Game of Thrones, The Wire, and the New York Fed

By James Kwak

I wrote a column that went up this morning at The Atlantic about the ProPublica/This American Life story about the New York Fed. The gist of the argument is that we all knew the New York Fed was captured; for people like Tim Geithner, that’s a feature, not a bug.

There was a paragraph in my original draft that I really liked, but I can completely understand why the editors didn’t want it:

“When Tyrion Lannister wants his son killed, he sentences him to death in public. When Avon Barksdale wants potential incriminating witnesses killed, he obliquely lets his lieutenant know that he’s worried about loose ends—because he doesn’t want his fingerprints (voiceprints, actually) visible. When senior New York Fed officials want their staff to go easy on Goldman Sachs—well, they don’t need to lift a finger. The institutional culture takes care of it for them.”

This is similar to the idea at the core of “The Quiet Coup,” the Atlantic article that had a million page views back in 2009. In a less well developed political system, rich businessmen buy favorable policy by passing money under the table (or hiring politicians’ relatives, or giving them loans and then letting them default, and so on). In the United States, for the most part, you don’t have to do anything illegal: the system takes care of it for you, whether it’s bailout money from the Treasury Department or regulatory forbearance from the New York Fed. That system is a combination of personal incentives, cultural capture, and institutional sclerosis.

In short, buying politicians (or regulators) is good. Not having to buy them in the first place is even better.

24 responses to “Game of Thrones, The Wire, and the New York Fed

  1. I think you mean Tywin Lannister. Tyrion’s the son he wanted dead.

  2. I believe you meant “Tywin Lannister”. Tyrion is the son being sentenced.

    I’m glad you got to address the “this is not a surprise” angle.

  3. see no evil, speak no evil and hear no evil…a higher level of what is generally called the blue line for blue collar and more “uniformed” levels. I think this speaks to the question of white collar collusion using benign neglect as the norm. But the real active side of this is the fact that while lip service is given to whistle blowing (a term that has something of a derogatory implication to begin with…), the maverick that goes to expose a gold-man had better have a popular backing, or at least a willing support system around them. Otherwise, the situation is at the least…career suicide.
    see: Carmen Segarra: Secretly Tape Recorded Goldman and New York Fed; By Pam Martens and Russ Martens: September 26, 2014
    http://wallstreetonparade.com/2014/09/carmen-segarra-secretly-tape-recorded-goldman-and-new-york-fed/
    and its followup article:
    http://wallstreetonparade.com/2014/09/carmen-segarra-wall-streets-spy-versus-spy/
    Carmen Segarra: Wall Street’s Spy Vs Spy
    By Pam Martens: September 28, 2014

  4. Gaming the Throne:
    [excerpted quote]:
    “Over the years, Wall Street On Parade has written about a raft of conflicts of interests at the New York Fed that would not be tolerated at any other financial regulator. During 2007 and 2008, as Citigroup entered an intractable death spiral from off balance sheet debt bombs and obscene executive pay, New York Fed Chief Tim Geithner was busy hobnobbing – enjoying 29 breakfasts, lunches, dinners and other meetings with Citi execs.

    On January 25, 2007, Geithner hosted former Citigroup Chairman and CEO, Sandy Weill, to lunch at the New York Fed. According to Geithner’s appointment calendar, Elise Geithner, his daughter, shared the chauffeured car to work with her father and then joined him at lunch with Sandy Weill.”
    Geithner went on to become Secretary of the Treasury and played a pivotal role in making sure that Citigroup was not allowed to fail but was instead bailed out by the taxpayer. Weill was one of Citigroup’s largest individual shareholders.”
    http://wallstreetonparade.com/2014/09/carmen-segarra-wall-streets-spy-versus-spy/

  5. Holding them responsible for their actions is the tops. Fine article James, by the way.

  6. Bruce E. Woych

    ….under the references from James’ Atlantic article…and viewers here should read that article; is further mention:
    “For more coverage, see ProPublica’s previous reporting on Segarra, the El Paso-Morgan deal and Goldman’s conflict of interest policies and predicaments: http://www.propublica.org/article/ny-fed-fired-examiner-who-took-on-goldman

    Nice article James!

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  8. It is a good scary article…though incomplete… for instance:

    

With their current capital requirements for banks that are much much lower when lending to “the infallible sovereign” than when lending to “the risky citizen”, it is also clear that the Fed, besides being beholden to big banks is also beholden to big government.



    When mentioning regulations and groupthink we should not forget that this encompasses much more than the Fed, and includes for instance professionals of the IMF and academics, as we rarely hear these raise any objections to their acting “colleagues”… when they are out, or when Monday morning quarterbacking, then it is easy.



    It mentions where regulators might go when they no longer work there but nothing about where they come from… which is usually when the problem begins.

    

It sheds too little light on what it would take to make it better, without risking making it worse. For instance, since if banks were not regulated at all, and caveat emptor reigned, these would never ever be allowed, by the market, to leverage as much as many or even
 most of them do…is that a saner alternative?

