Wall Street banking giant Goldman Sachs could be facing new regulatory action from the Federal Reserve.
Based on several anonymous sources, the New York Times and the Wall Street Journal are reporting that the Fed office in Washington, D.C. is looking into a two-year-old case that was already handled by New York State regulators.
The case started when an employee at the New York Federal Reserve Bank, Jason Gross, leaked information to a Goldman Sachs banker, Rohit Bansal. Bansal and Gross were close personal friends who had worked together when Bansal was also at the Fed.
After someone at Goldman took this information to regulators in 2014, the New York Department of Financial Services ultimately found that both had been involved in a scheme to share information relevant to mergers and acquisitions cases Bansal was working on at Goldman. They were fired, and Goldman Sachs was fined $50 million in 2015. Both also pleaded guilty to misdemeanor criminal charges.
The whole case fed the perception that there is a revolving door between the Fed and banks.
Now the Fed office in D.C. seems to be exploring some new action against Goldman over the incident, which could take the form of a new fine. The Fed may also target Bansal’s supervisor, whom Goldman fired after the incident as well. Bansal, in some of his testimony, seemed to suggest he was pressured to use his access to the Fed to get information, although he never pointed out his former boss Joseph Jiampietro. Jiampietro, through a lawyer, maintains he didn’t do anything and says he won’t be made a scapegoat.
“Certainly the Fed is trying to give the impression that it’s acting,” said Anat Admati, a Stanford business professor who’s been pushing for regulatory reform. “So here’s the Fed going after Goldman Sachs, wonderful. But in fact, the problem is probably partly in the New York Fed, and in its employees and their work with the industry.”
She said they would need much more strict and enforceable rules about what bankers are allowed to work on if they have Fed connections. Bansal said he had asked for clarity about what he could work on at Goldman, but was nonetheless assigned to work that involved contacts he’d worked with as a regulator.
As part of an effort to ramp up enforcement, Bansal was one of several bankers the Fed completely barred from the industry last year.
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