Tag Archives: United States

Chris Wood: Look to the books, not diplomacy, for the climate game-changer

Natural Security columnist Chris Wood is not impressed with this week’s much-trumpeted deal between China and the United States. He writes: “optimists greeted with hosannas the announcement that the Presidents Obama of the United States and Xi of China had agreed to a common statement setting out their respective goals to contain and eventually reduce their combined greenhouse gas emissions. The popular headline word was “game-changer.”

 

chris1

Chris Wood

“Sorry, but it was nothing of the sort. As numerous pundits pointed out, in restating China’s intention to allow GHG emissions to rise until 2030 before they begin to decline, and putting into words the reductions that are anticipated from U.S. actions already taken, the statement quite literally changed nothing.”

Change is indeed afoot — but it is coming from an entirely different direction, Wood argues. Excerpt of his new column, The Real ‘Game-Changer’ was not in Beijing. Has the ‘Anglosphere’ lost its Mojo?

Once upon a time an amalgam of rigorous, inquisitive candor about the physical world, and a deep delusion about superior racial entitlement, delivered control of two of the four continents that were up for colonial grabs in the 18th century to Britain.

Britain’s legal and political philosophy, its English language, and to a large extent genetic descendants of its families, dominate North America and Australia to this day. Europeans, Latin Americans, and others outside this socio-political clan have resented their exclusion and berated the ‘anglo’ model of cut-throat corporate permissiveness — what used to be called laissez-faire and is now re-branded for global distribution as neo-liberalism.

That fewer descendants of Empire persist in their delusions of racial superiority is a welcome development. But it’s worrying to see the Anglosphere also abandoning its realism about the physical world.

Exhibit A in this regard is climate change. … log in to read column  (paywall*)

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Posted in Current Affairs Also tagged , , , |

Deadly Force in Black and White America

Demonstrators march in Washington, D.C. on October 4 to protest the shooting of Michael Brown in Ferguson. Photo by Susan Melkisethian via Flickr, Creative Commons

Statistics show that American blacks are being killed at disturbing rates when set against the rest of the American population, reports ProPublica. Above, demonstrators march in Washington, D.C. on October 4 to protest the shooting of Michael Brown in Ferguson. Photo by Susan Melkisethian via Flickr, Creative Commons

by Ryan Gabrielson, Ryann Grochowski Jones and Eric Sagara, ProPublica
October 10, 2014   

Young American black males in recent years were at a far greater risk of being shot dead by police than their white counterparts – 21 times greater i, according to a ProPublica analysis of federally collected data on fatal police shootings.

The 1,217 deadly police shootings from 2010 to 2012 captured in the federal data show that blacks, age 15 to 19, were killed at a rate of 31.17 per million, while just 1.47 per million white males in that age range died at the hands of police in the United States.

One way of appreciating that stark disparity, ProPublica’s analysis shows, is to calculate how many more whites over those three years would have had to have been killed for them to have been at equal risk. The number is jarring – 185, more than one per week.

ProPublica’s risk analysis on young males killed by police certainly seems to support what has been an article of faith in the African American community for decades: Blacks are being killed at disturbing rates when set against the rest of the American population.

Our examination involved detailed accounts of more than 12,000 police homicides stretching from 1980 to 2012 contained in the FBI’s Supplementary Homicide Report. The data, annually self-reported by hundreds of police departments across the country, confirms some assumptions, runs counter to others, and adds nuance to a wide range of questions about the use of deadly police force.

Colin Loftin, University at Albany professor and co-director of the Violence Research Group, said the FBI data is a minimum count of homicides by police, and that it is impossible to precisely measure what puts people at risk of homicide by police without more and better records. Still, what the data shows about the race of victims and officers, and the circumstances of killings, are “certainly relevant,” Loftin said.

“No question, there are all kinds of racial disparities across our criminal justice system,” he said. “This is one example.”

The FBI’s data has appeared in news accounts over the years, and surfaced again with the August killing of Michael Brown in Ferguson, Missouri. To a great degree, observers and experts lamented the limited nature of the FBI’s reports. Their shortcomings are inarguable.

The data, for instance, is terribly incomplete. Vast numbers of the country’s 17,000 police departments don’t file fatal police shooting reports at all, and many have filed reports for some years but not others. Florida departments haven’t filed reports since 1997 and New York City last reported in 2007. Information contained in the individual reports can also be flawed. Still, lots of the reporting police departments are in larger cities, and at least 1000 police departments filed a report or reports over the 33 years.

There is, then, value in what the data can show while accepting, and accounting for, its limitations. Indeed, while the absolute numbers are problematic, a comparison between white and black victims shows important trends. Our analysis included dividing the number of people of each race killed by police by the number of people of that race living in the country at the time, to produce two different rates: the risk of getting killed by police if you are white and if you are black.

David Klinger, a University of Missouri-St. Louis professor and expert on police use of deadly force, said racial disparities in the data could result from “measurement error,” meaning that the unreported killings could alter ProPublica’s findings.

However, he said the disparity between black and white teenage boys is so wide, “I doubt the measurement error would account for that.”

ProPublica spent weeks digging into the many rich categories of information the reports hold: the race of the officers involved; the circumstances cited for the use of deadly force; the age of those killed.

Who Gets Killed?

The finding that young black men are 21 times as likely as their white peers to be killed by police is drawn from reports filed for the years 2010 to 2012, the three most recent years for which FBI numbers are available.

The black boys killed can be disturbingly young. There were 41 teens 14 years or younger reported killed by police from 1980 to 2012 ii. 27 of them were black iii; 8 were white iv; 4 were Hispanic v and 1 was Asian vi.

