
New Scrutiny of Goldman's Ties to the New York Fed After a Leak - taivare
http://dealbook.nytimes.com/2014/11/19/rising-scrutiny-as-banks-hire-from-the-fed/?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=1
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incision
The episode of _This American Life_ referenced is well worth a listen if
you've ever been curious about what trying to do good work inside a crushing
bureaucracy sounds like.

1: [http://www.thisamericanlife.org/radio-
archives/episode/536/t...](http://www.thisamericanlife.org/radio-
archives/episode/536/the-secret-recordings-of-carmen-segarra)

~~~
001sky
See also: on how they pick the bosses of career regulators

[http://www.huffingtonpost.com/elizabeth-warren/presidents-
wa...](http://www.huffingtonpost.com/elizabeth-warren/presidents-wall-street-
nominee_b_6188324.html)

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rayiner
Leaking confidential information is clearly not okay, and good on Goldman for
firing everyone involved.

That being said, look at how the government and regulators approach the tech
industry: Words like "open," "distributed," "inter-operable," which have not
just technical but _philosophical_ meanings in the tech industry have no
meaning to lawmakers or regulators. That's precisely because there's no
revolving door bringing people with these perspectives from the industry into
the government, where they can shape policy.

There's no particularly good solution to regulation, and I'm not convinced our
status quo is worse than the alternatives. Most people do not believe you can
achieve societal goals in a free-market without regulation. So you have some
sort of regulation, and the question becomes: who are the regulators? A
professional class of bureaucrats well-insulated from industries, or a class
of practitioner-bureaucrats that move fluidly from industry to government and
back? There's good and bad that comes with both options.

~~~
comboy
> good on Goldman for firing everyone involved

There's too much for one comment, but from the sound of it I think you may not
be seeing the full picture. E.g.

[http://www.zerohedge.com/news/2014-11-20/here-are-
highlights...](http://www.zerohedge.com/news/2014-11-20/here-are-highlights-
senates-finding-banks-manipulate-physical-commodities-live-heari)

~~~
rayiner
What in that article has anything to do with information leaking between
regulators and banks? That is an article about banks manipulating commodities
prices by buying up vast quantities of them. Which is a good argument in favor
of regulating the free market, but doesn't address the point I'm making.

~~~
comboy
It's about Goldman Sachs and I thought it gives some good general view, but
sure, here is an article related to the topic:

[http://www.zerohedge.com/news/2014-11-20/latest-scandal-
gold...](http://www.zerohedge.com/news/2014-11-20/latest-scandal-goldman-ny-
fed-employees-busted-colluding-illegally-sharing-confident)

------
philrapo
While the "revolving door" between banks and regulators clearly presents some
problems, consider the alternative.

I personally hate the idea of career politicians who have no practical
experience in the private sector trying to write laws. (We see examples of bad
legislation all the time from people who are clueless about tech, for
example). Finance and central banking are very complicated areas, and I'd
prefer to see regulations written by those who have an intricate and practical
understanding of how those industries/markets work.

It makes sense to me that the most qualified regulators would be those who
spent years in the private sector working at places like GS.

And on the flip side, it makes sense that private firms would be interested in
hiring former govt officials and regulators who best understand how compliance
and regulation work from the inside. It's like wanting to have an ex-IRS guy
do your taxes. Regulators and public officlas who spent years earning little
pay and doing public service also want to monetize their experience and
finally get a good paycheck after leaving office. (Lots of examples of this in
the bitcoin space lately.. e.g. Arthur Leavitt.. it's not just happening at
goldman sachs).

In this article, it sounds like a foolish (and possibly illegal) decision by a
29 year old former Fed guy, and as soon as it was identified by Goldman, they
self-reported the issue to make it public. What else are they supposed to do?

~~~
alexqgb
_" Regulators and public officlas who spent years earning little pay and doing
public service also want to monetize their experience and finally get a good
paycheck after leaving office."_

Do you really think any company is going to hire an honest, competent ex-
regulator who has made a career of fining and frustrating their top executives
- and possibly referring them to prosecutors? Or do you think they're more
likely to hire that regulator's "friendlier" colleague who spent the same
amount of time defusing and deflecting warranted regulatory actions in hopes
that he'd be rewarded with a plum gig once he left the government?

Assuming they did hire the softie, can you see how they'd want everyone still
working for the government what cushy well-paid gig the guy ended up with? And
isn't that exactly what happens?

 _" Lots of examples of this in the bitcoin space lately.. e.g. Arthur
Leavitt.. it's not just happening at goldman sachs)"_

Well, yes, my point exactly. "Lots of people doing it means it's okay" is one
view. Others would call the same pattern "evidence of entrenched systemic
corruption." Indeed, the very fact that this _is_ so widespread that's so
problematic as that's what signals to our shadier "regulator" in the previous
example that he will, in fact, be suitably rewarded if he plays ball.

 _" In this article, it sounds like a foolish (and possibly illegal) decision
by a 29 year old former Fed guy,"_

No, not "possibly illegal". Flagrantly illegal. That's why he's got a criminal
defense lawyer.

