Too close for comfort
WASHINGTON (AP) – The head of the New York Federal Reserve was put on the defensive by Senate Democrats, who accused the Fed of being too close to the big banks it is charged with regulating.
William Dudley, president of the New York Fed, insisted at a Senate hearing yesterday that “our eyes are open” and regulators are fair, unbiased and rigorous in their oversight of the biggest United States banks.
A 2009 report found that the New York Fed’s culture stifled dissenting views among its bank supervisors.
“Of course we are not perfect, but we always strive to improve and retain your trust,” Dudley said at the hearing, which focused on whether the Federal Reserve has too cozy of a relationship with Wall Street banks.
Democratic critics say the Fed’s lax regulation of Wall Street banks could end up putting taxpayers on the hook again to bail them out as in the 2008 financial crisis.
“We need bank regulators who work to protect the American people, not the profits of giant banks,” said Senator Elizabeth Warren, a member of the banking panel who has become a key spokeswoman for the Democratic Party on economic issues.
“Change has to come from the top,” Warren said. “Either you need to fix it Mr Dudley, or we need to get someone who will.”
Warren and other members of the panel had testy exchanges with Dudley, who repeatedly defended the Fed’s actions in several cases involving big banks and said it has made great progress in sharpening its oversight.
The Federal Reserve, which oversees Wall Street titans such as JPMorgan Chase & Co., Goldman Sachs & Co., Bank of America Corp. and Citigroup Inc., announced late Thursday that it will review how it inspects and supervises the banks.
The Fed said the review will examine whether its decision-makers get the information they need to make good decisions in their inspection and oversight of banks. It also will look at the Fed’s internal culture, and whether dissenting views related to oversight are stifled.
The banks are considered to be so huge and interconnected that each could threaten the financial system if it collapsed.