The New York Fed cannot effectively regulate Citi because it has been captured by the mega-bank, according to a top economic official inside the Obama administration. The close relationship between Citi executives and officials at the New York Fed is stymieing efforts to reform the bank and change its management, according to the official.
The official asked not to be identified.
Citi executives have told Charlie Gasparino that they are in a “regulatory purgatory,” unsure about what the government’s plans for them have been. Recently, the Wall Street Journal reported that Sheila Bair’s FDIC had been considering plans to oust senior management at the bank. Gasparino reported that Citi officials believe Bair herself leaked that story to the Journal in order to start the ball rolling.
Earlier, we mentioned reports that Tim Geithner was reportedly advocating keeping Citi chief executive Vikram Pandit in place. Neither Bair nor Geithner, however, are the primary regulator for Citi. That job falls to New York Fed.