“Our financial regulatory system,” as Michael Lewis writes, “is obviously dysfunctional. But because the subject is so tedious, and the details so complicated, the public doesn’t pay it much attention.”
Now we should.
“This American Life” has the recordings, from former employee Carmen Segarra (now suing the New York Fed), and they’re just as bad as you feared.
Lewis calls it “the Ray Rice video for the financial sector.”
And it’s pretty stunning. Based on 46 hours of recordings from fired New York Fed employee Carmen Segarra, who was assigned to regulate Goldman Sachs, the segment documents a mealy-mouthed culture of stultifying consensus, where suggesting that the emperor has no clothes is possibly a firing offense.
To take just one example (the whole transcript is available online) — here’s federal regulator Mike Silva (Segarra’s boss) “confronting” Goldman about a deal it had just closed with Spanish Banco Santander, one of the conditions of which was getting “no objection” from the Fed — something Goldman clearly had neglected to do.
“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 … ?” he says.
Later he seems pleased with how this went: “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.”
If that counts as “fussing at ’em pretty good,” no wonder we’ve had some problems.
To keep things interesting, I have taken the liberty of rewriting some famous scenes from classic books and movies with this new definition of confrontation in mind.
Gandalf, regulating the Balrog:
“You shall not PASS!”
The Fed, regulating the Balrog:
“Just to button up one point — it seems like you’re maybe considering sort of circumventing some of the usual obstacles here, and I’m — if you could consider instead of passing, perhaps, an alternative — how does that maybe strike you?”
Batman asking the Joker where Rachel is:
“WHERE IS SHE?”
The Fed, asking the Joker where Rachel is:
“Just to button up one point, the location of these two people you’ve seen fit to commandeer and relocate, for whatever purposes that might have been, their location, is that something you’d feel willing to divulge, or … ?”
Brad Pitt in “Se7en”:
“What’s in the BOX? What’s in the box?”
The Fed in “Se7en”:
“Now, just a final concern we thought maybe could be brought to the table concerning the, I guess, the contents — of this box here — is that a subject that could be touched on at all? I assume not?”
Ygritte to Jon Snow:
“You know nothing, Jon Snow.”
The Fed to Jon Snow:
“I mean it certainly seems as if you might be able to know — not more necessarily, but certainly that it wouldn’t be beyond the realm of possibility entirely for you to obtain maybe — not more information, even, but — well, some information, certainly? Never mind, forget I said anything.”
“Show me the money!”
[Long weird silence.]
Boy, telling the emperor he has no clothes:
“The emperor has no clothes.”
The Fed, telling the Emperor he has no clothes:
“Just looking at this outfit you have assembled here — I wonder — I wouldn’t go so far as to say that you don’t have clothes, I think that’s putting it a little strong, but certainly, certainly this isn’t — a set of clothes that is exactly great or maybe that provides the kind of coverage that you, our great emperor, I think and hope would probably deserve, right? Not that it’s not clothes. We certainly aren’t saying that.”