Every so often a family member does something significant that makes you really proud. That happened to me this week when I learned about the full details of the role my Dad played in trying to prevent regulatory failure by the New York Federal Reserve in a pretty astonishing story that was uncovered by Pulitzer Prize-winning reporter Jake Bernstein at ProPublica and This American Life and covered subsequently by Michael Lewis on Bloomberg and by the Washington Post.
The story involves a former employee of the New York Federal Reserve named Carmen Segarra who was fired for refusing to back down from her conclusion that Goldman Sachs fell short of regulatory requirements for dealing with certain conflicts of interest. Sensing that she was working in an overly deferential regulatory system that would reject her conclusions, she secretly recorded meetings that supported her case.
The most notable smoking gun quotes were from a Goldman employee who said that “once clients are wealthy enough, certain consumer laws don’t apply to them” and from a fellow Fed regulator who responded to Segarra’s surprise at this statement by saying “you didn’t hear that.”
The background for this story is that in 2009, the head of the New York Federal Reserve asked my father, David Beim, a Professor at Columbia Business School, to write an internal report on how the Fed could have missed all the incredibly risky behavior at investment banks that helped cause the 2008 financial crisis.