'Have a sense of humility, right?': Fired Fed worker unveils secretly taped meetings between regulators and Goldman Sachs showing government 'is in the bankers' pockets'

  • Carmen Segarra, 41, made recordings while working for the Fed at Goldman
  • Says her tapes show a culture of 'fear' and 'deference' towards bankers
  • Senior regulator heard gently bringing up a potential lapse in meeting then trailing off - despite previously calling the deal 'shady'
  • In another meeting afterwards he congratulates himself and says bank will 'think twice' before trying to do the same thing again
  • Segarra was fired after seven months on the job - and lost lawsuit over it
  • Claimed she was kicked out for refusing to back down over critical report  
  • Michael Lewis: 'The Ray Rice video for the financial sector has arrived' 

Secret tapes: Carmen Segarra, a fired NY Fed regulator, recorded meetings which she claims show deferential officials failing to hold banks to account

Secret tapes: Carmen Segarra, a fired NY Fed regulator, recorded meetings which she claims show deferential officials failing to hold banks to account

A fired New York Fed regulator recorded hours of meetings which allegedly show how government supervisors were afraid to ask tough questions of the biggest banks on Wall St.

Carmen Segarra, 41, was brought in by New York's banking watchdog in the wake of the financial crisis to tighten the government's grip on the major banks, and assigned to Goldman Sachs.

And after encountering a culture of 'fear' and 'deference' to the finance giants at Goldman, Segarra explosively started recording meetings in which regulators offer softball questions to bankers, then congratulate themselves for standing up to them.

The Big Short and Liar's Poker author Michael Lewis has dubbed the recordings the 'Ray Rice video of the financial sector.' 

Segarra was fired after just seven months working at Goldman for the Fed - which she says was because she refused to back down from a damning report on the bank's policies on conflicts of interest.  

The tapes, handed over to an investigation by ProPublica and This American Life, record meetings between where the Fed's live-in regulators do not press Goldman on parts of its dealings which they themselves admit are 'shady'.

Recordings show Michael Silva, the Fed's top man at Goldman, gently raising an issue of potential regulatory lapse in a way that allows Goldman to skirt over it.

A clause in a deal which Silva describes in the tapes before a meeting as 'legal but shady' seemed to require approval from the Fed - which had not been given.

In the private meeting, Silva aims to 'put a big shot across their bow on that'. But in the meeting itself - after more than 45 minutes without mentioning it, he only mentions that it 'sounds like' the clause 'dropped out'.

He is heard saying: '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...?'

Refused to toe the line: Segarra claims she was fired from the Fed because she refused to back down over a report which was critical of Goldman Sachs

Refused to toe the line: Segarra claims she was fired from the Fed because she refused to back down over a report which was critical of Goldman Sachs

Heart of Wall St: Segarra made the recordings during her seven-month tenure at Goldman Sachs before she was fired

Heart of Wall St: Segarra made the recordings during her seven-month tenure at Goldman Sachs before she was fired

Silva is later heard reflecting on the meeting, and says that by asking the question - and even having a meeting in the first place - the Fed has succeeded in making Goldman 'think twice'.

He says: '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.' 

Soft questions: Michael Silva, the Fed's top man at Goldman, is recorded during the tapes

Soft questions: Michael Silva, the Fed's top man at Goldman, is recorded during the tapes

He considers sending a letter - which he acknowledges the bank may ignore - but it is unclear whether it was ever sent. 

Segarra's analysis of the situation is that it shows the Fed was in the grip of an irrational 'fear' of Goldman which led to them giving the bank an easy ride.

She told the radio show: 'They were all sort of afraid of Goldman... What I was sort of seeing and experiencing was this level of deference to the banks. This level of fear.'

She is asked whether the attitude amounts to 'regulatory capture' - a form of corruption when officials put the interests of those they are scrutinizing ahead of doing their job.

Her response is: 'You know, if that isn't [it], I don't know what is.'  

