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The truth is out there

10 November 2015 By Antony Currie

The Federal Reserve has just given Goldman Sachs conspiracy kooks a field day. Neel Kashkari, whose claim to fame is running the U.S. bank and autos bailout fund during the financial crisis, will be in charge of the central bank’s Minneapolis office starting next year. That leaves the investment bank’s alumni in charge of three of the 12 regional branches.

Robert Kaplan, who led Goldman’s investment banking business before leaving in 2006, took over the Dallas Fed in September. His former colleague William Dudley, once Goldman’s chief economist, has been in charge of the New York Fed for almost seven years. That’s the most powerful of the dozen regional offices as it gives him a permanent seat on the Federal Open Market Committee that decides interest rates.

It’s a pretty easy leap to construe the trio as a cabal. Virtually all other regional bosses are Fed lifers, aside from Atlanta chief Dennis Lockhart, who cut his teeth at Citicorp. The Kashkari appointment is therefore great fodder for anyone seeking evidence of a system in thrall to Wall Street, especially as it comes fresh on the heels of Goldman paying a $50 million fine to settle a case involving the leak of Fed documents that speaks to the revolving-door problem.

The broader reality is less accommodating, however. For starters, interest-rate policy is hardly doing the financial-services industry any favors. Higher rates sooner would have helped interest income and spurred more trading activity for the likes of Goldman, consequently giving a boost to most firms trudging through mediocre or abysmal earnings.

Dudley, meanwhile, has been pretty vocal about Wall Street’s need to change its culture so that its companies and employees pose less of a risk to the economy. Progress has admittedly been slow. As for Kashkari, he was never a Goldman heavyweight, just one of thousands of vice presidents, working on mergers in the technology sector.

Moreover, the bank’s poachers can make good gamekeepers. Goldman veteran Gary Gensler was one of Wall Street’s biggest critics when he was Commodity Futures Trading Commission chairman. Such facts, however, get in the way of an otherwise juicy story.


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