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  10. You’re right Per, it’s the way people think that is the problem, they then act on those false premises wrongly (because it would be just as easy to act correctly too) and end up paying the consequences. So the question now is why do so many elites have a thinking problem, or an interpretation problem. It’s because of the make up of the brain, and you either don’t have food for the brain and think that way, or you do have food for the brain and you think another way. Now sometimes the food can be poisoned and then willingly taken, which has eventual side effects and that too becomes a different way of thinking. So we basically have 3 types of thinkers on every subject, and they all claim to be the superior ones, wanting to impose their will on the others. So i ask how can this not lead to war, and why can’t it prevent war, because there are a thousand ways to wrong, and only one way to be right. And the military solution will backfire, intentionally.

  11. ray lapan-love

    A good article but well short of providing an explanation as to what is happening. In fact, articles of this sort give the false impression that corruption is anomalous as opposed to systematic in the broadest sense.

    What is happening though, is that nations are competing with each other to control and own global market share and the resources thereof. Thus, this competition puts governments in a necessary position of support to corporations. Governments, and the Fed, are then required to chose between the welfare of citizens, and support via policy of corporations and shareholders. For example, a weaker currency and a concerted push to increase exports could improve the job shortage in the USA, and with its perpetual trade deficit the value of the dollar should have been adjusting downward for decades anyway, naturally and easily, but that would drive up the cost of global market share. So, the Fed and the Treasury have had a long-standing choice which they have clearly made to the benefit of that which supports global expansion.

    So ultimately, when the collusion between government and the MNCs is presented as something surprising, or shocking, that attitude serves to imply that corporate fascism can somehow be avoided within the existing framework, but it can’t be avoided thus. The global resource base is finite, and the nation that owns the most stock in those resources will have what amounts to a tax on global commerce, a tax which is collected through profits on the utilization of resources. Accordingly, governments that favor their people at the expense of their investors… those governments will lose the economic war that is being fought worldwide.

  12. Reblogged this on Accidental Gold Miner and commented:
    You are so right You can and did write a book about the New York Fed that is above all a club of bankers

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  14. Moses Herzog

    Carmen Segarra had attempted to get a job at Goldman 3 times. I believe this is a DEFINITIVELY separate issue from the tapes themselves and how what is on those tapes implicates (and criminalizes) the New York Federal Reserve. I do still believe strongly that it is worthy of note in trying to find her true motives in bringing the tapes out at this particular time (why not make the audio tapes public EARLIER???) This type thing always makes me think of Yves Smith* and Nomi Prins (who I believe BOTH worked at Goldman).

    Although I take Nomi Prins to be 99.99% altruistic in her writings and the things she says, a kind individual, and a great contributor to the dialogue, I often wonder how she felt about those things when they had to have been shoved into her face working at Goldman at the time.

    I don’t see Yves Smith as altruistic, as Yves COMPLETELY shuts down and BLOCKS even SLIGHTLY contrary or opposing views on her blog, and seems only interested in some form of dogma, only allowing a Rush Limbaugh type dogma where commenters must constantly bow down and continually flatter her. That along with the “Yves here” narcissism, I don’t know how they bear it. But again, I wonder how she could have worked at Goldman for any time and not seen the predatory culture at the time she was there.

    *it’s possible I am remembering wrongly about Yves working at Goldman Sachs in the past, if I am wrong on this, I welcome anyone who knows for a FACT otherwise to correct me.

  15. From the Desk of H.R. Series

    Scroll down to the third interview: “Then finally, we hear from William Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World”. He joins us to discuss his article at Politico, “Why the Fed Will Always Wimp Out on Goldman” ….”

    http://ianmasters.com/content/september-28-how-hard-will-china-crack-down-hong-kong-protests-explosive-secret-goldman-sach

    NPR radio interview/transcript: http://www.npr.org/2014/10/01/352779367/transcript-sen-warrens-full-npr-interview-on-financial-regulation

    Was she (Carmen Segarra) hired to regulate or hired to review banking practices at GS?

    “Individuals interested in a career as an analyst should have a degree in business administration with concentration in accounting or finance, and experience in financial analysis as it relates to banking. Knowledge of the laws and regulations governing banks and bank holding companies is preferred. A master’s degree is required for most higher-level positions.”

    Carmen Segarra released those tapes not so much as a whistle blower but more to do with her own issues of being fired from her hired position as bank examiner.

    http://www.npr.org/2014/10/01/352779367/transcript-sen-warrens-full-npr-interview-on-financial-regulation

    Agreed that the Senator made several remarks (and already known by even the most casual observers) the need for regulation and oversight of financial markets. However, some of that luster seems to have worn off since her position to distance herself from the “Ready with Warren” Political Action Committee, repeatedly saying that she has no interest in running for POTUS in 2016, at least, not if Hillary decides to run.

    If Hillary has the gall to actual run again in 2016, anticipate and expect the following without much surprise:

    The anti-Wall Street, anti-Republican sentiment in Hillary’s political speeches and rhetoric will be just that, mostly “talk”. Most of the campaign promises will be reversed, and her administration could even back down from corporate and lobbying objections soon after the swearing-in ceremonies of Jan 2017. Or maybe, not even waiting that long, to compromise and work bipartisan with colleagues from the other side of the aisle, with a hand-selected bipartisan cabinet because they really agree and think more alike than any of them are publically willing to admit.

    Teddy Roosevelt would not turn over in his grave knowing the state of today’s politics. In character, he would raise from the dead and run for a “third term” to make up for his political mistake (see his fight with JP Morgan in http://www.pbs.org/kenburns/the-roosevelts/watch-videos/ – 2nd episode.)

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