Fed Fines Goldman Sachs $36 Million

By Protess, Ben | International New York Times, August 5, 2016 | Go to article overview

Fed Fines Goldman Sachs $36 Million


Protess, Ben, International New York Times


The action stemmed from an episode in 2014, when a banker received confidential information from the Federal Reserve Bank of New York.

The United States Federal Reserve has taken action against Goldman Sachs and one of its former executives, escalating a long- running investigation into a leak of confidential government information.

The action, which required Goldman to pay a $36.3 million penalty, stemmed from an episode in 2014, when a junior Goldman banker took confidential information from the Federal Reserve Bank of New York. The junior banker, whom Goldman promptly fired, received the information from a New York Fed employee.

Both men pleaded guilty to stealing government property, and Goldman paid a $50 million penalty to New York State regulators because its "management failed to effectively supervise" the banker.

The Fed did not act against Goldman at the time, making its decision to pursue Goldman now a somewhat unusual move. The action, which cites Goldman for an "unauthorized use and disclosure of confidential supervisory information," is also an awkward one for the Fed.

The leak, after all, originated at the Federal Reserve Bank of New York with one of its own employees. And the junior Goldman banker who received the confidential information was a former New York Fed employee himself. Goldman, not the New York Fed, was the one to uncover the leak.

Yet the Fed's board in Washington, a unit that operates separately from the New York Fed, is the one penalizing Goldman.

And the Fed's action on Wednesday goes further than Goldman's settlement with New York State last year, reaching back several years to highlight how the bank failed since 2012 to have sufficient policies and employee training to prevent a leak like this one.

The case reflects a broader effort at the Fed to adopt a tougher stance against Wall Street misconduct and to crack down on individual bankers. In 2015, the Fed chose to bar six bankers from the industry, twice the number in 2014. The year before that, the Fed did not take any such actions.

The Fed's case against Goldman, the details of which were reported last week by The New York Times, centers on what could have been a regulatory gold mine. The confidential information, the Fed said, included reports of bank examinations and other "confidential reports prepared by banking regulators."

The documents effectively provided Goldman with a window into the Fed's private insights about regulatory matters. And the bank, the Fed said, used the information in presentations to current and prospective clients "in an effort to solicit business."

"The board expects all firms, including Goldman Sachs, to comply with all U.S. laws, rules and regulations," the Fed said in a statement, noting that it is "illegal to use or disclose confidential supervisory information without prior approval."

In its own statement, Goldman said it was "pleased to have resolved this matter. …

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