On Sept. 26, ProPublica, in partnership with the radio program This American Life, revealed that a bank examiner for the Federal Reserve Bank of New York had secretly recorded approximately 46 hours of audio while on the job. The stories focused on what happened to the examiner, Carmen Segarra, and what she witnessed while embedded at Goldman Sachs between November 2011 and May 2012. 

For the first time, the public could hear regulators supervise a powerful bank in real time. Sen. Sherrod Brown, D-Ohio, echoed the opinion of many who said they found the recordings troubling. "It kind of emphasizes what we have thought all along, that the regulators are too cozy toward the industry they are meant to police," said Brown. 

The New York Fed hired Segarra as part of a wave of new expert examiners to supervise banks so big their failure could torpedo the economy. Soon after she started, Segarra began experiencing conflicts with her colleagues over differing views of what they were seeing at Goldman Sachs. She was fired after only seven months. A week before her termination, her supervisor tried unsuccessfully to get her to change her findings about Goldman’s conflicts-of-interest policy. 

The New York Fed says Segarra’s firing was unrelated to her supervision of Goldman. She filed a lawsuit against the New York Fed and her supervisors in 2013. It was dismissed without a ruling on the merits and is on appeal.  

Here's some of the audio that was released. Check back — we will be updating this page. 

"I fussed at them pretty good."

In a meeting with his team, Mike Silva extolled the strides the Fed had made on the Banco Santander deal. The Fed's interest got the bank's attention, he said, and senior Goldman executives had apologized to him for the way the Fed had learned about the deal. "I guarantee they'll think twice about the next one, because by putting them through their paces, and having that large Fed crowd come in, you know we, I fussed at 'em pretty good," he said. "They were very, very nervous."

"I never want to get close to that moment again."

Mike Silva tells the Fed’s team at Goldman what it was like during one of the darkest moments of the financial crisis. Shares in a large money market fund – the Reserve Primary Fund – had fallen below the standard price of $1, "breaking the buck" and threatening to touch off a run by investors. The investment firm Lehman Brothers had entered bankruptcy, and the financial system appeared in danger of collapse. Silva said when realized that “nobody had any idea how to respond to that, I went into the bathroom and threw up.”

"Just to button up one point."

The Fed team met with Goldman executives to question them about the Banco Santander deal. Mike Silva had been particularly interested in asking them about the “no-objection” clause in the deal. After more than an hour, he sprung the question.

"A lot of it is consensus building."

Johnathon Kim urged Segarra to focus on “consensus building” to try and win over her colleagues, role playing how she should go about it. Almost three years earlier, David Beim had written in report about the New York Fed: “An allied issue is that building consensus can result in a whittling down of issues or a smoothing of exam findings. Compromise often results in less forceful language and demands on the banks involved."

"We have to come off the view."

In May 2012, New York Fed examiner Carmen Segarra was summoned to meet with Michael Silva, the head Fed official embedded at Goldman Sachs. After he and his deputy ushered her into a small office, Silva got straight to the point. “We have to come off the view that Goldman doesn’t have any kind of conflicts of interest policy,” said Silva. Over the next 40 minutes, Silva urged Segarra to change her examination conclusions. Segarra said that based on the evidence she had found, professionally, she could not. A week after the meeting, she was fired. The New York Fed says her firing had nothing to do with her examination of Goldman.

"Don’t mistake our inquisitiveness."

In January 2012, after a meeting where the New York Fed team of examiners peppered Goldman Sachs executives with questions about a controversial deal involving Banco Santander, the group went back to their floor at the bank and held a “pow-wow” to discuss the meeting. One Fed examiner worried that they had pushed Goldman too hard. “I think we don’t want to discourage Goldman from disclosing these types of things in the future,” he said. Instead, he suggested telling the bank, “Don’t mistake our inquisitiveness, and our desire to understand more about the marketplace in general, as a criticism of you as a firm necessarily.” To Segarra, the comment represented a fear she had encountered among some of her colleagues of upsetting the bank they supervised, despite the fact it was required by law to turn over information to the regulators.

"Legal but shady."

As Michael Silva rallied his team before their big meeting about the Banco Santander deal with Goldman Sachs executives, he sketched out his view. “My own personal thinking right now is that we're looking at a transaction that's legal but shady,” he said before explaining how he wanted his staff to act in the meeting. “I want to keep them nervous,” he said. The examiners huddled around him laughed.

"(One thing) they never got from me was a no objection."

One aspect of the Santander transaction in particular piqued Silva’s interest. It appeared that the agreement required Goldman Sachs to obtain a “no objection” from the New York Fed on the deal. Yet the deal had gone forward and Silva had not given his blessing. “The one thing I know as a lawyer that they never got from me was a no objection,” he said. In the meeting with Goldman, an executive would say the “no objection” clause was for the firm’s benefit and not meant to obligate the bank to get approval from its regulator.

"A consensus view of definitely."

In his 2009 review of the New York Fed, Columbia Professor David Beim wrote that a push for consensus by senior managers sometimes softened the New York Fed’s enforcement. It “can result in a whittling down of issues or a smoothing of exam findings. Compromise often results in less forceful language and demands on the banks involved.” On Segarra’s tapes, her supervisor Johnathon Kim criticizes her for being too strong in her conclusions and using the word “definitely” too much. “If you use that, then you want to have a consensus view of definitely, not only your own,” he says.

"It’s basically window dressing."

The Santander transaction was complex, but one New York Fed employee boiled it down to its essence. It was like Goldman “getting paid to watch a briefcase.” Under the deal, Santander transferred some of the shares it held in its Brazilian subsidiary to Goldman. This effectively reduced the amount of capital Santander needed. In exchange for a fee from Santander, Goldman would hold on to the shares for a few years and then return them. The deal would help Santander announce that it had reached the capital ratio its regulators required six months ahead. Silva called it “basically window dressing that’s designed to help Banco Santander artificially enhance its capital."

"You’ve heard about all the issues."

 Perhaps to make Carmen Segarra feel better about the resistance she was encountering from her Fed colleagues at Goldman Sachs, Johnathon Kim pointed out she wasn’t alone. It was bad at JPMorgan too, he suggested. 

"Grinds everything to a halt."

Johnathon Kim told Segarra that there was a bottleneck on the New York Fed’s team at JPMorgan. The senior official on the team wanted all the information before she would allow examiners to proceed with their investigations. Kim provided the sound effects for what happened next – a crunch – “grinds everything to a halt."

"The issue is one that is alive."

In early January, the head of supervision for the New York Fed, Sarah Dahlgren, stopped by a meeting of legal and compliance risk specialists. The meeting turned into a gripe session about the difficulty the risk examiners were encountering from management embedded at the banks. In particular, it was not clear who called the shots where their examinations were concerned – was it the head New York Fed person stationed at the bank or their own risk specialist supervisors. Dahlgren acknowledged this was a problem at JPMorgan. 

"Iron hand woman."

Johnathon Kim described Dianne Dobbeck, the senior New York Fed official stationed at JPMorgan, as an “iron hand woman,” because he believed she expected the specialized risk examiners to follow orders, not think for themselves. The legal and compliance risk specialists wasn’t allowed access to anything,” he said. “Nada."