Barely a year removed from the devastation of the 2008 financialcrisis, the president of the Federal Reserve Bank of New York faceda crossroads. Congress had set its sights on reform. The biggestbanks in the nation had shown that their failure could threaten theentire financial system. Lawmakers wanted new safeguards.

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The Federal Reserve, and, by dint of its location off WallStreet, the New York Fed, was the logical choice to head theeffort. Except it had failed miserably in catching themeltdown.

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New York Fed President William Dudley had to answer twoquestions quickly: Why had his institution blown it, and how couldit do better? So he called in an outsider, a Columbia Universityfinance professor named David Beim, and granted him unlimitedaccess to investigate. In exchange, the results would remainsecret.

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After interviews with dozens of New York Fedemployees, Beimlearned something that surprised even him. The most dauntingobstacle the New York Fed faced in overseeing the nation's biggestfinancial institutions was its own culture. The New York Fed hadbecome too risk-averse and deferential to the banks it supervised.Its examiners feared contradicting bosses, who too often forcedtheir findings into an institutional consensus that watered downmuch of what they did.

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The report didn't only highlight problems. Beim provided a pathforward. He urged the New York Fed to hire expert examiners whowere unafraid to speak up and then encourage them to do so. It wasessential, he said, to preventing the next crisis.

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A year later, Congress gave the Federal Reserve even moreoversight authority. And the New York Fed started hiringspecialized examiners to station inside the too-big-to failinstitutions, those that posed the most risk to the financialsystem.

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One of the expert examiners it chose wasCarmenSegarra.

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Segarra appeared to be exactly what Beim ordered. Passionate anddirect, schooled in the Ivy League and at the Sorbonne, she was alawyer with more than 13 years of experience in compliance – thespecialty of helping banks satisfy rules and regulations. The NewYork Fed placed her inside one of the biggest and, at the time,most controversial banks in the country, Goldman Sachs.

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It did not go well. Shewas fired after only seven months.

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As ProPublica reported last year, Segarrasued the New York Fed and her bosses, claiming she wasretaliated against for refusing to back down from a negativefinding about Goldman Sachs. A judge threwout the case this year without ruling on the merits,saying the facts didn't fit the statute under which she sued.

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At the bottom of a document filed in the case, however, herlawyer disclosed a stunning fact: Segarra had made a series ofaudio recordings while at the New York Fed. Worried about what shewas witnessing, Segarra wanted a record in case events weredisputed. So she had purchased a tiny recorder at the Spy Store andbegan capturing what took place at Goldman and with her bosses.

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Segarra ultimately recorded about 46 hours of meetings andconversations with her colleagues. Many of these events documentkey moments leading to her firing. But against the backdrop of theBeim report, they also offer an intimate study of the New YorkFed's culture at a pivotal moment in its effort to become a moreforceful financial supervisor. Fed deliberations, confidential byregulation, rarely become public.

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The recordings make clear that some of the cultural obstaclesBeim outlined in his report persisted almost three years after hehanded his report to Dudley. They portray a New York Fed that is attimes reluctant to push hard against Goldman and struggling todefine its authority while integrating Segarra and a new corps ofexpert examiners into a reorganized supervisory scheme.

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Segarra became a polarizing personality inside the New York Fed— and a problem for her bosses — in part because she was toooutspoken and direct about the issues she saw at both Goldman andthe Fed. Some colleagues found her abrasive and complained. Herunwillingness to conform set her on a collision course withhigher-ups at the New York Fed and, ultimately, led to herundoing.

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In a tense, 40-minute meeting recorded the week before she wasfired, Segarra's boss repeatedly tries to persuade her to changeher conclusion that Goldman was missing a policy to handleconflicts of interest. Segarra offered to review her evidence withhigher-ups and told her boss she would accept being overruled onceher findings were submitted. It wasn't enough.

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"Why do you have to say there's no policy?" her boss said nearthe end of the grueling session.

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"Professionally," Segarra responded, "I cannot agree."

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The New York Fed disputes Segarra's claim that she was fired inretaliation.

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"The decision to terminate Ms. Segarra's employment with the NewYork Fed was based entirely on performance grounds, not because sheraised concerns as a member of any examination team about anyinstitution," it said ina two-page statement responding toanextensive list of questions from ProPublica and ThisAmerican Life.

