Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street
By Carmen Segarra
352 pp.; Nation Books, 2018
Carmen Segarra's story broke in a big way in 2013 and 2014. It was a tale of big banks in New York, the supervisors of those banks, and tapes of sensitive conversations she secretly recorded before being fired as an employee of the Fed's most prominent regional bank. Her story revealed that, five years after the financial crisis, there were still systemic problems, not just with the big financial institutions that received all manner of bailouts, but also with the Federal Reserve Bank of New York, which was at the epicenter of distributing those bailouts. Contemporaneously with the release of her story, renowned business writer Michael Lewis wrote an article claiming her revelations were a clear indication of "how dysfunctional our financial regulatory system is."
It has taken nearly half a decade, but now Segarra, the whistleblower who first told her story to journalists at ProPublica, has turned that story into a book. She is an attorney who worked in regulatory compliance positions in banks such as MBNA, Citigroup, and Societe Generale before taking a job at the New York Fed.
Her work as a regulator was not that of a typical bank examiner who visits the banks to review loan files for asset quality and crunch numbers on the bank's capital, liquidity, and earnings. Rather, she specialized in areas on the "compliance" side of regulation to check matters such as how banks monitor their conflicts of interest. This position was a good match for her legal background and is why Noncompliant makes for a logical title for the book.
Segarra does a good job of summarizing the book in one of her final chapters:
A lawyer goes to work for the New York Fed. She is assigned to supervise a bank, verifying whether said bank is complying with the law. In the process the lawyer discovers that numerous laws, rules and regulations are being violated and disregarded. And not just by the bank the lawyer supervises--but also by some of her fellow New York Fed regulators. The reorganization / Segarra's first few weeks on the job at the New York Fed just happened to be at the same time that a bizarre reorganization of the bank's compliance function was in motion. Her new boss explained that the group in which Segarra would work was staffed by "relationship managers" who in the past were responsible for scrutinizing compliance at the megabanks. But, as...