When the New York Federal Reserve fired Carmen Segarra, it’s unlikely they realized she was taking 46 hours of recordings of meetings between the Fed and Goldman Sachs. The secretly recorded tapes are apparently damaging enough that it’s being called the “Ray Rice video for the financial sector” by Bloomberg View’s Michael Lewis.
Segarra, who was assigned to regulate Goldman Sachs, has reportedly provided all of the recordings to "This American Life" and all of the audio is set to be aired.
Segarra claimed the Fed appeared to be afraid of Goldman Sachs. She was fired after only seven months at the Fed for allegedly taking a stand over a report on the bank’s handling of conflicts of interest. Segarra is suing the New York Fed over her termination.
A lighted sign marks the Goldman Sachs trading post on the floor of the New York Stock Exchange, Tuesday, Aug. 5, 2014. The designated market maker operations of Goldman Sachs were sold to Dutch company IMC Financial Markets, which is scheduled to rebrand the post next week. (AP Photo/Richard Drew)
To take just one example (the whole transcript is available online) — here’s federal regulator Mike Silva (Segarra’s boss) “confronting” Goldman about a deal it had just closed with Spanish Banco Santander, one of the conditions of which was getting “no objection” from the Fed — something Goldman clearly had neglected to do.
“Just to button up one point. I know the term sheet called for a notice to your regulator. The original term sheet also called for expression of non-objection, sounds like that dropped out at some point, or … ?” he says.
Later he seems pleased with how this went: “At a minimum, we made them, I guarantee they’ll think twice about the next one, because by putting them through their paces and having that large Fed crowd come in. You know we fussed at ‘em pretty good.”
In a radio interview, Segarra said bankers were “all sort of afraid of Goldman,” which is why there was a “level of deference” showed to the financial giant.
Lewis also provides two key conclusions he drew from the stunning recordings:
1. You sort of knew that the regulators were more or less controlled by the banks. Now you know.
2. The only reason you know is that one woman, Carmen Segarra, has been brave enough to fight the system. She has paid a great price to inform us all of the obvious. She has lost her job, undermined her career, and will no doubt also endure a lifetime of lawsuits and slander.
The New York Fed responded to This American Life on Friday, claiming its examiners “are encouraged to speak up and escalate any concerns they may have regarding the New York Fed or institutions that we supervise.”
“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 an institution,” the statement said.