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The statement also defends the bank's record as regulator,saying it has taken steps to incorporate Beim's recommendations and"provides multiple venues and layers of recourse to help ensurethat its employees freely express their views and concerns."

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"The New York Fed," the statement says, "categorically rejectsthe allegations being made about the integrity of its supervisionof financial institutions."

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In the spring of 2009, New York Fed President William Dudley puttogether a team of eight senior staffers to help Beim in hisinquiry. In many ways, this was familiar territory for Beim.

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He had worked on Wall Street as a banker in the 1980s at BankersTrust Company, assisting the firm through its transition from aretail to an investment bank. In 1997, the New York Fed hired Beimto study how it might improve its examination process. Beimrecommended the Fed spend more time understanding the businesses itsupervised. He also suggested a system of continuous monitoringrather than a single year-end examination.

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Beim says his team in 2009 pursued a no-holds-barredinvestigation of the New York Fed. They were emboldened because thereport was to remain an internal document, so there was no reasonto hold back for fear of exposure. The words "ConfidentialTreatment Requested" ran across the bottom of the report.

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"Nothing was off limits," says Beim. "I was told I could askanyone any question. There were no restrictions."

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In the end, his 27-page report laid bare a culture ruled bygroupthink, where managers used consensus decision-making andlayers of vetting to water down findings. Examiners feared to speakup lest they make a mistake or contradict higher-ups. Excessivesecrecy stymied action and empowered gatekeepers, who used theirauthority to protect the banks they supervised.

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"Our review of lessons learned from the crisis reveals a culturethat is too risk-averse to respond quickly and flexibly to newchallenges," the report stated. "A number of people believe thatsupervisors paid excessive deference to banks, and as a result theywere less aggressive in finding issues or in following up on themin a forceful way."

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One New York Fed employee, a supervisor, described hisexperience in terms of "regulatory capture," the phrase commonlyused to describe a situation where banks co-opt regulators. Beimincluded the remark in a footnote. "Within three weeks on the job,I saw the capture set in," the manager stated.  

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Confronted with the quotation, senior officers at the Fed askedthe professor to remove it from the report, according to Beim."They didn't give an argument," Beim said in an interview. "Theywere embarrassed." He refused to change it.

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The Beim report made the case that the New York Fed needed aspecific kind of culture to transform itself into an institutionable to monitor complex financial firms and catch the kinds ofrisks that were capable of torpedoing the global economy.

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That meant hiring "out-of-the-box thinkers," even at the risk ofgetting "disruptive personalities," the report said. It called forexpert examiners who would be contrarian, ask difficult questionsand challenge the prevailing orthodoxy. Managers should addcategories like "willingness to speak up" and "willingness tocontradict me" to annual employee evaluations. And senior Fedmanagers had to take the lead.

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"The top has to articulate why we're going through this change,what the benefits are going to be and why it's so important thatwe're going to monitor everyone and make sure they stay on board,"Beim said in an interview.

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Beim handed the report to Dudley. The professor kept it in draftform to help maintain secrecy and because he thought the Fedpresident might request changes. Instead, Dudley thanked him andthat was it. Beim never heard from him again about the matter, hesaid.

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In 2011, the Financial Crisis Inquiry Commission, created byCongress to investigate the causes behind the economic calamity,publicly released hundreds of documents. Buried among them wasBeim's report.

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Because of the report's candor, the release surprised Beim andNew York Fed officials. Yet virtually no one else noticed.

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Among the New York Fed employees enlisted to help Beim in hisinvestigation was Michael Silva.

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As a Fed veteran, Silva was a logical choice. A lawyer andgraduate of the United States Naval Academy, he joined the bank asa law clerk in 1992. Silva had also assisted disabled veterans andhad gone into Iraq after the 2003 invasion to help the country'scentral bank. Prior to working on Beim's report, he had been chiefof staff to the previous New York Fed president, TimothyGeithner.

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In declining through his lawyer to comment for this story, Silvacited the appeal of Segarra's lawsuit and a prohibition ondisclosing unpublished supervisory material. The rule allowsregulators to monitor banks without having to worry about therelease of information that could alarm customers and create a runon a bank that's under scrutiny.

