Smoking Gun – How the FED Pampered Goldman Sachs
By Shlomo Maital
Carmen Sigarra is a veteran lawyer, who worked for the Federal Reserve, overseeing banking operations, specifically Goldman Sachs. She was fired and is now suing the Fed.
During her stay at the Fed, she recorded nearly 50 hours of sessions in which Fed examiners checked Goldman Sachs transactions. She has now released these tapes, and they will be the subject of an upcoming episode of This American Life, on PBS (American public radio). Don’t miss it!
What emerges is a picture of lax regulators, overly delicate with how they treat Wall St. Big Money, especially Goldman Sachs. It demonstrates the culpability of the Fed in the 2008 financial collapse and crisis. Blame the Fed is the title of an article I published in Barron’s, and these tapes confirm it. Blame Goldman Sachs too – they are not blameless.
Specifically, one transaction that illustrates the whole picture was this: the embattled Spanish bank Santander was being pressed by European regulators to boost its capital – that is, to have more liquid cash on hand, in case its assets declined in value. To avoid doing this, Santander needed to get some assets off its books. So it asked Goldman Sachs to babysit them – keep the assets on Goldman’s books. For a hefty fee, of course. Goldman agreed… it’s legal, (but shady, said the Fed examiner. Legal, but shady. That is the mantra of many people on Wall St.).
Goldman attached a clause: The transaction was subject to Fed approval. So the Fed could have killed this ‘shady’ transaction. But of course they didn’t. And it went ahead. And so did many many many other similar, much worse transactions.
What do we learn? Wall St. has immense power. The alleged independence of the regulators, the Fed, is a fiction. This is why another financial collapse, totally different in nature, could well occur.