That’s not to say officers weren’t killing white people. Indeed, some 44 percent of all those killed by police across the 33 years were white.

White or black, though, those slain by police tended to be roughly the same age. The average age of blacks killed by police was 30. The average age of whites was 35.

Who is killing all those black men and boys?

Mostly white officers. But in hundreds of instances, black officers, too. Black officers account for a little more than 10 percent of all fatal police shootings. Of those they kill, though, 78 percent were black.

White officers, given their great numbers in so many of the country’s police departments, are well represented in all categories of police killings. White officers killed 91 percent of the whites who died at the hands of police. And they were responsible for 68 percent of the people of color killed. Those people of color represented 46 percent of all those killed by white officers.

What were the circumstances surrounding all these fatal encounters?

There were 151 instances in which police noted that teens they had shot dead had been fleeing or resisting arrest at the time of the encounter. 67 percent of those killed in such circumstances were black. That disparity was even starker in the last couple of years: of the 15 teens shot feeling arrest from 2010 to 2012, 14 were black.

Did police always list the circumstances of the killings? No, actually, there were many deadly shooting where the circumstances were listed as “undetermined.” 77 percent of those killed in such instances were black.

Certainly, there were instances where police truly feared for their lives.

Of course, although the data show that police reported that as the cause of their actions in far greater numbers after the 1985 Supreme Court decision that said police could only justify using deadly force if the suspects posed a threat to the officer or others. From 1980 to 1984, “officer under attack” was listed as the cause for 33 percent of the deadly shootings. Twenty years later, looking at data from 2005 to 2009, “officer under attack” was cited in 62 percent xxxvii of police killings.

Does the data include cases where police killed people with something other than a standard service handgun?

Yes, and the Los Angeles Police Department stood out in its use of shotguns. Most police killings involve officers firing handguns xl. But from 1980 to 2012, 714 involved the use of a shotgun xli. The Los Angeles Police Department has a special claim on that category. It accounted for 47 cases xlii in which an officer used a shotgun. The next highest total came from the Dallas Police Department: 14 xliii.

Creative Commons

i ProPublica calculated a statistical figure called a risk ratio by dividing the rate of black homicide victims by the rate of white victims. This ratio, commonly used in epidemiology, gives an estimate for how much more at risk black teenagers were to be killed by police officers.Risk ratios can have varying levels of precision, depending on a variety of mathematical factors. In this case, because such shootings are rare from a statistical perspective, a 95 percent confidence interval indicates that black teenagers are at between 10 and 40 times greater risk of being killed by a police officer. The calculation used 2010-2012 population estimates from the U.S. Census Bureau’s American Community Survey.

ii https://www.propublica.org/documents/item/1307015-victims-14under-byraceanddecade-spssoutput.html#document/p1/a179431

iii https://www.propublica.org/documents/item/1307015-victims-14under-byraceanddecade-spssoutput.html#document/p1/a179432

iv https://www.propublica.org/documents/item/1307015-victims-14under-byraceanddecade-spssoutput.html#document/p1/a179433

v https://www.propublica.org/documents/item/1307015-victims-14under-byraceanddecade-spssoutput.html#document/p1/a179434

vi https://www.propublica.org/documents/item/1307015-victims-14under-byraceanddecade-spssoutput.html#document/p1/a179435

xxxvii https://www.propublica.org/documents/item/1307298-circumstances-yearcats-spssoutput.html#document/p1/a179463

xl Calculated from the “Weapon Used by Offender” variable. Ranked based on frequency of reported shotgun homicides by police agencies.

xli https://www.propublica.org/documents/item/1307312-offweapon-bystate-spssoutput.html#document/p3/a179466

xlii https://www.propublica.org/documents/item/1307313-offweapon-lapd-spssoutput.html#document/p1/a179467

xliii https://www.propublica.org/documents/item/1307316-offweapon-dallas-spssoutput.html#document/p1/a179468

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U.S. Financial System Reform: Secret Recordings and a Culture Clash

Federal Reserve Bank of New York. Photo by Andreas Metz, Creative Commons

Federal Reserve Bank of New York. Photo by Andreas Metz, Creative Commons

 

by Jake Bernstein, ProPublica
September 26, 2014

Barely a year removed from the devastation of the 2008 financial crisis, the president of the United States’ Federal Reserve Bank of New York faced a crossroads. Congress had set its sights on reform. The biggest banks in the nation had shown that their failure could threaten the entire financial system. Lawmakers wanted new safeguards.

The Federal Reserve, and, by dint of its location off Wall Street, the New York Fed, was the logical choice to head the effort. Except it had failed miserably in catching the meltdown.

New York Fed President William Dudley had to answer two questions quickly: Why had his institution blown it, and how could it do better? So he called in an outsider, a Columbia University finance professor named David Beim, and granted him unlimited access to investigate. In exchange, the results would remain secret.

After interviews with dozens of New York Fed employees, Beim learned something that surprised even him. The most daunting obstacle the New York Fed faced in overseeing the nation’s biggest financial institutions was its own culture. The New York Fed had become too risk-averse and deferential to the banks it supervised. Its examiners feared contradicting bosses, who too often forced their findings into an institutional consensus that watered down much of what they did.

The report didn’t only highlight problems. Beim provided a path forward. He urged the New York Fed to hire expert examiners who were unafraid to speak up and then encourage them to do so. It was essential, he said, to preventing the next crisis.

A year later, Congress gave the Federal Reserve even more oversight authority. And the New York Fed started hiring specialized examiners to station inside the too-big-to fail institutions, those that posed the most risk to the financial system.

One of the expert examiners it chose was Carmen Segarra.

