Six weeks ago, two Goldman Sachs bankers were fired after the bank discovered that one improperly accessed confidential regulatory information from the Federal Reserve Bank of New York and the other, a senior manager, saw the information but failed to report it.
But it was only this week, after details of the story were leaked to the media, that the news was made public. That's despite the fact that Goldman was required, within one month of firing the senior banker, to make a public disclosure including the reasons for his termination.
The company didn't meet that deadline. Goldman only made the disclosure -- via a form required by FINRA, the financial industry self-regulator -- this Wednesday, after being contacted by the New York Times, which had learned of details of the firings.
Goldman missed the deadline because it was allowed to -- FINRA gave it permission, a source familiar with the situation said, because the bank had been asked by the New York state Department of Financial Services not to file the report, so as not to obstruct an investigation by the department. The FBI and Manhattan U.S. Attorney's office are also investigating, according to the Times.
The newspaper contacted Goldman about its story on Wednesday, in timing that put both Goldman and New York Fed in an awkward position. On Thursday, three Goldman Sachs executives — along with other bank leaders — were scheduled to be questioned by a Senate panel over the role of large banks in the commodities markets. And on Friday, the head of the New York Fed, William Dudley, will be questioned by a different Senate panel on the "capture" of regulators by the financial industry.
That kind of regulatory capture is at the heart of the problems that led to the firings. The junior banker who was let go, Rohit Bansal, joined Goldman in July after spending seven years at the New York Fed, where he worked as a bank examiner. He joined Goldman's financial institutions group, which advises other banks, including ones he would have overseen in his time at the New York Fed.
The senior banker let go, Joseph Jiampietro, was a managing director in Bansal's group. He joined the firm in February, 2011 following over a year working as an advisor to Sheila Bair, who at the time was chairwoman of the FDIC, another bank regulator. Bair often took an aggressive stance toward banks and the regulators she perceived as being too close to them, and since leaving the FDIC has spoken out against the so-called "revolving door" between banks and their government overseers. Before joining the FDIC, Jiampietro was a financial institutions banker — meaning he advised other banks — at JPMorgan and UBS.
"Mr. Jiampietro never knowingly or improperly reviewed or misused confidential supervisory information," Jiampietro's lawyer, Adam Ford, said in a statement in response to the Times. "He should not have been terminated. Any compliance failings regarding Mr. Bansal had nothing to do with Mr. Jiampietro."
Bansal's attorney Sean Casey did not respond to a request for comment and Ford said he had no further comment. The New York state Department of Financial Services declined to comment, citing an ongoing investigation.
The firing of the two bankers is the latest fallout from increased scrutiny of Goldman's relationship with the New York Fed. Following the initial broadcast of tapes recorded by former Fed supervisor Carmen Segarra that depicted a cozy and non-confrontational relationship between Goldman and its supervisors, Goldman banned employee ownership of individual stocks. While at the New York Fed, Segarra had wanted to get the Fed to say officially that Goldman had no firm-wide conflicts of interest policy and pointed to a senior banker's financial stake in a firm that was seeking to acquire the banker's client.
The Federal Reserve announced Thursday afternoon that its inspector general was looking into its supervision of banks with more than $50 billion in assets, which would include megabanks like Goldman Sachs and JPMorgan. The review will address whether Fed officials are getting the information they need from large banks and if they know about possible dissenting or divergent opinions among the frontline examiners of banks.
The Fed's inspector general will investigate whether Fed officials can "obtain all material information necessary to ensure that decisions and supervisory conclusions...are appropriate, supported by the record, and consistent with supervisory policies." The inspector general will also look into whether Fed officials have "channels, both within and outside the immediate chain of command" that alert them to "divergent views about material issues."