There’s a revolving door between Washington and the banks it regulates, and it leads to toxic conflicts of interest and scandal, a consensus on Capitol Hill believes.
But seasoned hands in financial services are taking aim these critics, saying veteran bankers and traders can sometimes be the smartest and most effective cops.
“There are several ways to look at it, and one is this — you need expertise to provide oversight,” Ed Moy, former special assistant to President George W. Bush for presidential personnel, told The Post.
“I wouldn’t, for example, hire a physician to provide regulatory oversight over the banking industry. I would want some expertise either on the inside or on the outside,” added the ex-government official, who later served as director of the US Mint.
The latest criticism was fueled when New York Fed senior examiner Carmen Segarra recently claimed her attempts to take Goldman Sachs to task were stifled by her supervisors. The pugnacious Segarra went as far as releasing recordings of internal Fed meetings that depicted a regulator seemingly gone soft on Goldman. Goldman this month fired a worker, it said, after he received leaked secret Fed information from a former co-worker.
The New York Fed denies it is on bended knee before Wall Street. Still, critics may be hard to please. “More than six years ago, when regulators got too cozy with the banks they were regulating, we saw the cost in lost jobs, retirement savings, and homes,” said Sen. Sherrod Brown (D-Ohio), chairman of the Subcommittee on Financial Institutions and Consumer Protection. “It’s past time that the Federal Reserve show — with actions, not words — that it will protect consumers rather than Wall Street,” Brown added.
Wall Street has a long history from the very beginning of dispatching its own to regulate the Street. The first Securities and Exchange Commission chairman was Wall Street tycoon Joe Kennedy, father of the late president.
In modern times, the revolving door has continued to spin. New York Fed President William Dudley is a former Goldman Sachs economist. Amid an outcry, Pres. Obama recently nominated Lazard banker Antonio Weiss to a senior Treasury Department post.
“If you want someone to regulate the industry, you don’t want to have to train them as to what the hell the industry does,” said bank industry analyst Dick Bove of Rafferty Capital Markets. “The fact the Fed is hiring personnel from Wall Street to regulate Wall Street I think is almost a necessity.”
“Look at any oversight body of the financial services industry — it is a revolving door now, and it has always been a revolving door,” said Gary Swiman, former deputy director of regulatory affairs at Merrill Lynch, referring to the output of former Street personnel turned regulators. “You need these people at the Fed who worked at Goldman Sachs or people at the SEC who worked at Morgan Stanley — that is the only reason you can get anything done,” added Swiman, now a partner at EisnerAmper in New York.