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Silva had been in the room with Geithner in September 2008during a seminal moment of the financial crisis. Shares in a largemoney market fund – the Reserve Primary Fund – had fallen below thestandard price of $1, "breaking the buck" and threatening to touchoff a run by investors. The investment firm Lehman Brothers hadentered bankruptcy, and the financial system appeared in danger ofcollapse.

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In Segarra's recordings, Silva tells his team how, at leastinitially, no one in the war room at the New York Fed knew how torespond. He went into the bathroom, sick to his stomach, andvomited.

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"I never want to get close to that moment again, but maybe I'mtoo close to that moment," Silva told his New York Fed team atGoldman Sachs in a meeting one day.

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Despite his years at the New York Fed, Silva was new to theinstitution's supervisory side. He had never been an examiner orparticipated as part of a team inside a regulated bank until beingappointed to lead the team at Goldman Sachs. Silva prefaced hisfinancial crisis anecdote by saying the team needed to understandhis motivations, "so you can perhaps push back on thesethings."

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In the recordings, Silva then offered a second anecdote. Thisone involved the moments before the Lehman bankruptcy.

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Silva related how the top bankers in the nation were asked tocontribute money to save Lehman. He described his disappointmentwhen Goldman executives initially balked. Silva acknowledged thatit might have been a hard sell to shareholders, but added that "ifGoldman had stepped up with a big number, that would haveencouraged the others."

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"It was extraordinarily disappointing to me that they weren'tthinking as Americans," Silva says in the recording. "Those twothings are very powerful experiences that, I will admit, influencemy thinking."  

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Silva's stories help explain his approach to a controversialdeal that came to the New York Fed team's attention in January2012, two months after Segarra arrived. She said the Fed's handlingof the deal demonstrated its timidity whenever questions aroseabout Goldman's actions. Debate about the deal runs through many ofSegarra's recordings.

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On Friday, Jan. 6, 2012, at 3:54 p.m., a senior Goldman officialsent an email to the on-site Fed regulators – including Silva,Segarra and Segarra's legal and compliance manager, Johnathon Kim.Goldman wanted to notify them about a fast-moving transaction witha large Spanish bank, Banco Santander. Spanish regulators hadsigned off on the deal, but Goldman was reaching out to its ownregulators to see whether they had any questions.

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At the time, European banks were shaky, particularly the Spanishones. To shore up confidence, the European Banking Authority wasdemanding that banks hold more capital to offset potential futurelosses. Meeting these capital requirements was at the heart of theGoldman-Santander transaction.

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Under the deal, Santander transferred some of the shares it heldin its Brazilian subsidiary to Goldman. This effectively reducedthe amount of capital Santander needed. In exchange for a fee fromSantander, Goldman would hold on to the shares for a few years andthen return them. The deal would help Santander announce that ithad reached its proper capital ratio six months ahead of thedeadline.

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In the recordings, one New York Fed employee compared it toGoldman "getting paid to watch a briefcase." Silva states that thefee was $40 million and that potentially hundreds of millions morecould be made from trading on the large number of shares Goldmanwould hold.

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Santander and Goldman declined to respond to detailed questionsabout the deal.

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Silva did not like the transaction. He acknowledged it appearedto be "perfectly legal" but thought it was bad to help Santanderappear healthier than it might actually be.

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"It's pretty apparent when you think this thing through thatit's basically window dressing that's designed to help BancoSantander artificially enhance its capital position," he told histeam before a big meeting on the topic with Goldman executives.

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The deal closed the Sunday after the Friday email. The followingweek, Silva spoke with top Goldman people about it and told histeam he had asked why the bank "should" do the deal. As Silvadescribed it, there was a divide between the Fed's view of the dealand Goldman's.

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"[Goldman executives] responded with a bunch of explanationsthat all relate to, 'We can do this,' " Silva told his team.

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Privately, Segarra saw little sense in Silva's preoccupationwith the question of whether "should" applied to the Santanderdeal. In an interview, she said it seemed to her that Silva and theother examiners who worked under him tended to focus on abstractissues that were "fuzzy" and "esoteric" like "should" and "reputationalrisk."