Segarra appeared to be exactly what Beim ordered. Passionate and direct, schooled in the Ivy League and at the Sorbonne, she was a lawyer with more than 13 years of experience in compliance 2013 the specialty of helping banks satisfy rules and regulations. The New York Fed placed her inside one of the biggest and, at the time, most controversial banks in the country, Goldman Sachs.

It did not go well. She was fired after only seven months.

New York City's Financial District. Photo by Dirk Knight, Creative Commons

New York City’s Financial District. Photo by Dirk Knight, Creative Commons

As ProPublica reported last year, Segarra sued the New York Fed and her bosses, claiming she was retaliated against for refusing to back down from a negative finding about Goldman Sachs. A judge threw out the case this year without ruling on the merits, saying the facts didn’t fit the statute under which she sued.

At the bottom of a document filed in the case, however, her lawyer disclosed a stunning fact: Segarra had made a series of audio recordings while at the New York Fed. Worried about what she was witnessing, Segarra wanted a record in case events were disputed. So she had purchased a tiny recorder at the Spy Store and began capturing what took place at Goldman and with her bosses.

Segarra ultimately recorded about 46 hours of meetings and conversations with her colleagues. Many of these events document key moments leading to her firing. But against the backdrop of the Beim report, they also offer an intimate study of the New York Fed’s culture at a pivotal moment in its effort to become a more forceful financial supervisor. Fed deliberations, confidential by regulation, rarely become public.

The recordings make clear that some of the cultural obstacles Beim outlined in his report persisted almost three years after he handed his report to Dudley. They portray a New York Fed that is at times reluctant to push hard against Goldman and struggling to define its authority while integrating Segarra and a new corps of expert examiners into a reorganized supervisory scheme.

Segarra became a polarizing personality inside the New York Fed — and a problem for her bosses — in part because she was too outspoken and direct about the issues she saw at both Goldman and the Fed. Some colleagues found her abrasive and complained. Her unwillingness to conform set her on a collision course with higher-ups at the New York Fed and, ultimately, led to her undoing.

In a tense, 40-minute meeting recorded the week before she was fired, Segarra’s boss repeatedly tries to persuade her to change her conclusion that Goldman was missing a policy to handle conflicts of interest. Segarra offered to review her evidence with higher-ups and told her boss she would accept being overruled once her findings were submitted. It wasn’t enough.

“Why do you have to say there’s no policy?” her boss said near the end of the grueling session.

“Professionally,” Segarra responded, “I cannot agree.”

The New York Fed disputes Segarra’s claim that she was fired in retaliation.

“The decision to terminate Ms. Segarra’s employment with the New York Fed was based entirely on performance grounds, not because she raised concerns as a member of any examination team about any institution,” it said in a two-page statement responding to an extensive list of questions from ProPublica and This American Life.

The statement also defends the bank’s record as regulator, saying it has taken steps to incorporate Beim’s recommendations and “provides multiple venues and layers of recourse to help ensure that its employees freely express their views and concerns.”

“The New York Fed,” the statement says, “categorically rejects the allegations being made about the integrity of its supervision of financial institutions.”

In the spring of 2009, New York Fed President William Dudley put together a team of eight senior staffers to help Beim in his inquiry. In many ways, this was familiar territory for Beim.

He had worked on Wall Street as a banker in the 1980s at Bankers Trust Company, assisting the firm through its transition from a retail to an investment bank. In 1997, the New York Fed hired Beim to study how it might improve its examination process. Beim recommended the Fed spend more time understanding the businesses it supervised. He also suggested a system of continuous monitoring rather than a single year-end examination.

Beim says his team in 2009 pursued a no-holds-barred investigation of the New York Fed. They were emboldened because the report was to remain an internal document, so there was no reason to hold back for fear of exposure. The words “Confidential Treatment Requested” ran across the bottom of the report.

“Nothing was off limits,” says Beim. “I was told I could ask anyone any question. There were no restrictions.”

In the end, his 27-page report laid bare a culture ruled by groupthink, where managers used consensus decision-making and layers of vetting to water down findings. Examiners feared to speak up lest they make a mistake or contradict higher-ups. Excessive secrecy stymied action and empowered gatekeepers, who used their authority to protect the banks they supervised.

“Our review of lessons learned from the crisis reveals a culture that is too risk-averse to respond quickly and flexibly to new challenges,” the report stated. “A number of people believe that supervisors paid excessive deference to banks, and as a result they were less aggressive in finding issues or in following up on them in a forceful way.”

One New York Fed employee, a supervisor, described his experience in terms of “regulatory capture,” the phrase commonly used to describe a situation where banks co-opt regulators. Beim included the remark in a footnote. “Within three weeks on the job, I saw the capture set in,” the manager stated.  

Confronted with the quotation, senior officers at the Fed asked the professor to remove it from the report, according to Beim. “They didn’t give an argument,” Beim said in an interview. “They were embarrassed.” He refused to change it.

The Beim report made the case that the New York Fed needed a specific kind of culture to transform itself into an institution able to monitor complex financial firms and catch the kinds of risks that were capable of torpedoing the global economy.

That meant hiring “out-of-the-box thinkers,” even at the risk of getting “disruptive personalities,” the report said. It called for expert examiners who would be contrarian, ask difficult questions and challenge the prevailing orthodoxy. Managers should add categories like “willingness to speak up” and “willingness to contradict me” to annual employee evaluations. And senior Fed managers had to take the lead.

“The top has to articulate why we’re going through this change, what the benefits are going to be and why it’s so important that we’re going to monitor everyone and make sure they stay on board,” Beim said in an interview.

Beim handed the report to Dudley. The professor kept it in draft form to help maintain secrecy and because he thought the Fed president might request changes. Instead, Dudley thanked him and that was it. Beim never heard from him again about the matter, he said.

