“The issues are lack of backbone, transparency, thoroughness and perseverance.”
– So Who is Carmen Segarra? A Fed Whistleblower Q&A (ProPublica)
Thanks to Yoav Lurie for tweeting about the most recent episode of This American Life. I’ve subscribed to the podcast for several months and have seen other friends refer to it, but had never listened to a full episode. However, this issue struck a chord with me. I lived and worked in New York City during the last financial crisis and have some strong opinions on the subject.
We aren’t in the middle of a financial crisis right now. The US unemployment rate has gone down from 10% in 2010 to 6% in 2014. GDP growth has recovered from a negative rate in 2008 to over 4% this year. This would be an excellent time to make preventative changes in the way that we regulate banks in order to avoid another severe recession, and that is why I am excited about the work of Carmen Segarra.
Today I run a web development consultancy, but I still remember working as a Commercial Mortgage Backed Security (CMBS) and Collateralized Debt Obligation (CDO) analyst in 2006-2007. Goldman and the rest of the banks were lying through their teeth in an effort to sell these securities and the feds were doing nothing to prevent it. It was extremely challenging for me to stand up to my managers at the time and disagree with their bullish stance on the market.
Carmen Segarra lost her job and put her reputation on the line standing up to the most powerful people in banking, and we owe her a big thank you for that. Have you listened to the recordings that she took of discussions between Goldman and Fed officials? The people regulating our banking system sound pathetic and incompetent! They are afraid to enforce reasonable requirements on banks.
The primary motivation for creating the Federal Reserve System was to address banking panics. This is a system that we as Americans have created through our own government. It is something that we all have a stake in. I am thrilled that Elizabeth Warren is calling for an investigation into Segarra’s recordings, but it isn’t enough. Let’s work together to support the effort to reform our banking system and give praise to Carmen Segarra.