NEW YORK (TheStreet) -- This American Life and ProPublica recently broke the story of the secret tapes of the Federal Reserve's supervision of Goldman Sachs (GS) . If the Fed as a regulator and Goldman Sachs as an advisor did not have such a bad reputation, one might say the tapes were shocking.
The most interesting part of the tapes is where the whistleblower, Carmen Segarra, is asked to change her report by her boss. Segarra says Goldman Sachs does not have a conflict of interest policy. The chief supervisor at Goldman Sachs at the time can't convince her to recant her opinion. Soon after she was fired, just seven months into the job at the New York Fed.
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The problem seems to be that Segarra did not fit in -- despite her impressive educational accomplishments. The Fed employs a lot of people with degrees from prestigious universities, just like the Wall Street banks.
The report suggests that the federal bureaucracy attracts a lot of people who don't mind keeping their mouths shut, just closing their eyes and ears to all the bad stuff happening around them. Segarra actually cared. Unfortunately, caring appears to be a career-killer for a Federal Reserve supervisor.
At the time, the "Vampire Squid" -- as Goldman was infamously called by Rolling Stone--had no policy to prevent its clients from being treated like Muppets, a reference to what Goldman internally called its unsophisticated customers. But the Fed had a regulation that required bank holding companies, such as Goldman Sachs, to have a conflict of interest policy. At the time, Goldman Sachs was advising a Muppet, which shall remain nameless, and which was a merger target.
Segarra was fired for complaining about this kind of thing. And she's not alone in being attacked for criticizing banks.
Here's how I found that the regulators are spineless until a whistleblower appears.