Occupy Wall Street March in 2012. Photo by Michael Fleshman, Creative Commons

Occupy Wall Street March in 2012. Photo by Michael Fleshman, Creative Commons

In 2011, the Financial Crisis Inquiry Commission, created by Congress to investigate the causes behind the economic calamity, publicly released hundreds of documents. Buried among them was Beim’s report.

Because of the report’s candor, the release surprised Beim and New York Fed officials. Yet virtually no one else noticed.

Among the New York Fed employees enlisted to help Beim in his investigation was Michael Silva.

As a Fed veteran, Silva was a logical choice. A lawyer and graduate of the United States Naval Academy, he joined the bank as a law clerk in 1992. Silva had also assisted disabled veterans and had gone into Iraq after the 2003 invasion to help the country’s central bank. Prior to working on Beim’s report, he had been chief of staff to the previous New York Fed president, Timothy Geithner.

In declining through his lawyer to comment for this story, Silva cited the appeal of Segarra’s lawsuit and a prohibition on disclosing unpublished supervisory material. The rule allows regulators to monitor banks without having to worry about the release of information that could alarm customers and create a run on a bank that’s under scrutiny.

Silva had been in the room with Geithner in September 2008 during a seminal moment of the financial crisis. Shares in a large money market fund 2013 the Reserve Primary Fund 2013 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.

In Segarra’s recordings, Silva tells his team how, at least initially, no one in the war room at the New York Fed knew how to respond. He went into the bathroom, sick to his stomach, and vomited.

“I never want to get close to that moment again, but maybe I’m too close to that moment,” Silva told his New York Fed team at Goldman Sachs in a meeting one day.

Despite his years at the New York Fed, Silva was new to the institution’s supervisory side. He had never been an examiner or participated as part of a team inside a regulated bank until being appointed to lead the team at Goldman Sachs. Silva prefaced his financial crisis anecdote by saying the team needed to understand his motivations, “so you can perhaps push back on these things.”

In the recordings, Silva then offered a second anecdote. This one involved the moments before the Lehman bankruptcy.

Silva related how the top bankers in the nation were asked to contribute money to save Lehman. He described his disappointment when Goldman executives initially balked. Silva acknowledged that it might have been a hard sell to shareholders, but added that “if Goldman had stepped up with a big number, that would have encouraged the others.”

“It was extraordinarily disappointing to me that they weren’t thinking as Americans,” Silva says in the recording. “Those two things are very powerful experiences that, I will admit, influence my thinking.”  

Silva’s stories help explain his approach to a controversial deal that came to the New York Fed team’s attention in January 2012, two months after Segarra arrived. She said the Fed’s handling of the deal demonstrated its timidity whenever questions arose about Goldman’s actions. Debate about the deal runs through many of Segarra’s recordings.

On Friday, Jan. 6, 2012, at 3:54 p.m., a senior Goldman official sent an email to the on-site Fed regulators 2013 including Silva, Segarra and Segarra’s legal and compliance manager, Johnathon Kim. Goldman wanted to notify them about a fast-moving transaction with a large Spanish bank, Banco Santander. Spanish regulators had signed off on the deal, but Goldman was reaching out to its own regulators to see whether they had any questions.

At the time, European banks were shaky, particularly the Spanish ones. To shore up confidence, the European Banking Authority was demanding that banks hold more capital to offset potential future losses. Meeting these capital requirements was at the heart of the Goldman-Santander transaction.

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 its proper capital ratio six months ahead of the deadline.

In the recordings, one New York Fed employee compared it to Goldman “getting paid to watch a briefcase.” Silva states that the fee was $40 million and that potentially hundreds of millions more could be made from trading on the large number of shares Goldman would hold.

Santander and Goldman declined to respond to detailed questions about the deal.

Silva did not like the transaction. He acknowledged it appeared to be “perfectly legal” but thought it was bad to help Santander appear healthier than it might actually be.

“It’s pretty apparent when you think this thing through that it’s basically window dressing that’s designed to help Banco Santander artificially enhance its capital position,” he told his team before a big meeting on the topic with Goldman executives.

The deal closed the Sunday after the Friday email. The following week, Silva spoke with top Goldman people about it and told his team he had asked why the bank “should” do the deal. As Silva described it, there was a divide between the Fed’s view of the deal and Goldman’s.

“[Goldman executives] responded with a bunch of explanations that all relate to, ‘We can do this,’ ” Silva told his team.

Privately, Segarra saw little sense in Silva’s preoccupation with the question of whether “should” applied to the Santander deal. In an interview, she said it seemed to her that Silva and the other examiners who worked under him tended to focus on abstract issues that were “fuzzy” and “esoteric” like “should” and “reputational risk.”

Segarra believed that Goldman had more pressing compliance issues 2013 such as whether executives had checked the backgrounds of the parties to the deal in the way required by anti-money laundering regulations.

Segarra had joined the New York Fed on Oct. 31, 2011, as it was gearing up for its new era overseeing the biggest and riskiest banks. She was part of a reorganization meant to put more expert examiners to the task. 

In the past, examiners known as “relationship managers” had been stationed inside the banks. When they needed an in-depth review in a particular area, they would often call a risk specialist from that area to come do the examination for them.

In the new system, relationship managers would be redubbed “business-line specialists.” They would spend more time trying to understand how the banks made money. The business-line specialists would report to the senior New York Fed person stationed inside the bank.

The risk specialists like Segarra would no longer be called in from outside. They, too, would be embedded inside the banks, with an open mandate to do continuous examinations in their particular area of expertise, everything from credit risk to Segarra’s specialty of legal and compliance. They would have their own risk-specialist bosses but would also be expected to answer to the person in charge at the bank, the same manager of the business-line specialists.

