Federal Reserve Examiner Fired for Refusing to Lie About Goldman Sachs
October 14th, 2013
In the movie Silver Circle, Federal Reserve investigator Jay Nelson is assigned to an arson case and discovers evidence of corruption that causes him to reconsider his allegiance to his employer. Since the film went into production, a wide range of real-world events have transpired which almost seem as if they were directly inspired by Silver Circle‘s plot. As it happens, the real-life Federal Reserve Bank of New York appears to have just fired a Jay Nelson figure of its own.
The Atlantic is reporting on allegations that the New York Fed fired examiner Carmen Segarra, an expert on regulatory compliance, because she refused to cover up evidence of conflicts of interests at Goldman Sachs. According to her eye-opening wrongful termination complaint, she was escorted out of the building by security when she refused to lie in writing to protect the Wall Street firm. Whether or not one believes that the regulations she was enforcing are just, this is yet another example of the cronyism that happens when un-elected bureaucracies are given the power to pick winners and losers in business.
Cronyism Run Wild
Goldman Sachs received huge sums of taxpayer money during the Wall Street bailout. The firm is routinely implicated in scandals, yet rarely receives the same regulatory attention that confronts smaller financial institutions. As such, it is difficult for upstarts to compete with Goldman Sachs.
This is typical of the Mussolini-style regulatory regimes that emerge from bills like the Dodd-Frank Act. When regulatory powers are shifted away from the courts and legislatures and granted instead to un-elected bureaucrats in the executive branch, the end result is that lobbyists from the biggest corporations are hired to write the rules for their own employers. This creates a regulatory framework aimed at preventing competition, rather than catching fraud or abuse.
Enforcing the Rules Equally
If such regulations are going to exist, every American should be able to at least agree that the rules should be equally enforced on all firms. However, this happens so rarely that one should assume that it isn’t possible. There is a revolving door, employment-wise, between the largest corporations in an industry and their regulatory bodies in the executive branch.
Also, mega-corporations like Goldman Sachs give huge donations to politicians, thus ensuring special treatment. When new regulations are passed, big companies will lobby for exemptions or special subsidies, and their paid-for politicians will typically give them what they want. This is why business regulations were originally intended to be carried out by courts, and only when there is a specific victim citing a complaint pursuant to contract law.
Carmen Segarra can now consider herself to be another great American whistle-blower, alongside a long list including recent standouts like Edward Snowden and Chelsea Manning. While they stood up to the NSA and the military-industrial complex respectively, she applied the same principles to hold the Federal Reserve, the most arbitrarily powerful and corrupt financial institution in the world, to account. In a way, she’s like a real-life Jay Nelson.
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