Wall Street Chums

It is common knowledge in the finance business that the revolving door between government and Goldman-Sachs has filled Washington with Goldman employees. The problem arises from the fact that financial products have become so complicated that government inspectors have to work closely with Goldman to understand them and a kind of Stockholm Syndrome develops. When this happens with the SEC it is called regulatory capture. An insider is now releasing secret tapes showing how these regulators have been taken in by Goldman employees. In 2009 the Federal Reserve Bank of New York set out to investigate why US government officials were so blind to the Wall Street crash of 2008. Why were they unable to forecast the oncoming financial crisis? Why did the economic contagion nearly topple the whole global financial system? The fault, according to an independent review by Columbia University Prof David Beim, was that the government regulators were too deferential to the banks they were supposed to oversee. Within the New York Fed, employees were urged by their supervisors to look the other way when they found violations and to temper critical reports. Ho hum.