In Goldman’s case, that was Silva.

Shortly after the Santander transaction closed, Segarra notified her own risk-specialist bosses that Silva was concerned. They told her to look into the deal. She met with Silva to tell him the news, but he had some of his own. The general counsel of the New York Fed had “reined me in,” he told Segarra. Silva did not refer by name to Tom Baxter, the New York Fed’s general counsel, but said: “I was all fired up, and he doesn’t want me getting the Fed to assert powers it doesn’t have.”

This conversation occurred the day before the New York Fed team met with Goldman officials to learn about the inner workings of the deal.

From the recordings, it’s not spelled out exactly what troubled the general counsel. But they make clear that higher-ups felt they had no authority to nix the Santander deal simply because Fed officials didn’t think Goldman “should” do it.

Segarra told Silva she understood but felt that if they looked, they’d likely find holes. Silva repeated himself. “Well, yes, but it is actually also the case that the general counsel reined me in a bit on that,” he reminded Segarra.

The following day, the New York Fed team gathered before their meeting with Goldman. Silva outlined his concerns without mentioning the general counsel’s admonishment. He said he thought the deal was “legal but shady.”

“I’d like these guys to come away from this meeting confused as to what we think about it,” he told the team. “I want to keep them nervous.”

As requested, Segarra had dug further into the transaction and found something unusual: a clause that seemed to require Goldman to alert the New York Fed about the terms and receive a “no objection.”

This appeared to pique Silva’s interest. “The one thing I know as a lawyer that they never got from me was a no objection,” he said at the pre-meeting. He rallied his team to look into all aspects of the deal. If they would “poke with our usual poker faces,” Silva said, maybe they would “find something even shadier.”

But what loomed as a showdown ended up fizzling. In the meeting with Goldman, an executive said the “no objection” clause was for the firm’s benefit and not meant to obligate Goldman to get approval. Rather than press the point, regulators moved on.

Afterward, the New York Fed staffers huddled again on their floor at the bank. The fact-finding process had only just started. In the meeting, Goldman had promised to get back to the regulators with more information to answer some of their questions. Still, one of the Fed lawyers present at the post-meeting lauded Goldman’s “thoroughness.”

Another examiner said he worried that the team was pushing 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 “inquisitiveness” comment represented a fear of upsetting Goldman.

By law, the banks are required to provide information if the New York Fed asks for it. Moreover, Goldman itself had brought the Santander deal to the regulators’ attention.

Beim’s report identified deference as a serious problem. In an interview, he explained that some of this behavior could be chalked up to a natural tendency to want to maintain good relations with people you see every day. The danger, Beim noted, is that it can morph into regulatory capture. To prevent it, the New York Fed typically tries to move examiners every few years.

Over the ensuing months, the Fed team at Goldman debated how to demonstrate their displeasure with Goldman over the Santander deal. The option with the most interest was to send a letter saying the Fed had concerns, but without forcing Goldman to do anything about them.

The only downside, said one Fed official on a recording in late January 2012, was that Goldman would just ignore them.

“We’re not obligating them to do anything necessarily, but it could very effectively get a reaction and change some behavior for future transactions,” one team member said.

In the same recorded meeting, Segarra pointed out that Goldman might not have done the anti-money laundering checks that Fed guidance outlines for deals like these. If so, the team might be able to do more than just send a letter, she said. The group ignored her.

It’s not clear from the recordings if the letter was ever sent.

Silva took an optimistic view in the meeting. 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.”

Segarra had worked previously at Citigroup, MBNA and Société Générale. She was accustomed to meetings that ended with specific action items.

At the Fed, simply having a meeting was often seen as akin to action, she said in an interview. “It’s like the information is discussed, and then it just ends up in like a vacuum, floating on air, not acted upon.”

Beim said he found the same dynamic at work in the lead up to the financial crisis. Fed officials noticed the accumulating risk in the system. “There were lengthy presentations on subjects like that,” Beim said. “It’s just that none of those meetings ever ended with anyone saying, ‘And therefore let’s take the following steps right now.'”

The New York Fed’s post-crisis reorganization didn’t resolve longstanding tensions between its examiner corps. In fact, by empowering risk specialists, it may have exacerbated them.

Beim had highlighted conflicts between the two examiner groups in his report. “Risk teams … often feel that the Relationship teams become gatekeepers at their banks, seeking to control access to their institutions,” he wrote. Other examiners complained in the report that relationship managers “were too deferential to bank management.”

In the new order, risk specialists were now responsible for their own examinations. No longer would the business-line specialists control the process. What Segarra discovered, however, was that the roles had not been clearly defined, allowing the tensions Beim had detailed to fester.

Segarra said she began to experience pushback from the business-line specialists within a month of starting her job. Some of these incidents are detailed in her lawsuit, recorded in notes she took at the time and corroborated by another examiner who was present.

Business-line specialists questioned her meeting minutes; one challenged whether she had accurately heard comments by a Goldman executive at a meeting. It created problems, Segarra said, when she drew on her experiences at other banks to contradict rosy assessments the business-line specialists had of Goldman’s compliance programs. In the recordings, she is forceful in expressing her opinions.

ProPublica and This American Life reached out to four of the business-line specialists who were on the Goldman team while Segarra was there to try and get their side of the story. Only one responded, and that person declined a request for comment. In the recordings, it’s clear from her interactions with managers that Segarra found the situation upsetting, and she did not hide her displeasure. She repeatedly complains about the business-line specialists to Kim, her legal and compliance manager, and other supervisors.

“It’s like even when I try to explain to them what my evidence is, they won’t even listen,” she told Kim in a recording from Jan. 6, 2012. “I think that management needs to do a better job of managing those people.”