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Segarra believed that Goldman had more pressing complianceissues – such as whether executives had checked the backgrounds ofthe parties to the deal in the way required by anti-moneylaundering regulations.

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Segarra had joined the New York Fed on Oct. 31, 2011, as it wasgearing up for its new era overseeing the biggest and riskiestbanks. She was part of a reorganization meant to put more expertexaminers to the task. 

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In the past, examiners known as "relationship managers" had beenstationed inside the banks. When they needed an in-depth review ina particular area, they would often call a risk specialist fromthat area to come do the examination for them.

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In the new system, relationship managers would be redubbed"business-line specialists." They would spend more time trying tounderstand how the banks made money. The business-line specialistswould report to the senior New York Fed person stationed inside thebank.

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The risk specialists like Segarra would no longer be called infrom outside. They, too, would be embedded inside the banks, withan open mandate to do continuous examinations in their particulararea of expertise, everything from credit risk to Segarra'sspecialty of legal and compliance. They would have their ownrisk-specialist bosses but would also be expected to answer to theperson in charge at the bank, the same manager of the business-linespecialists.

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In Goldman's case, that was Silva.

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Shortly after the Santander transaction closed, Segarra notifiedher own risk-specialist bosses that Silva was concerned. They toldher to look into the deal. She met with Silva to tell him the news,but he had some of his own. The general counsel of the New York Fedhad "reined me in," he told Segarra. Silva did not refer by name toTom Baxter, the New York Fed's general counsel, but said: "I wasall fired up, and he doesn't want me getting the Fed to assertpowers it doesn't have."

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This conversation occurred the day before the New York Fed teammet with Goldman officials to learn about the inner workings of thedeal.

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From the recordings, it's not spelled out exactly what troubledthe general counsel. But they make clear that higher-ups felt theyhad no authority to nix the Santander deal simply because Fedofficials didn't think Goldman "should" do it.

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Segarra told Silva she understood but felt that if they looked,they'd likely find holes. Silva repeated himself. "Well, yes, butit is actually also the case that the general counsel reined me ina bit on that," he reminded Segarra.

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The following day, the New York Fed team gathered before theirmeeting with Goldman. Silva outlined his concerns withoutmentioning the general counsel's admonishment. He said he thoughtthe deal was "legal but shady."

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"I'd like these guys to come away from this meeting confused asto what we think about it," he told the team. "I want to keep themnervous."

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As requested, Segarra had dug further into the transaction andfound something unusual: a clause that seemed to require Goldman toalert the New York Fed about the terms and receive a "noobjection."

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This appeared to pique Silva's interest. "The one thing I knowas a lawyer that they never got from me was a no objection," hesaid at the pre-meeting. He rallied his team to look into allaspects of the deal. If they would "poke with our usual pokerfaces," Silva said, maybe they would "find something evenshadier."

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But what loomed as a showdown ended up fizzling. In the meetingwith Goldman, an executive said the "no objection" clause was forthe firm's benefit and not meant to obligate Goldman to getapproval. Rather than press the point, regulators moved on.

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Afterward, the New York Fed staffers huddled again on theirfloor at the bank. The fact-finding process had only just started.In the meeting, Goldman had promised to get back to the regulatorswith more information to answer some of their questions. Still, oneof the Fed lawyers present at the post-meeting lauded Goldman's"thoroughness."

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Another examiner said he worried that the team was pushingGoldman too hard.

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"I think we don't want to discourage Goldman from disclosingthese types of things in the future," he said. Instead, hesuggested telling the bank, "Don't mistake our inquisitiveness, andour desire to understand more about the marketplace in general, asa criticism of you as a firm necessarily."

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To Segarra, the "inquisitiveness" comment represented a fear ofupsetting Goldman.

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By law, the banks are required to provide information if the NewYork Fed asks for it. Moreover, Goldman itself had brought theSantander deal to the regulators' attention.

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Beim's report identified deference as a serious problem. In aninterview, he explained that some of this behavior could be chalkedup to a natural tendency to want to maintain good relations withpeople you see every day. The danger, Beim noted, is that it canmorph into regulatory capture. To prevent it, the New York Fedtypically tries to move examiners every few years.

