Warren, Dems put screws to NY Fed chief

Democrats on a Senate Banking subcommittee pressured New York Federal Reserve President William Dudley Friday to strengthen his oversight of Wall Street.

Dudley has come under fire following reports that the bank — one of the top entities that policies Wall Street — has been lax in regulating big banks like Goldman Sachs.

“You need to fix it, or we need to get someone who will,” Sen. Elizabeth Warren (D-Mass.) told Dudley during one tense exchange.

“This culture begins at the top,” added Sen. Jack Reed (D-R.I.).

Dudley and his team have “failed time and time again” to find the proper balance between enforcing and enacting Wall Street policies, said Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, which convened the hearing.

The hearing followed a September ProPublica report centered on a recording seen as portraying a cozy relationship between the New York Fed and Wall Street.

The story, published through NPR, based its reporting on 46 hours of previously unreleased taped recordings of meetings at the bank.

Former New York Fed bank examiner Carmen Segarra, who was present at Friday’s hearing, taped the meetings. The recordings suggest that Segarra’s colleagues wouldn’t allow her to fully regulate Goldman Sachs.

“You backed up when Goldman was unhappy; you told the lead investigator to back up,” Warren said at one point during the hearing.

Dudley offered an unapologetic defense against his critics. He maintained that following the 2008 collapse, regulators have used new regulatory authorities granted to them by the 2010 Dodd-Frank Wall Street Reform law to strengthen oversight of the financial services industry.

Dudley said he “didn’t accept the characterization” that the tapes show the New York Fed isn’t working correctly. He said the tapes were an “incomplete record.”

“There are 46 hours of tapes. There was about 10 minutes of those tapes that were released,” Dudley said in response to a question from Warren. “To say that’s the definitive record of how the New York Fed conducts its supervision.”

Warren wouldn’t let him finish.

“I’m sorry,” Warren said, interrupting. “Surely you are not going to take the position, Mr. Dudley, that, if most of the time, most of what the Fed does is boring or even does its job, that it’s OK every now and again to throw in 10 minutes of backing people off their regulatory duties? …You think that’s not a problem if, the rest of the time, they’re doing their job?”

“I have no way of assessing how accurate those 10 minutes are, because I have had no ability to listen to the full 46 hours of tapes,” Dudley said. “So, I have no idea of assessing whether those 10 minutes are reflective of what’s going on at the New York Fed, or whether they’re a snippet that distorts what’s the situation.”

On the day before the hearing, Federal Reserve officials announced they were reviewing how they police Wall Street.