’s something legal about this? You think justice can–or will– be done? C’mon.

      1. TheCatSaid

        Could pressure could be put on Santander to respond? Maybe a good financial reporter based in Spain could bring this up. You never know, maybe another whistleblower could surface from the Santander side of the deal.

        The more these things see the light of day, and the more people on all sides are informed, the better.

  12. cnchal

    In other words, most journalists are afraid to rock the access journalism boat and do real sleuthing, and to make up for that, they’ll pile onto a story where someone else has taken the risk

    Lots of things are like that. Someone blazes a trail and takes a risk, Goldman extracts money.

    Funny that Holder announced his leaving three nanoseconds before these tapes went public. Imagine the questions that now can never be asked.

  13. afisher

    With this information regarding complete regulatory capture – can we all admit that when average folks go looking – all they will find is there is NO WINNER for anyone to believe will lead the US, or any other country of the West for that manner. We are just pawns in this play. :-(

  14. troutcor

    The interesting thing about all of these revelations – from Segarra’s suit to the tapes to the judge’s background to the judge’s refusal to recuse – is that doing the right thing is penalized at every step of the way. In ways subtle (Segarra’s meeting with her boss, Mr. Kim, in which he urges her to play ball) or serious (the destruction of any chance Segarra will ever work in the field again), the implication is clear: be a “team” player or face failure, ostracism or worse.
    This is how a corrupt Soviet-style apparatchik culture is created.

    1. ambrit

      This is also how the system guarantees its own demise. The system ossifies and breaks at the next major stress.

    2. Doug

      From Wikipedia: (Conrad’s Heart of Darkness) “It is a story full of hollow men- men empty of faith, personality, moral strength, and even humanity. In it the character Marlow tells of his own journey into the heart of Africa, a dark world populated by morally empty men living only for ivory and the money and power that it brings.”

      We are the hollow men
      We are the stuffed men
      Leaning together
      Headpiece filled with straw. Alas!
      Our dried voices, when
      We whisper together
      Are quiet and meaningless
      As wind in dry grass
      Or rats’ feet over broken glass
      In our dry cellar
      Shape without form, shade without colour,
      Paralysed force, gesture without motion;
      Those who have crossed
      With direct eyes, to death’s other Kingdom
      Remember us – if at all – not as lost
      Violent souls, but only
      As the hollow men
      The stuffed men…….

      T.S.Eliot “The Hollow Men”


      (Pulled from John Mauldin’s latest “Thoughts…”)

  15. pgrommit

    Well, if you’re gonna have regulatory capture, you might as well have media capture too. Here are just a few examples of firms having board members that I’m sure help filter the news in the “proper” way.

    Charles K. Gifford – Director
    Mr. Gifford has been Chairman Emeritus of Bank of America Corporation since February 2005. He was Chairman and Chief Executive Officer of BankBoston prior to its 1999 merger with Fleet Financial Group and became President and Chief Operating Officer of the combined companies. Mr. Gifford became Chief Executive Officer of FleetBoston Financial in 2001 and Chairman in 2002. Mr. Gifford is also a director of Bank of America Corporation and NSTAR.

    Comcast (NBC)
    Eduardo G. Mestre, 64, has served as a director since May 2011. Since February 2012, he has been a Senior Managing Director and Chairman of Global Advisory of Evercore Partners Inc., an independent investment banking advisory firm. From October 2004 until February 2012, he was a Vice Chairman of Evercore Partners. From 2001 to 2004, Mr. Mestre served as Chairman of Citigroup’s global investment bank. From 1995 to 2001, he served as head of investment banking and, prior to that, as co-head of mergers and acquisitions at Salomon Smith Barney.

    Disney (ABC)
    Robert W. Matschullat, 66, a private equity investor…. Prior to joining Seagram, Mr. Matschullat was head of worldwide investment banking for Morgan Stanley & Co. Incorporated, a securities and investment firm, and was on the Morgan Stanley Group board of directors.

    Alan Greenberg
    He is Vice Chairman Emeritus of JPMorgan Chase & Co., having previously served as Chairman of the Executive Committee of The Bear Stearns Companies Inc. from June 2001 until Bear Stearns was acquired by JPMorgan in May 2008. Mr. Greenberg also served as Chairman of the Board of Bear Stearns from 1985 to 2001, and as its Chief Executive Officer from 1978 to 1993.

  16. Ian

    is Carmen Segarra NC poachable? might have some interesting insights she might want to share with us, perhaps structurally inside the FED.

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