Saturday, September 27, 2014

Secret Goldman Sachs tapes show regulators still respect bankers too much

Secret Goldman Sachs tapes show regulators still respect bankers too much - The Washington Post

The problem with Wall Street's cops is that, before the crisis, they didn't actually fall asleep on the job.

knew the big banks were taking big risks, and had the power to do
something about it. But they didn't. It's worse than outright neglect,
since it's not as obvious how to fix it. And now, thanks to 46 hours of secret audio tapes
from inside the New York Federal Reserve, we can hear that they're
still having trouble fixing it. The problem isn't that regulators don't
have the tools they need. It's that they won't use the tools they have,
because they respect the bankers too much.


This is where you need to go to This American Life, who, in conjunction with Jake Bernstein
of ProPublica, put together the highlights of Segarra's 46 hours of
audio recordings. You have to hear how obsequious the supervisors sound
when they talk to Goldman's executives, almost apologetic for not-quite
doing their jobs. The best example of this came during a deal between
Goldman and the Spanish banking behemoth Banco Santander in 2012. "We're
looking at a transaction that's legal but shady," Segarra's boss Mike
Silva said, and "I want to put a big shot across their bow on that."
Specifically, Goldman was making it look like it was taking assets from
Santander without really doing so — for a fee, of course — all so
Santader could avoid having to raise more capital. This was regulatory
arbitrage of the worst kind: It was potentially destabilizing. But the
term sheet said the deal wouldn't go ahead unless the New York Fed
explicitly signed off on it. Until, that is, Goldman just went ahead
without it.


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