“Memo to employees at big Wall Street banks and securities firms: Be careful what you say on the elevator. You might be surrounded by regulators.”That’s how a terrifying story in the Wall Street Journal begins.
Apparently, one of the ways that the Fed and the Comptroller of Currency are trying to prevent another financial crisis, is to have their field officers “embedded” in the firms they monitor, according to the WSJ.
“Embedded” basically means that they won’t be undercover per say, but they won’t be walking around with a name tag that says, Regulator.
“We’re a cop on the beat,” said the man who oversee the Fed’s embed program.
Goldman Sachs, JP Morgan, Citi, Barclays, Credit Suisse, UBS, Deutsche Bank, Bank of New York Mellon, Wells Fargo — they’re all getting their own on-site regulator. Those officers are supposed to have “a drop-by relationship” with the top banking executives.
According to the WSJ:
Much like reporters assigned to a military unit during war, these regulatory “embeds” get unprecedented access to financial firms such as Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley.
They file through the same security turnstiles, eat lunch at the company cafeteria and press top executives for answers to questions about mortgage-documentation procedures and exposure to European debt and municipal bonds.
We wish the Fed would reveal who’s working where, but they don’t, for obvious reasons.
We do have questions though: we wonder if there are certain “cooler” banks to be embedded? Or whether some banks have a reputation for being more hostile to the field officers than others?
Both the Fed and the Comptroller limit field officer rotations to five years lest they become to chummy with their targets. Although it would take a while for that happen. Not everyone had the same view as outgoing Morgan Stanley CEO John Mack, who in 2009 said he welcomed having more regulators inside the bank,
While apparently some bankers are “trying hard to accommodate the push for more in-your-face supervision [others] complain, though, that different regulators don’t always coordinate their requests for information.”
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