By Matthew Russell Lee
UNITED NATIONS, October 15 -- The secret recordings of then Federal Reserve examiner Carmen Segarra about Goldman Sachs and regulatory capture have given rise to calls for oversight hearings by at least two US Senators, and to spin from the Federal Reserve Bank of New York.
On October 10, Inner City Press was sent heavily redacted copies of two letters from the CIT Group to the Federal Reserve Bank of New York, supposedly in compliance with the Freedom of Information Act - nowuploaded to Scribd here and here.
CIT sought to withhold even its Community Reinvestment Act plan. Inner City Press raised the issue to Fed Chair Yellen in Washington - and today, October 15, the Federal Reserve called Inner City Press and left a voice mail to say its request for extension of the comment period, because of the incorrectly withheld CIT documents, has been granted until October 22.
While appreciating the Fed's comment period extension, the context and public policy questions recently raised must be noted.
The head of the FRBNY since 2009, William Dudley, has insisted that supervision by the Fed and its regional banks is "completely in the public interest." He cites, in support of this, something he calls "horizontal" supervision, which to many has the context of being supine.
And the Federal Reserve Banks are, in fact, owned by the banks they ostensibly regulate. And as Inner City Press has previously reported, while merger applications go in the first instance to the Federal Reserve Bank, they have only the power to approve, not deny or even impose conditions, the applications.
Horizontal, indeed.
This horizontal position is the rule, not the exception. Inner City Press routinely submits Freedom of Information Act requests for communication between the Fed and banks applying for mergers.
Most recently, the Fed has extended its deadline for responding to Inner City Press' request on CIT - OneWest, on which it purported to close its public comment period on September 24:
FOIA Request No. F-2014-00380
Dear Mr. Lee,
On August 27, 2014, the Board of Governors ("Board") received your electronic message dated August 26, pursuant to the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552... On August 28, 2014, the Board’s Freedom of Information Office made an interim production of responsive documents consisting of the public portion of the application by CIT Group Inc. and Carbon Merger Sub LLC to acquire and merge with IMB HoldCo LLC, and thereby indirectly acquire voting shares of OneWest Bank... Pursuant to section (a)(6)(B)(i) of the FOIA, we are extending the period for our response until October 9, 2014, in order to consult with two or more components of the Board having a substantial interest in the determination of the request. If a determination can be made before October 9, 2014, we will respond to you promptly.
How can the public be shut out before it has the basic information it has requested? Now, only because CIT mis-published public notice, the Fed's comment period has been extended to October 10. (A new Office of the Comptroller of the Currency comment period has opened, through October 24.)
The Federal Reserve Board has asked CIT some questions, including “discuss CIT Group's plans to manage OneWest Bank's mortgage servicing assets and nontraditional mortgage loan portfolio." Nontraditional mortgages - that would be, subprime.
Tellingly, when lawyers leave the Federal Reserve's Legal Division, many go to white shoe law firms that submit bank merger applications to the same people they until recently worked with or supervised.
Inner City Press, Bronx-based Fair Finance Watch and NCRC have repeatedly raised this to the Fed, without meaningful response.
So here's hoping that Carmen Segarra's courage, in secretly making the recordings and then releasing them, leads to increased oversight of and reform at the Fed.
The problem is, while some in Congress are willing to criticize the Fed, the real parties in interest here are the largest banks and investment banks in the country. Who in Congress will directly challenge those? Watch this site.
