Fed Whistleblower Carmen Segarra, Snowden, and the Closing of the Journalistic Mind

Published on naked capitalism, by Yves Smith, Sept 29, 2014;

… Now you might say, isn’t this media firestorm a great thing? It’s roused Elizabeth Warren and Sherrod Brown to demand hearing. The Fed has been toadying up to Wall Street for years. Shouldn’t we be pleased that the problem is finally being taken seriously?  

Let’s look at this a tad more clinically. This press reaction is in fact proof that the financial media has been asleep at the switch and underreporting stories by whistleblowers and critics of regulators. The reason that this story is getting traction is the salaciousness of secret tape recordings, which also reduce the burden on reporters to do their job, namely, investigate. Michael Lewis alluded to that issue in his enthusiastic write up in Bloomberg on Friday:

  • Our financial regulatory system is obviously dysfunctional. But because the subject is so tedious, and the details so complicated, the public doesn’t pay it much attention.
  • That may very well change today, for today — Friday, Sept. 26 — the radio program “This American Life” will air a jaw-dropping story about Wall Street regulation, and the public will have no trouble at all understanding it.

I don’t buy that excuse, that finance is too HAARD for the pubic to understand, for a nanosecond. Lewis himself has made a side career of making finance, from bond trading (in Liar’s Poker) to CDOs (in The Big Short) to the Iceland meltdown (in Vanity Fair) accessible to laypeople. I have taken issue with some important conclusions he’s reached, but the ideas that a smart, articulate, and diligent journalist can’t present the workings of finance an engaging and reasonably accurate manner is greatly exaggerated. Remember, Lewis isn’t an expert; he admits he quit doing finance when he left Salomon in the 1980s.

That it has taken the release of secret tape recordings for the media to treat an obvious problem like Fed capture by banks as real is an indictment of the state of financial reporting. The fact that all financial regulators, save in some measure the FDIC, are deeply captured should be treated as dog bites man. Willem Buiter spoke forcefully about cognitive regulatory capture considerably before he told Fed officials to their face at Jackson Hole in 2008 (it didn’t go over very well). The OCC has long been even more bank-cronyistic, and the SEC has been systematically hamstrung over the last two decades.

In fact, Carmen Segarra’s story was well told a full year ago, in her whistleblower suit against the Fed and in ProPublica’s coverage of her case, based on interviews with her. And those accounts has further damning details that have been left on the cutting room floor by virtue of not being part of what Segarra captured in her recordings. An extract from our 2013 post Whistleblower Suit Confirms that the New York Fed is in the Goldman Protection Racket: … //

… It’s not hard to see that the lap-doggishness of the Fed is mirrored by an undue deference to authority by reporters. A key section from a recent study by Indiana University of Journalism:

  • One of the most surprising developments over that period over the past ten years, is the steep decline in the percentage of journalists who say that using confidential documents without permission “may be justified.” That number has plummeted from about 78 percent in 2002 to just 58 percent in 2013. In 1992, it was over 80 percent.
  • That’s even more notable given that the survey took place from August to December of last year, not long after Edward Snowden became a household name for stealing classified documents that revealed the extent of NSA surveillance.

Ironically, the report also showed that only a minority approved of using hidden camera or microphones to get information, the precise approach Segarra used to protect herself, even though in many states, like New York, it is legal to record your own conversations without notifying other parties.

In other words, most journalists are afraid to rock the access journalism boat and do real sleuthing, and to make up for that, they’ll pile onto a story where someone else has taken the risk, in this case Segarra by making her tapes public. And while their release proves Segarra to be as credible as she appeared to be from her court filings, it remains to be seen whether she can really come out a winner. Reputable institutions close their ranks against people who refuse to knuckle under to pressure to conform, and Segarra has made it clear she has way more grit than most. I hope she’s able to use the media tailwinds to reinvent herself.

(full long text).

Related Links:


whistleblower on en.wikipedia … is a person who exposes misconduct, alleged dishonest or illegal activity occurring in an organization …;

Other Links:

VA Whistleblowers Reach Settlements With Watchdog’s Help, on WSJ, by Ben Kesling, Sept 29, 2014;

The Caliphate Next Door: Turkey Faces Up to its Islamic State Problem, on Spiegel Online International, by Katrin Elger, Hasnain Kazim, Christoph Reuter and Holger Stark, Sept 29, 2014 (Photo Galery): For years, Ankara has been tolerating the rise of the extremist Islamic State. But now that the jihadists are conquering regions just across the border in northern Syria, concern is growing that Islamist terror could threaten Turkey too …;

Film: Tout ça ne nous rendra pas le Congo, La Sharia avant les boeufs – Le grand cirque, 61.31 min, dans RTBF.be, Nov 6, 2012;

… and this:

… und noch das:

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