Kim let her know in the meeting that he did not expect such help from the Fed’s top management. “I just want to manage your expectations for our purposes,” he told Segarra. “Let’s pretend that it’s not going to happen.”

Instead, Kim advised Segarra “to be patient” and “bite her tongue.” The New York Fed was trying to change, he counseled, but it was “this giant Titanic, slow to move.”

Three days later, Segarra met with her fellow legal and compliance risk specialists stationed at the other banks. In the recording, the meeting turns into a gripe session about the business-line specialists. Other risk specialists were jockeying over control of examinations, too, it turned out.

“It has been a struggle for me as to who really has the final say about recommendations,” said one.

“If we can’t feel that we’ll have management support or that our expertise per se is not valued, it causes a low morale to us,” said another.

On Feb. 21, 2012, Segarra met with her manager, Kim, for their weekly meeting. After covering some process issues with her examinations, the recordings show, they again discussed the tensions between the two camps of specialists.

Kim shifted some of the blame for those tensions onto Segarra, and specifically onto her personality: “There are opinions that are coming in,” he began.

First he complimented her: “I think you do a good job of looking at issues and identifying what the gaps are and you know determining what you want to do as the next steps. And I think you do a lot of hard work, so I’m thankful,” Kim said. But there had been complaints.

She was too “transactional,” Kim said, and needed to be more “relational.”

“I’m never questioning about the knowledge base or assessments or those things; it’s really about how you are perceived,” Kim said. People thought she had “sharper elbows, or you’re sort of breaking eggs. And obviously I don’t know what the right word is.”

Segarra asked for specifics. Kim demurred, describing it as “general feedback.”

In the conversation that followed, Kim offered Segarra pointed advice about behaviors that would make her a better examiner at the New York Fed. But his suggestions, delivered in a well-meaning tone, tracked with the very cultural handicaps that Beim said needed to change.

Kim: “I would ask you to think about a little bit more, in terms of, first of all, the choice of words and not being so conclusory.”

Beim report: “Because so many seem to fear contradicting their bosses, senior managers must now repeatedly tell subordinates they have a duty to speak up even if that contradicts their bosses.”

Kim: “You use the word ‘definitely’ a lot, too. If you use that, then you want to have a consensus view of definitely, not only your own.”

Beim report: “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.”

In Segarra’s recordings, there is some evidence to back Kim’s critique. Sometimes she cuts people off, including her bosses. And she could be brusque or blunt.

A colleague who worked with Segarra at the New York Fed, who does not have permission from their employer to be identified, told ProPublica that Segarra often asked direct questions. Sometimes they were embarrassingly direct, this former examiner said, but they were all questions that needed to be asked. This person characterized Segarra’s behavior at the New York Fed as “a breath of fresh air.”

ProPublica also reached out to three people who worked with Segarra at two other firms. All three praised her attitude at work and said she never acted unprofessionally.

In the meeting with Kim, Segarra observed that the skills that made her successful in the private sector did not seem to be the ones that necessarily worked at the New York Fed.

Kim said that she needed to make changes quickly in order to succeed.

“You mean, not fired?” Segarra said.

“I don’t want to even get there,” Kim responded.

It would be unfair to fire her, Segarra offered, since she was doing a good job.

“I’m here to change the definition of what a good job is,” Kim said. “There are two parts to it: Actually producing the results, which I think you’re very capable of producing the results. But also be mindful of enfolding people and defusing situations, making sure that people feel like they’re heard and respected.”

Segarra had thought her job was simple: Follow the evidence wherever it led. Now she was being told she had to “enfold” business-line specialists and “defuse” their objections.

“What does this have to do with bank examinations,” Segarra wondered to herself, “or Goldman Sachs?”

Segarra worked on her examination of Goldman’s conflict-of-interest policies for nearly seven months. Her mandate was to determine whether Goldman had a comprehensive, firm-wide conflicts-of-interest policy as of Nov. 1, 2011.

Segarra has records showing that there were at least 15 meetings on the topic. Silva or Kim attended the majority. At an impromptu gathering of regulators after one such meeting early that December, her contemporaneous notes indicate Silva was distressed by how Goldman was dealing with conflicts of interest.

By the spring of 2012, Segarra believed her bosses agreed with her conclusion that Goldman did not have a policy sufficient to meet Fed guidance.

During her examination, she regularly talked about her findings with fellow legal and compliance risk specialists from other banks. In April, they all came together for a vetting session to report conclusions about their respective institutions. After a brief presentation by Segarra, the team agreed that Goldman’s conflict-of-interest policies didn’t measure up, according to Segarra and one other examiner who was present.

In May, members of the New York Fed team at Goldman met to discuss plans for their annual assessment of the bank. Segarra was sick and not present. Silva recounts in an email that he was considering informing Goldman that it did not have a policy when a business-line specialist interjected and said Goldman did have a conflict-of-interest policy 2013 right on the bank’s website.

In a follow-up email to Segarra, Silva wrote: “In light of your repeated and adamant assertions that Goldman has no written conflicts of interest policy, you can understand why I was surprised to find a “Conflicts of Interests Section” in Goldman’s Code of Conduct that seemed to me to define, prohibit and instruct employees what to do about it.”

But in Segarra’s view, the code fell far short of the Fed’s official guidance, which calls for a policy that encompasses the entire bank and provides a framework for “assessing, controlling, measuring, monitoring and reporting” conflicts.

ProPublica sent a copy of Goldman’s Code of Conduct to two legal and compliance experts familiar with the Fed’s guidance on the topic. Both did not want be quoted by name, either because they were not authorized by their employer or because they did not want to publicly criticize Goldman Sachs. Both have experience as bank examiners in the area of legal and compliance. Each said Goldman’s Code of Conduct would not qualify as a firm-wide conflicts of interest policy as set out by the Fed’s guidance.

