The Federal Reserve and Goldman Sachs: Carmen Segarra

Carmen Segarra, a recently hired bank examiner in the NY Fed's supervisory office for Goldman Sachs, strongly disagrees with her supervisor, Mike Silva, about whether Goldman Sachs has a viable overall conflict-of-interest policy. Silva says “yes,” and Segarra says “no.” This issue is the latest in which Segarra sees what she considers regulatory capture in the NY Fed/Goldman Sachs's relationship. An independent report had been critical of the NY Fed for being too cozy with the banking institutions it regulated and suggested hiring more aggressive and vocal examiners. Segarra realizes that her aggressive and frank communication style has irritated both Silva and others in their department but is determined to do her job. The tension between Silva and Segarra has reached a breaking point and Segarra must decide what actions she must take to address both the tension and what she considers regulatory capture. A teaching note accompanies this case and details how it is taught in Darden's ethics and leading organizations courses. Excerpt UVA-OB-1079 Rev. Mar. 15, 2016 The Federal Reserve and Goldman Sachs: Carmen Segarra As she left the meeting with Mike Silva, Carmen Segarra thought that if blood could indeed boil, hers would be doing exactly that at this moment. The meeting had been contentious, as she and Silva debated yet again the issue of Goldman Sachs's conflict-of-interest policy. Segarra, who had recently joined the Federal Reserve Bank of New York (NY Fed) as a bank examiner, had grown increasingly frustrated by its refusal to push Goldman Sachs on a number of issues, including the conflict-of-interest policy. She had discussed this at length with Silva, the NY Fed's senior supervisory officer for Goldman Sachs, in often combative conversations. He claimed that she was wrong and that, although the Goldman Sachs policy was imperfect, it did exist. Segarra thought his argument was laughable; she had researched the issue and found that other financial institutions—Barclays and Morgan Stanley—for example, had comprehensive company-wide compliance policies. Why should Goldman Sachs not have the same? Segarra's relationship with Silva and some of the other supervisors was already shaky; Segarra did not believe in mincing words and she knew that her communication style irritated some of her colleagues. But she was just doing her job, and in her opinion, they were not. She had stood by and watched them avoid pushing Goldman Sachs to address certain shady deals. The current issue, however, was bigger. She believed Goldman Sachs needed an overall compliance policy, but her NY Fed co-workers, Silva in particular, were dragging their feet on addressing the issue. Segarra had contemplated several courses of action, including quitting her job, but was unsure exactly what to do. Carmen Segarra Born in Indiana but raised mostly in Puerto Rico, Segarra graduated from Harvard University and Cornell Law School and also studied international litigation and European community law at the Sorbonne. Encouraged by her father to pursue lifelong learning, Segarra was a polyglot, fluent in several languages and continually picking up new ones. One of her early career interests was the millennial computer bug, Y2K; she had written and published on this topic and worked with banks to create a Y2K legal and compliance program. Prior to working at the NY Fed , Segarra had worked for 13 years at, among others, Bank of America, Citigroup, Al