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Over the ensuing months, the Fed team at Goldman debated how todemonstrate their displeasure with Goldman over the Santander deal.The option with the most interest was to send a letter saying theFed had concerns, but without forcing Goldman to do anything aboutthem.

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The only downside, said one Fed official on a recording in lateJanuary 2012, was that Goldman would just ignore them.

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"We're not obligating them to do anything necessarily, but itcould very effectively get a reaction and change some behavior forfuture transactions," one team member said.

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In the same recorded meeting, Segarra pointed out that Goldmanmight not have done the anti-money laundering checks that Fedguidance outlines for deals like these. If so, the team might beable to do more than just send a letter, she said. The groupignored her.

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It's not clear from the recordings if the letter was eversent.

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Silva took an optimistic view in the meeting. The Fed's interestgot the bank's attention, he said, and senior Goldman executiveshad apologized to him for the way the Fed had learned about thedeal. "I guarantee they'll think twice about the next one, becauseby putting them through their paces, and having that large Fedcrowd come in, you know we, I fussed at 'em pretty good," he said."They were very, very nervous."

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Segarra had worked previously at Citigroup, MBNA and SociétéGénérale. She was accustomed to meetings that ended with specificaction items.

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At the Fed, simply having a meeting was often seen as akin toaction, she said in an interview. "It's like the information isdiscussed, and then it just ends up in like a vacuum, floating onair, not acted upon."

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Beim said he found the same dynamic at work in the lead up tothe financial crisis. Fed officials noticed the accumulating riskin the system. "There were lengthy presentations on subjects likethat," Beim said. "It's just that none of those meetings ever endedwith anyone saying, 'And therefore let's take the following stepsright now.'"

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The New York Fed's post-crisis reorganization didn't resolvelongstanding tensions between its examiner corps. In fact, byempowering risk specialists, it may have exacerbated them.

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Beim had highlighted conflicts between the two examiner groupsin his report. "Risk teams … often feel that the Relationship teamsbecome gatekeepers at their banks, seeking to control access totheir institutions," he wrote. Other examiners complained in thereport that relationship managers "were too deferential to bankmanagement."

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In the new order, risk specialists were now responsible fortheir own examinations. No longer would the business-linespecialists control the process. What Segarra discovered, however,was that the roles had not been clearly defined, allowing thetensions Beim had detailed to fester.

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Segarra said she began to experience pushback from thebusiness-line specialists within a month of starting her job. Someof these incidents are detailed in her lawsuit, recorded in notesshe took at the time and corroborated by another examiner who waspresent.

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Business-line specialists questioned her meeting minutes; onechallenged whether she had accurately heard comments by a Goldmanexecutive at a meeting. It created problems, Segarra said, when shedrew on her experiences at other banks to contradict rosyassessments the business-line specialists had of Goldman'scompliance programs. In the recordings, she is forceful inexpressing her opinions.

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ProPublica and This American Life reached out to four of thebusiness-line specialists who were on the Goldman team whileSegarra was there to try and get their side of the story. Only oneresponded, and that person declined a request for comment. In therecordings, it's clear from her interactions with managers thatSegarra found the situation upsetting, and she did not hide herdispleasure. She repeatedly complains about the business-linespecialists to Kim, her legal and compliance manager, and othersupervisors.

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"It's like even when I try to explain to them what my evidenceis, they won't even listen," she told Kim in a recording from Jan.6, 2012. "I think that management needs to do a better job ofmanaging those people."

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Kim let her know in the meeting that he did not expect such helpfrom the Fed's top management. "I just want to manage yourexpectations for our purposes," he told Segarra. "Let's pretendthat it's not going to happen."

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Instead, Kim advised Segarra "to be patient" and "bite hertongue." The New York Fed was trying to change, he counseled, butit was "this giant Titanic, slow to move."

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Three days later, Segarra met with her fellow legal andcompliance risk specialists stationed at the other banks. In therecording, the meeting turns into a gripe session about thebusiness-line specialists. Other risk specialists were jockeyingover control of examinations, too, it turned out.

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"It has been a struggle for me as to who really has the finalsay about recommendations," said one.