In the recordings, Segarra asks Gwen Libstag, the executive at Goldman who is responsible for managing conflicts, whether the bank has “a definition of a conflict of interest, what that is and what that means?”

“No,” Libstag replied at the meeting in April.

Back in December, according to meeting minutes, a Goldman executive told Segarra and other regulators that Goldman did not have a single policy: “It’s probably more than one document 2013 there is no one policy per se.”

Early in her examination, Segarra had asked for all the conflict-of-interest policies for each of Goldman’s divisions as of Nov. 1, 2011. It took months and two requests, Segarra said, to get the documents. They arrived in March. According to the documents, two of the divisions state that the first policy dates to December 2011. The documents also indicate that policies for another division were incomplete.

ProPublica and This American Life sent Goldman Sachs detailed questions about the bank’s conflict-of-interest policies, Segarra and events in the meetings she recorded.

In a three-paragraph response, the bank said, “Goldman Sachs has long had a comprehensive approach for addressing potential conflicts.” It also cited Silva’s email about the Code of Conduct in the statement, saying: “To get a balanced view of her claims, you should read what her supervisor wrote after discovering that what she had said about Goldman was just plain wrong.”

Goldman’s statement also said Segarra had unsuccessfully interviewed for jobs at Goldman three times. Segarra said that she recalls interviewing with the bank four times, but that it shouldn’t be surprising. She has applied for jobs at most of the top banks on Wall Street multiple times over the course of her career, she said.

The audio is muddy but the words are distinct. So is the tension. Segarra is in Silva’s small office at Goldman Sachs with his deputy. The two are trying to persuade her to change her view about Goldman’s conflicts policy.

“You have to come off the view that Goldman doesn’t have any kind of conflict-of- interest policy,” are the first words Silva says to her. Fed officials didn’t believe her conclusion — that Goldman lacked a policy — was “credible.”

Segarra tells him she has been writing bank compliance policies for a living since she graduated from law school in 1998. She has asked Goldman for the bank’s policies, and what they provided did not comply with Fed guidance.

“I’m going to lose this entire case,” Silva says, “because of your fixation on whether they do or don’t have a policy. Why can’t we just say they have basic pieces of a policy but they have to dramatically improve it?”

It’s not like Goldman doesn’t know what an adequate policy contains, she says. They have proper policies in other areas.

“But can’t we say they have a policy?” Silva says, a question he asks repeatedly in various forms during the meeting.

Segarra offers to meet with anyone to go over the evidence collected from dozens of meetings and hundreds of documents. She says it’s OK if higher-ups want to change her conclusions after she submits them.

But Silva says the lawyers at the Fed have determined Goldman has a policy. As a comparison, he brings up the Santander deal. He had thought the deal was improper, but the general counsel reined him in.

“I lost the Santander transaction in large part because I insisted that it was fraudulent, which they insisted is patently absurd,” Silva said, “and as a result of that, I didn’t get taken seriously.”

Now, the same thing was happening with conflicts, he said.

A week later, Silva called Segarra into a conference room and fired her. The New York Fed, he told Segarra, who was recording the conversation, had “lost confidence in [her] ability to not substitute [her] own judgment for everyone else’s.”

Update: Senators react, Goldman changes conflicts of interest policy. 

Creative Commons

This story was co-published by ProPublica with This American Life, from WBEZ Chicago.

Hear the radio version on these stations or download the episode now.

Producer Brian Reed of This American Life contributed reporting to this story. ProPublica intern Abbie Nehring contributed research.

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.

 

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Will Islamic State zealots bring U.S. and Iran together?

Relations between Iran and the United States have been ice cold since 1979. The terrorist attack of 9/11 could have been one opportunity for  a thawing, but “among the plethora of murderously stupid things former United States President George W. Bush did was to shut that door by including Iran in his “axis of evil” speech in 2002,” writes International Affairs columnist Jonathan Manthorpe

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James Foley. Photo © Jonathan Pedneault, courtesy of FreeJamesFoley.org

But now, the common threat posed by the Islamic State extremists — in the news this week for their grotesque murder of journalist James Foley — may finally open channels of communication. An excerpt of Manthorpe’s new column, Washington and Tehran find common cause against Islamic State:

It’s always a bit of a shock when the stern clerics that run Iran display an impish sense of humour.

So when Iran’s Foreign Minister, Javad Zarif, was quoted today as offering to help the West’s campaign against the Islamic State militants in Syria and Iraq in return for the lifting of crippling sanctions against Tehran, the natural inclination was to chuckle at his gall and turn the page.

But not so fast. A close reading of Zarif’s remarks shows that he was not being whimsical. He was entirely serious and while his suggestion is not feasible at the moment, it reflects the reality that there is a growing convergence of interests in the Middle East between Iran on one side and the United States and its European allies on the other.

That convergence has been brought into focus by the rise of the fanatical Sunni Muslim group, the Islamic State (IS) …  read Washington and Tehran find common cause against Islamic State. (Log in first; subscription required*)

Click here for Jonathan Manthorpe’s columnist page or here to subscribe or purchase a $1 site day pass

Facts and Opinions is a boutique for slow journalism, without borders. Independent, non-partisan and employee-owned, F&O performs journalism for citizens, sustained entirely by readers: we do not carry advertising or solicit donations from foundations or causes.  Why? We appreciate your interest and support:  for $2.95 (the price of a cheap brew) you can subscribe to F&O for a month. If that breaks your budget, a one-day pass is $1. A subscription is required for most F&O original work.

