William C. Dudley defended his supervisory record in heated exchanges with U.S. senators, who accused the Federal Reserve Bank of New York president of being too cozy with the biggest Wall Street banks.
“I wouldn’t accept the premise that there’s been a long list of failures by the New York Fed since my tenure,” Dudley said in response to an assertion by Elizabeth Warren, a Massachusetts Democrat.
“Is there a cultural problem at the New York Fed? I think the evidence suggests that there is,” Warren said. “Either you need to fix it, Mr. Dudley, or we need to get someone who will.”
The hearing was prompted by allegations by a former New York Fed bank examiner, Carmen Segarra, who said her colleagues were too deferential to Goldman Sachs Group Inc., the Wall Street bank where Dudley once worked. Segarra, who attended today’s hearing, declined to speak with reporters.
Senators questioned Dudley, 61, on issues ranging from whether some banks are too big to regulate to the Fed’s role in overseeing their commodities businesses.
Some of the criticism was pointed. Warren, a frequent critic of financial regulators, asked Dudley if he was “holding a mirror to your own behavior.”
Jeff Merkley, an Oregon Democrat, complained that bank employees involved in misdeeds haven’t been prosecuted and are “too big to jail.” Dudley repeatedly disagreed with assertions that the New York wasn’t doing enough to regulate banks and said lenders have become stronger and safer in the past few years.
Dudley took issue with Warren’s description of regulators as the “cop on the beat,” saying the Fed is concerned more with the safety and soundness of the financial system and refers potential crimes to law-enforcement agencies.
“I think of it more like a fire warden makes sure that the institution is run well so that it’s not going to catch on fire and burn down,” he said.
Sherrod Brown, an Ohio Democrat and chairman of the subcommittee that held the hearing, urged the Fed to increase its emphasis on oversight and said only two of the central bank’s 12 regional presidents have “any background in supervision.”
Brown also asked Dudley if he thought banks should have commodities businesses, the subject of another congressional hearing today at which Fed Governor Daniel Tarullo testified.
“I think there are serious questions of whether they should be,” Dudley said.
The Fed yesterday announced a broad review of its supervision of the largest banks and asked an internal watchdog to look into whether dissenting views among its bank examiners got sufficient attention within the central bank.