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From: Paul H. Christiansen11/19/2014 3:28:50 PM
   of 686
 
The Fed Needs Governors Who Aren’t Wall Street Insiders

Two recent reports highlight that the Fed isn’t very good at supervising certain banks. In September, Carmen Segarra, a former bank examiner at the Federal Reserve Bank of New York, released secret recordings she had made of meetings at the New York Fed in 2012. The recordings revealed that New York Fed employees had identified concerns with a proposed Goldman Sachs deal with Banco Santander , calling it “legal but shady.” The New York Fed didn’t attempt to make Goldman address these concerns. The recordings also showed Ms. Segarra’s superiors pressuring her to soften her finding that Goldman did not comply with federal regulations on conflicts of interest. While the recordings offered important new insights, they ultimately confirmed the old suspicion that the Fed is too cozy with big banks to provide the kind of tough oversight that’s needed.

An October report from the Fed’s Office of Inspector General provided additional confirmation that the Fed is failing to oversee the big banks. The report found that the New York Fed had failed to examine J.P. Morgan Chase ’s Chief Investment Office—the office that incurred over $6 billion in losses in the infamous 2012 “London Whale” incident—despite a recommendation to do so in 2009 from another Federal Reserve System team. The report concluded that the New York Fed needed to improve its supervision of the biggest, most complex banks.

The complete WSJ article is available only with subscription . . .

The Fed Needs Governors Who Aren’t Wall Street Insiders
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