Two members of the Senate Banking Committee began pushing on September 26, 2014 for an investigation of the New York Federal Reserve Bank after a terminated employee released tapes supposedly indicating that New York Fed pressured her to give favorable treatment to some private banks, such as Goldman Sachs.
The New York Federal Reserve Bank is 1 of 12 banks in the Federal Reserve System. Established in 1913, the Federal Reserve System carries out monetary policy, regulates and supervises financial institutions and assists in payments systems, all in behalf of the United States of America. The New York Fed, responsible for those activities in New York State, 12 northern counties in New Jersey, Fairfield County, CT, the U. S. Virgin Islands and Puerto Rico, is the most influential of all 12 Federal Reserve banks.
Carmen Segarra, a bank examiner employed by New York Fed, was fired in 2012 and subsequently filed suit for wrongful termination. While employed by New York Fed, Segarra allegedly became concerned by her supervisors’ pressure to “go easy on” certain banks. Segarra asserts that after discovering and refusing to disregard Goldman Sachs’ lack of a “conflict of interest” policy and other violations, she was fired.
Segarra’s secret tapes were aired on September 26, 2014 by Segarra, ProPublica and This American Life. On that same day, U. S. Senators Elizabeth Warren and Sherrod Brown publicly called for an investigation of the New York Fed. Senator Warren stated, “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. We learned this the hard way in 2008.”
Segarra, ProPublica and This American Life are essentially accusing the New York Fed of being a “captured agency,” an agency that is supposed to regulate an industry in the public interest but instead favors some or all of the very groups it is supposed to regulate. It is a serious form of political corruption that enables the favored groups to actively help themselves and harm the public.
The New York Fed commented that Segarra was terminated due to her job performance but it could not comment further due to the pending wrongful termination suit. Goldman Sachs stated that Segarra applied for employment with the company on several occasions and that It has had a complete “conflict of interest” policy for a long time. Despite their replies, both institutions must still deal with the secret tapes’ contents and implications.
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