~~~
philrapo
>Do you really think any company is going to hire an honest, competent ex-
regulator who has made a career of fining and frustrating their top executives
- and possibly referring them to prosecutors?

Yes, absolutely. I think it's ridiculous to suggest that competent and strict
regulators are not in demand by the private sector. They clearly have valuable
experience, advice, and skills. A timely example is Ben Lawsky, former head of
the NY DFS, who is often referred to as one of the "most feared" regulators in
banking. I have no doubt he will find himself in demand by the private sector.
Another example is Mary Shapiro, former head of the SEC, who now works for
Promontory Financial (along with dozens of former regulators) providing
consulting services and regulatory advice for the private sector. [1]

>Well, yes, my point exactly. "Lots of people doing it means it's okay" is one
view.

So after one does public service, they should not be allowed to work in the
private sector? How is that not okay? I think that people should be free to
work whereever they like, provided the do not break laws. There is nothing
illegal about taking a profitable position after public service.

[1]
[http://www.promontory.com/Bios.aspx?id=2731](http://www.promontory.com/Bios.aspx?id=2731)

~~~
alexqgb
Shapiro's bio is hilarious.

 _" The Hon. Mary Schapiro was chairman of the U.S. Securities and Exchange
Commission from 2009 to 2012, capping a distinguished career in government and
private-sector regulation. Ms. Schapiro advises companies on corporate
governance and compliance standards that meet regulatory and investor
expectations."_

Why is this so funny? Because she was running the SEC when Jed Rakoff, the
judge overseeing its settlement with BoA, publicly castigated her agency on
the grounds that the deal they brokered (token fine, no admission of
wrongdoing) did not "comport with the most elementary notions of justice and
morality". So much for "advising companies on corporate governance and
compliance standards that meet regulatory and investor expectations."

And that was hardly the only bank-friendly failure on her watch. 2009-2012 is
timeframe in which, famously, nobody responsible for the global-economy
wrecking implosion of securities fraud on Wall St. went to jail. The DoJ said
it was because the didn't have the evidence needed to bring anyone to trial.
And whose job was it to gather that evidence? That's right, Mary Shapiro's.

Usually, when people talk about the toothlessness of "light-touch" regulation
and the rank corruption the begets regulatory capture, they cite Shapiro as an
example of everything that is _wrong_ with the system. You are literally the
first person I've ever encountered who has held her up as an example of
something done right.

Seriously, this is like getting upset about unjust sentencing laws and using
Charles Manson as a case in point.

Also, about your boy Ben Lawsky? All of his high profile enforcement actions
were _foreign_ banks (Paribas, for example, is French). Hometown banks (GS,
JPM, etc.) went largely untouched. I'm sure he'll have no trouble landing a
job, but not because he was tough. He was _selectively_ tough. Big difference.

> _" So after one does public service, they should not be allowed to work in
> the private sector? How is that not okay?"_

Dude, spare me the bullshit straw man, okay? That's not even remotely close to
what I - or anyone else who has a problem with regulatory capture - has ever
said. What people who follow this stuff _do_ say is that high-ranking
officials responsible for setting policy or directing law enforcement should
not be allowed to accept lucrative jobs from the specific companies or
industries they oversaw. Why? Because those jobs are a thinly-veiled vector
for outright bribery.

At _minimum_ there needs to be a 5-7 year cooling down period before they can
go to work for one of their former charges. Others say a decade, at least, if
you're serious about maintaining trust in the government.

------
cryoshon
Scrutiny? The article is pretty weak on real scrutiny. It's not quite a
whitewash, but it's definitely limp when it comes to hammering the bottom
line:

The "ties" described by the article would be better described as symbiosis
between regulatory bodies and Goldman Sachs designed to maximize wealth for
Goldman Sachs to the detriment of the public. Everyone knew that Goldman Sachs
owned most of the politicians and regulatory groups before. This article puts
forth a few more pieces of evidence, to nail the coffin shut. Cue apologists
denying that these are established facts.

Why is this corruption tolerated?

~~~
sillysaurus3
_Why is this corruption tolerated?_

A more illuminating way to phrase this is, "What are you going to do about
it?"

~~~
alphonse23
use bitcoins, stop using banks.

------
jostmey
After listening to the entire article what struck me hard was the secretive
nature of the "fed". Their behavior was the exact opposite of what I consider
to be a transparent and corrupt free government agency.

------
jgalt212
Goldman, it seems, has become very effective in the practice of Regulatory
Capture.

[http://en.wikipedia.org/wiki/Regulatory_capture](http://en.wikipedia.org/wiki/Regulatory_capture)

