1/23/23: A Fed Whistleblower Reveals Efforts to Silence Him 30 Years Ago

By Pam Martens and Russ Martens:

Walker F. Todd, Former New York Fed and Cleveland Fed Insider

The U.S. Department of Justice needs to immediately appoint an independent Special Counsel to investigate how long and in how many ways the U.S. Central Bank (the Federal Reserve or simply “the Fed”) has been functioning as a protection racket for Wall Street mega banks.

We’ll get to the latest revelation about the Fed bullying and intimidating a Fed official in a moment, but first some necessary background.

In 2013 the American people learned that Carmen Segarra had been a bank examiner with a law degree at the Federal Reserve Bank of New York, one of Wall Street’s key regulators. Segarra charged in a Federal lawsuit that she was bullied by colleagues to change her negative examination of the powerful Wall Street mega bank, Goldman Sachs. Segarra detailed how her colleagues also obstructed and interfered with her investigation. When she refused to alter her findings, she was terminated in retaliation and escorted from the Fed premises, according to her lawsuit. Segarra’s lawsuit was dismissed by a federal judge, Ronnie Abrams, whose husband was engaged in legal matters for Goldman Sachs. (See The Carmen Segarra Case: Welcome to New York, Wall Street and McJustice. See also, These Are the Banks that Own the New York Fed and Its Money Button.)

Unfortunately for the New York Fed, however, the secret tape recordings that Segarra had made to document the matter, ended up going viral.

Then there was the 2015 case of the Wall Street Journal reporter, Pedro da Costa, asking Fed Chair Janet Yellen an uncomfortable question about Fed leaks of confidential information and finding himself without a job. According to a deep dive by Max Moran, writing for The American Prospect, the individual who cracks the whip at the Fed to keep reporters in line is Michelle Smith, Fed Chair Jerome Powell’s Chief of Staff and the woman “who has served every Fed Chair of the last 30 years in some capacity—Powell, Janet Yellen, Ben Bernanke, and Alan Greenspan.”

Intimidating the press to toe the line on asking acceptable questions and writing acceptable articles is not compatible with a free society. See our report: There’s a News Blackout on the Fed’s Naming of the Banks that Got Its Emergency Repo Loans; Some Journalists Appear to Be Under Gag Orders; and Mainstream Media Has Morphed from Battling the Fed in Court in 2008 to Groveling at its Feet Today.

Then there was the stench around former Fed Chair Janet Yellen stepping down as Fed Chair and embarking on a multi-million dollar money grab dressed up as speaking fees at the banks regulated by the Fed. (See Janet Yellen’s Cash Haul of $7 Million Is Just the Tip of the Iceberg; She Failed to Report Her Wall Street Speaking Fees from JPMorgan and Others in 2018.) Yellen was then reconstituted as the U.S. Treasury Secretary, where her rubber stamp is required under Dodd-Frank financial “reform” legislation in order for the Fed to throw more trillions of dollars at Wall Street.

And, finally, more than two years after the former President of the Dallas Fed, Robert Kaplan, was exposed as trading like a hedge fund kingpin while sitting on confidential Fed information, there has still been no investigative findings in this matter shared with the American people by the U.S. Department of Justice; the Securities and Exchange Commission; or the Fed’s Inspector General.

Against that backdrop, consider the latest news about intimidation and efforts to silence a Fed official – going back 30 years.

Last month, financial writer Lynn Parramore conducted an interview for the Institute for New Economic Thinking (INET) with two former Federal Reserve Bank employees: Walker Todd, a former attorney and legal officer at the New York Fed and a former legal and research officer at the Cleveland Fed; and Bill Bergman, a Clinical Instructor in Finance for Loyola University who worked previously at the Chicago Fed.

During the interview, Todd stuns with this revelation:

“I had the misfortune of drafting an article for publication by the Cleveland Fed, which came out in ’93, about the emergency lending provisions of FDICIA [Federal Deposit Insurance Corporation Improvement Act]. I explained how this came about. The sense of the provision was a section that said that the Fed was able to make emergency loans based on any collateral satisfactory to it – which could be just about anything. Changing that provision allowed securities firms to borrow directly from the Fed for the first time in history because the Fed discount window was originally set up to make loans only on types of collateral eligible for discount — and investment securities most definitely were not eligible for discount.

“The Board staff turned out to be very unhappy with the submission of this article and kept intervening with my management to try to block publication. I was required to do 21 drafts over a year, which impeded my doing anything else. Eventually, it was published in mostly the same form in which I had originally submitted it, and at the last moment, a senior Board staffer called the research department at the Cleveland Fed to order them to stop the presses. But they couldn’t, because the president and research director were out of the office and couldn’t be reached. So it went out the door. That was it. I was given an unfavorable rating for the year and I left the next year.”

For how this tweak to congressional legislation played out in real life, and how Sullivan & Cromwell’s Rodge Cohen’s fingerprints were all over it, see our report: Fed Announces Program for Wall Street Banks to Pledge Plunging Stocks to Get Trillions in Loans at ¼ Percent Interest.

It’s all enough to make Americans sick to their stomachs at how their democracy has been strong-armed, bribed and bullied into a dystopian Wall Street casino. But is it enough to make Americans pick up their phones, call their U.S. Senators, and demand the appointment of a genuinely independent Special Counsel?

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