The Fed have basically infiltrated Wall Street board meetings

Lloyd Blankfein James Dimon John Mack Brian MoynihannJason Reed/ReutersRemember these guys? Lloyd Blankfein, chairman of the Board and CEO of Goldman Sachs Group, James Dimon, chairman of the Board and CEO of JP Morgan Chase & Company, John Mack, chairman of the Board of Morgan Stanley, and Brian Moynihan, CEO and president of the Bank of America Corporation.

After the financial crisis, U.S. regulators faced criticism for not adequately supervising Wall Street management and started to boost their oversight. Now, they’re keeping an eye on the banks’ board members, too.

The Fed and the OCC have started holding regular meetings with bank boards, reviewing minutes, and asking more and more questions of directors, The Wall Street Journal’s Victoria McGrane and
Jon Hilsenrath reported.

The idea is to monitor the boards’ own oversight of management.

At Morgan Stanley, for example, Fed representatives are allowed to participate in every board meeting — at least for a portion of the meetings. JPMorgan Chase invites Fed supervisors to some meetings, while directors hold outside meetings with regulators as well.

A Goldman Sachs director meets with Fed supervisors each month. And at Bank of America, one lead director makes monthly phone calls to regulators in addition to regular meetings in person.

And those are just the regular meetings. Then there are the special circumstances. After this month’s bank stress tests, for example, Fed representatives held multiple conversations to discuss the results with directors, the Journal reported.

Regulators say it’s important for boards to understand the risks their companies take — something that was missing in the years running up to the financial crisis.

But, not surprisingly, some board members are not responding well. The American Association of Bank Directors said directors are afraid to stay on boards because of the increased responsibility and risk of personal liability. Other would-be directors aren’t even joining in the first place.

Those Fed officials can be pretty scary.

Read the full story in The Wall Street Journal ยป

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