HUFFINGTON POST | Federal Reserve Employees Afraid To Speak Put Financial System At Risk

August 28, 2013 – Shahien Nasiripour of the Huffington Post reports

Regulators overseeing the nation’s largest financial institutions are distrustful of their bosses, afraid to speak out, and feeling isolated, according to a confidential survey this year of Federal Reserve employees.

The findings from the April survey of roughly 400 employees, presented to Fed staff during multiple meetings in June and July and obtained by The Huffington Post, show a workforce that is demoralized, and an institution where teamwork is nonexistent, innovation and creativity are discouraged and employees feel underutilized.

The shaky morale is a legacy of Alan Greenspan’s 19-year term as Fed chairman. From 1987 to 2006, the Greenspan Fed pushed for a hands-off approach by regulators, who then found themselves blamed for the financial crisis that led to the most punishing economic downturn since the Great Depression.

“Supervisors during the Greenspan years were beaten down pretty regularly,” Phil Angelides, former chairman of the congressionally appointed Financial Crisis Inquiry Commission, told HuffPost. “It doesn’t surprise me that you would still have some dysfunction, a lack of morale and something less than a highly energized and well-coordinated arm of the Federal Reserve, where for so long the regulators and bank supervisors were held back by the leadership of the Fed.”

An overwhelming majority of Fed regulators are proud to work at the central bank and believe in its mission of supervising the financial system and ensuring stability. They also trust and have good relationships with their immediate supervisors. But most say that top leaders are failing the organization, in part by not communicating honestly, and that employees are in the wrong jobs, or are poorly managed.

The Fed, concerned about employee morale and its impact on performance, has held numerous group meetings to discuss the survey findings.

The culture of non-regulation is gone, but the Fed has a new problem. Several current and former Fed regulators blame the morale shortcomings on senior officials such as Dan Tarullo, the Fed governor who oversees the central bank’s regulatory and supervision staff, and his top lieutenants. Tarullo is viewed as a polarizing figure intensely disliked by big bank executives, but admired by financial reformers. He is an ideological break from Greenspan, but carrying out the regulatory mission has proven difficult.

The Fed’s inspector general has launched a probe into complaints lodged by Fed staff, employees told HuffPost. John Manibusan, spokesman for the internal auditor, declined to comment.

“You’re never going to find the problem unless there’s healthy probing, healthy pushing, healthy questioning,” Angelides said. Bank regulators, “already face enormous power coming against them from the banks and their extraordinarily well-paid lobbyists. They need backing from their bosses.”

Read the full article here.