Segarra also recorded interviews with her own superiors, in which she is told to adopt a less confrontational style in order to get taken seriously.

Segarra filed a lawsuit against the Fed, claiming she was dismissed unfairly and demanded $7million in damages. But her case was struck down by a judge and is now undergoing an appeal.

Goldman Sachs and the New York Federal Reserve declined to comment on the specifics of the deals and exchanges mentioned.

But in a response to This American Life, the Fed said: 'The New York Fed categorically rejects the allegations being made about the integrity of its supervision of financial institutions.

'Afraid of Goldman': Segarra has now claimed that her recordings show a meek and deferential attitude from government regulators towards the banks they are supposed to be in charge of

'Afraid of Goldman': Segarra has now claimed that her recordings show a meek and deferential attitude from government regulators towards the banks they are supposed to be in charge of

On the issue of whether it is difficult for regulators to express concerns, the Fed said: 'Examiners are encouraged to speak up and escalate any concerns they may have regarding the New York Fed or institutions that we supervise.

'The New York Fed provides multiple venues and layers of recourse to help ensure that its employees freely express their views and concerns...'

 And on Segarra in particular, it said: '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.'

SECRET GOLDMAN RECORDINGS: HOW THE FED DEALS WITH THE BANKS IT'S CHARGED WITH REGULATING 

Carmen Segarra's 46 hours of tapes record conversations between her and superiors at the Fed, as well as interactions between Goldman and its regulators.

One of the earliest parts relates to a transaction between Goldman and Satander, a Spanish bank, designed to move shares to help them meet regulations in Europe.

Mike Silva, the Fed's top man at Goldman,makes the following plan about how to put his concerns to the bank:

Silva: 'My own personal thinking right now is that we’re looking at a transaction that’s legal but shady.

I want to put a big shot across their bow on that. Poking at it, maybe we find something even shadier than we already know.

So let’s poke at this thing, let’s poke at it with our usual poker faces, you know. I’d like these guys to come away from this meeting confused as to what we think about it. I want to keep then nervous.'

Others: OK.

Silva: Does that make sense?

Woman: Yeah yeah, it does.

However, in the meeting, Silva does not make his point for more than 45 minutes. When he does, he says the following.

Silva to Goldman bankers: '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...?'

Silva, who appears not to get a definitive answer, doesn't bring it up again.

After the meeting, another Fed worker is recorded saying the following:

Fed worker:  'I would add to his comments in that I think we don’t want to discourage Goldman from disclosing these types of things in the future, and therefore maybe you know some comment that says don’t mistake our inquisitiveness, and our desire to understand more about the marketplace in general, as a criticism of you as a firm necessarily.

'Like I don’t want to, I don’t want to hit them on the bat with the head, and they say screw it we’re not gonna disclose it again, we don’t need to.' [Goldman are required by law to give the Fed any information they ask for]

Later Silva mentions his performance in the meeting, and says he thinks it will bring about change:

Silva: '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.'

Segarra also recorded her superior at the Fed - Johnathan Kim - giving her advice on her role, in which he tries to change her attitude.

Kim: I want to manage your sort of career and expectations, right? I want you to be successful. Ok? There are –there's information that's coming in, there's opinions that are coming in. Right?...

'I’m never questioning about the knowledge base or the assessments or those things, it’s really about how you are perceived, right? So if there’s more a general sort of feedback that says that it’s not only one person, it’s not only two persons, but many more people who are perceiving that you’re –um, you have more sharper elbows, right.

' Or that you’re sort of breaking eggs. And obviously I don’t know what the right word is.'

Two weeks before she was fired, Kim told Segarra the following:

Kim: 'Couple of things, ok, that I would suggest: Have a sense of humility, right?

'Because a lot of the things that you say, and this is the way you’re coming across,I think I know you well enough that that’s not what you’re saying, right?

'But if I were to be a new person, I would say Carmen, you’re very arrogant. Right?' 

Carmen Segarra recorded 46 hours secret tapes between New York Fed and Goldman Sachs

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