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Analysis: Iran and United States join forces against common foes

International affairs columnist Jonathan Manthorpe writes on the sea-change in the Middle East as Tehran and Washington find common cause and turmoil grows in Iraq and Syria. Excerpt:

As al-Qaida-linked groups hijack the anti-government insurgencies in Syria, Iraq and elsewhere, Washington is finding itself making common cause with its old enemy, Iran, and exciting the anger of its traditional ally, Saudi Arabia.

This tectonic shift in Middle Eastern alliances stems from two decisions made by the administration of President Barack Obama in the closing months of last year.

Washington is now finding itself in the previously unthinkable position of leaning more towards the Shiite factions of Islam, led by Iran, and turning away from the purist Sunni factions led by Saudi Arabia.

The first of Obama’s decisions that propelled this shift was his response after United Nations investigators claimed the forces of Syrian President Bashar Assad, an ally of Iran whose followers belong to the Shiite Alawite sect, had used chemical weapons against rebel insurgents and civilians.

Log in to read the column, Common enemies draw Washington and Tehran closer, here.*

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Science and Abortion: an interview with Tracy Weitz

There is an interesting side issue, about science and American law, to this Dispatches, Science story about research on abortions, featuring an interview with Tracy Weitz, one of the most prominent abortion researchers in the United States. Comments Weitz:

“there’s a whole body of criticism — a lot of it around climate change — over whether courts should have anything to do with science…. There was a recognition that these issues were really complicated — more science-y — and you needed to have judges who had specific expertise to decide them. Now, whether they’re about environmental science or, in our case, health-related science, these cases are being spread out across multiple courts, and judges with absolutely no scientific training are being asked to make adjudications about science. Should we be training judges to review science? Should we be thinking about specialty courts with scientific expertise?

“One of the more troubling findings is the way that controversy has become a reason to discount science …”

The story, Tracy Weitz: Amid Abortion Debate, the Pursuit of Science, is here.

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Analysis: Turkey’s military, Islamists, and prime minister

International affairs columnist Jonathan Manthorpe examines the contentious roles of the military and Islamists in the desperate quest by Turkey’s prime minister to cling to political power. Excerpt:

Manthorpe B&WTurkey’s Prime Minister Tayyip Erdogan has spent a decade trying to curb the political power of the country’s military, but now there are early indications he wants the support of the generals as he confronts the more serious threat of vengeance by his former Islamist allies.

Erdogan is turning to the military for support as he fights for his political life against the supporters of popular Muslim cleric, Fethullah Gulen.

Since coming to power in Turkey in 2002, Erdogan has aided Gulenists to grab key positions in the police and judiciary. This was all part of his policy of Islamisation of Turkey, whose 1924 constitution defines the country as a secular republic, with the military having tacit authority to block any efforts to create a religious state.

It will be astonishing if Erdogan can survive this crisis, however. His ruling Justice and Development Party, known by its Turkish initials AKP, is being torn apart as the Gulenists in the judiciary and police launch corruption investigations and prosecutions of party members and their families.

In the last decade Erdogan has overseen vigorous advances in the Turkish economy and the re-emergence of Ankara as a major influence in the politics of the Middle East, rivaling the authority of Iran, Egypt and Saudi Arabia.

Log in to read the column, Turkey’s Erdogan seeks military support after falling out with Islamists*

(F&O premium works, including commentary, are available for a $1 site day pass, or with monthly or annual subscriptions. Real journalism has value, and to avoid the conflicts inherent in advertising or soliciting outside funding F&O relies entirely on reader payments to sustain our professional quality.)

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“The Wire” creator David Simon on modern America as a “horror show”

Journalist and television writer David Simon delivered a speech to the Festival of Dangerous Ideas that was every bit as scorching as his incendiary television series The Wire. “I come from a country that is utterly schizophrenic, he said of the United States. Because of its society, economy and politics, he said, it is “a horror show.”

Simon chose as his “dangerous idea” a subject sure to provoke free-enterprising Americans: Karl Marx. “He was really sharp about what goes wrong when capital wins unequivocally, when it gets everything it asks for,” Simon told the audience at Australia’s Sydney Opera House. “Capitalism stomped the hell out of socialism in the 20th Century … It has achieved its dominance without regard for a social compact.”

But Simon did not advocate Marxism – or any ism. He spoke instead of solutions he called pragmatic, non-ideological, impure, non-partisan and philosophically imperfect. His comments have been getting a lot of attention, in North America and internationally. Hear him out for yourself. Here’s the video of his “dangerous” talk in Australia:

— Deborah Jones

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America’s military’s biggest security threat

“Say what you will about the United States military, no organization on earth is more focused on maintaining its capabilities no matter what,” writes Natural Security columnist Chris Wood. “As a result, its upper echelons spend a fair amount of time considering what that ‘what’ might actually look like.”

Wood examines recent statements by United States Defense Secretary Chuck Hagel on the biggest looming threats to America’s security — and the reaction to the threats by America’s neighbours, Canada and Mexico. Men with guns don’t even make Hagel’s list. Only Natural Security does. Read Wood’s column here.*

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Manthorpe: Philippines politics still stormy after Haiyen

F&O international affairs columnist Jonathan Manthorpe examines the chaos that typhoon Haiyan made of  the Philippines’ presidential campaign. An excerpt: 

When aid arrived this week in the Philippines’ Capiz region devastated by typhoon Haiyan, some of it came in tasteful blue bags decorated in prominent white letters with the name of Vice-President Jejomar Binay and adorned with his official logo of office.

Social media in the Philippines went viral with criticism of Binay, calling him “epal” – someone constantly trying to draw attention to himself.

A stream of bitter messages accused him of using the horror of the typhoon …. read more*

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