According to a report commissioned by the New York Federal Reserve in 2009, the Fed's culture for lax supervision was to blame for the financial crisis in 2008.

Even though some of the Fed's supervisory staff offices were located in the offices of major banks, individually, they lacked the initiative to take actions on things they saw, the report read. The Fed's culture also did not encourage such action.

“Examiners note how important it is to receive support from senior management when the banks complain about supervisory intrusion, and how demoralizing it can be when they perceive insufficient support,” the report's authors wrote.

“Many have been reluctant to press changes on the supervised banks. Some interviewees attribute the excessive deference to a lack of seniority, training, experience and confidence on the part of the relationship managers themselves,” the report read.

A footnote quoted one of the supervisors who was interviewed by the report's authors: “Within three weeks on the job, I saw the [regulatory] capture set in.”

Regulatory capture is defined as when the regulated dominate the regulators, influencing their supervisory actions.

Federal Reserve Bank President William Dudley invited David Beim, a finance professor from Columbia University, to conduct a study of the bank and what happened leading up to the 2008 financial crisis, according to ProPublica, which, along with the NRP program, “This American Life,” jointly published stories about the report.

The report entered the public square in the course of litigation between Carmen Segarra, a former Fed employee and the Fed, ProPublica reported. Segarra said the Fed fired her for following the recommendations in the Beim report even though the agency had not done the same, according to ProPublica.

Segarra also made secret recordings of meetings she attended while working for the Fed while in the offices of investment bank Goldman Sachs, the report noted.

Her recordings, the stories argued, backed up the suggestion that the New York Fed had still not made changes to its culture based on suggestions from the report.

The New York Fed has strongly denied this claim.

The NCUA said it has not had the time yet to study the report and has not said whether it will comment on it or on whether a similar report on the corporate crisis exists.

Instant Insights /

Fed to Blame for 2008 Financial Crisis: Report

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