Fed Prez Slams Wall Street
Well sure, Wells Fargo and HSBC may have settled lawsuits for insurance overcharging. And maybe a Citigroup affiliate may have violated the Bank Secrecy Act through money laundering. And JPMorgan Chase settled for $1.4 billion the NCUA over mortgage-backed securities fraud.
However, does the recent rash of litigation on Wall Street mean that the whole system is broken? According to one prominent regulator, that indeed is the case.
William C. Dudley, president of the Federal Reserve Bank of New York, is publicly speaking out against major banks, saying that big banks’ misdeeds are indicative of a problem with the larger financial industry rather than simply a few bad actors.
“There is evidence of deep-seated cultural and ethical failures at many large financial institutions,” Dudley said in a speech last year. He recently elaborated to the New York Times, saying that he is going on the offensive “to make it clear that ‘too big to fail’ isn’t the only problem. I don’t want senior bank management to feel, ‘Oh gee, if we solve “too big to fail,” we’re done.’ ”
When Dudley speaks, big banks listen. The Federal Reserve Bank of New York works on a close basis with many Wall Street financial institutions, with the NYT saying that Dudley’s agency “has more day-to-day contact with Wall Street than any other arm of the government.”
According to Dudley, one of the major issues facing banks currently is the public relations battle. Despite the work of regulators to instill public confidence in banks through tough restrictions, banks often undo any good work with even more misdeeds.
“I think that they really do have a serious issue with the public,” Dudley said. “And I think that trust issue is of their own doing — they have done it to themselves.”
Notably, many Wall Street executives have not come out in support of Dudley’s statements. Many large financial institutions also claim that they simply have too many employees to be able to keep track of everyone. Dudley, however, says that regulators will not accept excuses.
“Either the firm is not too complex, you can manage it, you do know what’s going on,” he said. “Or, if you don’t know, that’s sort of raising the question whether the firm is too complex to manage.”
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