Bill Dudley, Former Kingpin of Darkness at the New York Fed, Now Urges Transparency at the Fed

Sat Jan 6 05:12:42 PST 2024

https://wallstreetonparade.com/2024/01/bill-dudley-former-kingpin-of-darkness-at-the-new-york-fed-now-urges-transparency-at-the-fed/

Bill Dudley, Former Kingpin of Darkness at the New York Fed, Now Urges
Transparency at the Fed

By Pam Martens and Russ Martens: January 4, 2024 ~

William C. (Bill) Dudley, Former President of the Federal Reserve Bank of
New York

William (Bill) Dudley served as President of the New York Fed from 2009 to
2018. (He was previously an executive at Goldman Sachs.) During Dudley’s
tenure at the New York Fed, it secretly oversaw the largest and darkest
bailout of Wall Street mega banks in global banking history.

A Bloomberg News reporter, the late Mark Pittman, battled in court for
years to get the details of those bailouts released to the public. Today,
the former kingpin of darkness at the New York Fed, Bill Dudley, had the
audacity to pen an opinion column for Bloomberg News, urging – wait for it
– more transparency at the Fed.

The ironic title of Dudley’s column is (paywall): “If Only We Knew the
Problems Facing America’s Banks.” (We do. See Federal Agency Study
Contradicts Fed Chair: Finds Banking System Is Ripe for Another Crisis and
Remains “Fragile and Uncertain.”)

The hubris of Dudley’s reign at the New York Fed is perhaps only second to
Robert Kaplan’s reign at the Dallas Fed. (Kaplan also came from Goldman
Sachs.)

Let’s start with Carmen Segarra, a lawyer and former bank examiner at the
New York Fed, one of the 12 regional Federal Reserve Banks – but the only
one with two trading floors and a money spigot to Wall Street. Segarra
charged in a lawsuit filed in October 2013 that she was told to change her
negative examination of Goldman Sachs by colleagues, who also obstructed
and interfered with her investigation. According to her lawsuit, when she
refused to alter her findings, she was terminated in retaliation and
escorted from the New York Fed premises.

After having her case tossed by a federal Judge whose lawyer husband was
representing Goldman Sachs, Segarra turned over her 46 hours of secret tape
recordings on the matter to ProPublica’s Jake Bernstein and public radio’s
This American Life, creating a media frenzy.

In early 2012, as JPMorgan Chase was making risky bets with derivatives in
London, using deposits from its federally-insured bank in the U.S., its
Chairman and CEO, Jamie Dimon, was sitting on the Board of Directors at the
New York Fed. As Dimon’s bank was being investigated by the New York Fed,
Jamie Dimon continued to sit on its Board, serving out his two terms which
ended in late 2012. The derivatives debacle became infamously known as the
London Whale trades where JPMorgan admitted to losing $6.2 billion of its
bank depositors’ money.

But it wasn’t the New York Fed that released a transparent report on the
London Whale and the diabolical risk-taking with federally-insured
deposits, it was the U.S. Senate’s Permanent Subcommittee on Investigations.

A report in October of 2014 from the Federal Reserve’s Inspector General
indicated that the New York Fed was advised of potential trouble in the
Chief Investment Office at JPMorgan Chase on multiple occasions but failed
to conduct a comprehensive examination that might have alerted it at an
early stage to the wild gambles JPMorgan was making in derivatives with
depositors’ money, leading to the London Whale scandal and $6.2 billion in
losses.

While the New York Fed was “supervising” JPMorgan, Bill Dudley was serving
as the President of the New York Fed and his wife, Ann Darby, a former Vice
President at JPMorgan, was receiving approximately $190,000 per year in
deferred compensation from JPMorgan – an amount she was slated to receive
until 2021 according to financial disclosure forms.

According to the New York Fed’s web site, its “employees are subject to the
same conflict of interest statute that applies to federal government
employees (18 U.S.C. Section 208).” Under that statute, a spouse’s
conflicts become the conflicts of the employee.

As far as we can recall, Dudley is the only Fed Bank President to have been
put through a public shaming before a U.S. Senate Banking Subcommittee. In
November 2014, the Senate Subcommittee on Financial Institutions and
Consumer Protection called Dudley to testify following the Segarra
revelations.

During the hearing, Senator Elizabeth Warren drilled down to just how
Dudley saw his role as a regulator. In a revealing exchange, Dudley made it
clear that he didn’t interpret his role as a cop on the beat, calling his
job “more of a fire warden” to make sure the banking institutions are run
well so that they’re not going to catch on fire and burn down.

Warren shot back: “But you don’t think you should be doing any
investigation; you should wait and see if it jumps in front of you.” Warren
also brought out the fact that once the New York Fed learned that Goldman
Sachs had fashioned a deal for the Spanish bank, Banco Santander, which a
New York Fed employee called “legal but shady,” to dress up its capital,
the New York Fed failed to bring the activity to the attention of European
banking regulators.

Citigroup, supervised by the New York Fed, burned down to a 99-cent stock
while Dudley was President at the New York Fed. It would later be revealed
via a Government Accountability Office audit that Citigroup had secretly
received $2.5 trillion in cumulative emergency loans from the New York Fed
from December 2007 to at least July of 2010 to resuscitate its sinking
carcass.

Dudley’s appearance at the Senate hearing was followed by testimony from
David O. Beim, Professor of Professional Practice at Columbia Business
School. Professor Beim was the author of a 2009 report, commissioned by the
New York Fed, that was highly critical of how deferential the regulator was
to the banks it was charged with supervising. The report made multiple
recommendations for changing the culture. The existence of the report was
revealed in the ProPublica story on the Segarra tapes. At the Senate
hearing, Dudley admitted that he had never spoken with Professor Beim in
the five years since the report was given to him but said many
recommendations had been implemented.