Jake Bernstein and Steve Engelberg from ProPublica discuss the Federal Reserve Bank of New York’s weak oversight and the aftermath of the Carmen Segarra tapes
The inner workings of the Federal Reserve Bank of New York rarely come to light. But excerpts from a bank examiner’s secret recordings have made the Fed’s struggles to be a watchdog over Wall Street’s biggest banks more transparent.
“We never get to sit inside these rooms and hear these conversations and really watch as the regulatory process unfolds. I think a lot of the people were surprised at what they heard,” says ProPublica’s Jake Bernstein to Editor-in-Chief Steve Engelberg on this week’s podcast.
In September, ProPublica teamed up with radio program This American Life to tell the story of Carmen Segarra, a Fed examiner who made secret audio recordings while embedded at Goldman Sachs. Bernstein continues to investigate the New York Fed after Segarra’s whistle blowing, which has led to a review by the Federal Reserve Board, Senate hearing on regulatory capture, and a bill introduced by Sen. Jack Reed, D-R.I. to make the Fed’s president subject to Senate confirmation.
After the financial crisis of 2008, the New York Fed actually received more authority from Congress to supervise the big banks under its umbrella, including Goldman Sachs, JPMorgan, Citigroup, and more, but some of the new specialized examiners sent into these banks like Segarra faced resistance to doing their jobs from their Fed supervisors.
Bernstein describes how an outside consultant attributed much of the Fed’s weak oversight to a “culture of passivity,” deference to big banks, and “fear among the employees of the New York Fed to step out of line and contradict their superiors.” Engelberg points out that Fed accountability is seemingly one of the few bipartisan issues that both Democrats and Republicans can agree on.
Both political parties have called for reform at the Fed, especially after the financial crisis in 2008. “The right seems to be a little more concerned about monetary policy and the left seems to be a little more concerned about supervision,” Bernstein says. “But what I think unites [Republicans and Democrats] is the idea of transparency and the idea that the Fed operates in a very secretive manner.”
However, if Nifty does not make a lower low and closes above 8,560, bulls will regain control
In line with US indices, which closed lower on Monday, the Indian indices too opened lower. We had mentioned in Monday’s closing report that NSE’s CNX Nifty will shoot up if the Reserve Bank of India (RBI) surprises with a rate cut. If not, the index will move sideways. Except for the volatility noticed at the time of RBI announcement during which the Nifty hit both its intra-day low and the high, the benchmark moved sideways for the entire session and closed in the negative for the second consecutive session.
The S&P BSE Sensex opened at 28,522 while Nifty opened at 8,535. The indices hit a low at 28,386 and 8,505 and high at 28,576 and 8,560, respectively. Sensex closed at 28,444 (down 116 points or 0.40%) while Nifty closed at 8,525 (down 31 points or 0.36%). The NSE recorded a volume of 80.36 crore shares. India VIX fell 6.12% to close at 12.3950.
The RBI kept its main lending rate viz. the repo rate unchanged at 8% and also kept the cash reserve ratio of scheduled banks unchanged at 4% of net demand and time liabilities. RBI said after a monetary policy review that if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle.
The output of eight core industries, having a combined weight of 37.9% in the Index of Industrial Production (IIP), galloped 6.3% in October 2014, government data released on Monday showed. Coal production shot up 16.2%, while the electricity generation zoomed 13.2% in October 2014 over October 2013, mainly contributing to the healthy growth in the output of overall eight core industries. The core sectors output growth stood at 4.3% in April-October 2014 compared with 4.2% growth in the corresponding period last year. HSBC India Services PMI for November 2014 is due on Wednesday.
On Monday, the Department of Financial Services invited suggestions from general public on various parameters as to how to improve performance of public sector banks.
Recently RBI eased imports curbs by scrapping 80:20 schemes. According to PTI report, gold today posted this year's biggest single-day rise of Rs840, and regained the Rs27,000 per 10-gram level after a gap of over one month. Silver also recorded a significant gain of Rs2,700 to reach Rs37,000 per kg on increased offtake by industrial units and coin makers.
Coming back to markets, Sun Pharma Advanced Research (9.75%) was the top gainer in ‘A’ group on the BSE. The stock was in news as it announced that the US FDA has issued a complete response letter to its new drug application for Latanoprost BAK-free eyedrops.
While the FDA did not seek any additional information for supporting clinical data, it sought additional information on certain labelling and other deficiencies for processing the NDA. The company believes that this additional information request from the FDA can be addressed on priority.
Public sector oil marketing companies were pulled lower after the government raised factory gate duties on petrol by Rs2.25 a litre and on diesel by Re1 per litre with immediate effect. BPCL (4.06%) was among the top four losers in the ‘A’ group on the BSE.
Bharti Airtel (1.76%) was among the top two gainers in Sensex 30 pack. the company was in news as on Monday it said that it will offer high-speed 3G roaming services to its 8.5 million customers in Odisha.
State-run GAIL (2.85%) was the top loser in Sensex 30 stock. Media reports say that the oil and power ministry is also looking at avoiding double-charging of marketing margins once the gas is pooled. For the gas pooling to become more viable and help the shortage of gas faced by stranded power plants, the government is now looking at cutting GAIL’s marketing margins by 75%.
On Monday, US indices closed in the red. The Institute for Supply Management said its US manufacturing index edged down to 58.7% in November from 59% in October. A separate report on Monday by the research firm Markit said that purchasing managers index for November showed a reading of 54.8, down from 55.9 in October. That marks the lowest reading in ten months.
Except for NZSE 50 (0.20%) and Taiwan Weighted (0.91%) all the other Asian indices closed in the green. Shanghai Composite (3.11%) was the top gainer.
European indices were showing mixed trading while US Futures were trading in the green.
Sahara's properties at Jodhpur, Chomu, Pune and Vasai near Mumbai are expected to fetch about Rs2,700 crore
The Supreme Court on Tuesday allowed Subrata Roy-led Sahara group to sell four of its domestic properties that are likely to fetch about Rs2,700 crore. This includes Sahara's properties at Jodhpur, Chomu, Pune and Vasai near Mumbai.
The apex court also directed Sahara group to handover the proceeds from the sale to market regulator Securities and Exchange Board of India (SEBI) to facilitate bail for Roy.
Earlier, Sahara had told a bench headed by Justice TS Thakur that it could not sell its two hotels in London and another in New York as Bank of China, which has charge on these, has put hurdles.
When SEBI objected to deduction from the loan amount on Sahara's overseas properties for paying to Bank of China, the apex court asked SEBI to seek more details from Roy-led group on the loan agreement.
Last week, the SC had asked SEBI to suggest an asset management agency that could arrange better deals for the Sahara properties up for sale.
Sahara chief Roy has been imprisoned in Tihar Jail since 4th March on Court orders and his bail requires Rs10,000 crore, including Rs5,000 crore in cash and the rest in bank guarantees.