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"If we can't feel that we'll have management support or that ourexpertise per se is not valued, it causes a low morale to us," saidanother.

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On Feb. 21, 2012, Segarra met with her manager, Kim, for theirweekly meeting. After covering some process issues with herexaminations, the recordings show, they again discussed thetensions between the two camps of specialists.

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Kim shifted some of the blame for those tensions onto Segarra,and specifically onto her personality: "There are opinions that arecoming in," he began.

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First he complimented her: "I think you do a good job of lookingat issues and identifying what the gaps are and you knowdetermining what you want to do as the next steps. And I think youdo a lot of hard work, so I'm thankful," Kim said. But there hadbeen complaints.

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She was too "transactional," Kim said, and needed to be more"relational."

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"I'm never questioning about the knowledge base or assessmentsor those things; it's really about how you are perceived," Kimsaid. People thought she had "sharper elbows, or you're sort ofbreaking eggs. And obviously I don't know what the right wordis."

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Segarra asked for specifics. Kim demurred, describing it as"general feedback."

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In the conversation that followed, Kim offered Segarra pointedadvice about behaviors that would make her a better examiner at theNew York Fed. But his suggestions, delivered in a well-meaningtone, tracked with the very cultural handicaps that Beim saidneeded to change.

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Kim: "I would ask you to think about a little bit more, in termsof, first of all, the choice of words and not being soconclusory."

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Beim report: "Because so many seem to fear contradicting theirbosses, senior managers must now repeatedly tell subordinates theyhave a duty to speak up even if that contradicts their bosses."

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Kim: "You use the word 'definitely' a lot, too. If you use that,then you want to have a consensus view of definitely, not only yourown."

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Beim report: "An allied issue is that building consensus canresult in a whittling down of issues or a smoothing of examfindings. Compromise often results in less forceful language anddemands on the banks involved."

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In Segarra's recordings, there is some evidence to back Kim'scritique. Sometimes she cuts people off, including her bosses. Andshe could be brusque or blunt.

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A colleague who worked with Segarra at the New York Fed, whodoes not have permission from their employer to be identified, toldProPublica that Segarra often asked direct questions. Sometimesthey were embarrassingly direct, this former examiner said, butthey were all questions that needed to be asked. This personcharacterized Segarra's behavior at the New York Fed as "a breathof fresh air."

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ProPublica also reached out to three people who worked withSegarra at two other firms. All three praised her attitude at workand said she never acted unprofessionally.

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In the meeting with Kim, Segarra observed that the skills thatmade her successful in the private sector did not seem to be theones that necessarily worked at the New York Fed.

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Kim said that she needed to make changes quickly in order tosucceed.

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"You mean, not fired?" Segarra said.

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"I don't want to even get there," Kim responded.

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It would be unfair to fire her, Segarra offered, since she wasdoing a good job.

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"I'm here to change the definition of what a good job is," Kimsaid. "There are two parts to it: Actually producing the results,which I think you're very capable of producing the results. Butalso be mindful of enfolding people and defusing situations, makingsure that people feel like they're heard and respected."

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Segarra had thought her job was simple: Follow the evidencewherever it led. Now she was being told she had to "enfold"business-line specialists and "defuse" their objections.

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"What does this have to do with bank examinations," Segarrawondered to herself, "or Goldman Sachs?"

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Segarra worked on her examination of Goldman'sconflict-of-interest policies for nearly seven months. Her mandatewas to determine whether Goldman had a comprehensive, firm-wideconflicts-of-interest policy as of Nov. 1, 2011.

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Segarra has records showing that there were at least 15 meetingson the topic. Silva or Kim attended the majority. At an impromptugathering of regulators after one such meeting early that December,her contemporaneous notes indicate Silva was distressed by howGoldman was dealing with conflicts of interest.

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By the spring of 2012, Segarra believed her bosses agreed withher conclusion that Goldman did not have a policy sufficient tomeet Fed guidance.

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During her examination, she regularly talked about her findingswith fellow legal and compliance risk specialists from other banks.In April, they all came together for a vetting session to reportconclusions about their respective institutions. After a briefpresentation by Segarra, the team agreed that Goldman'sconflict-of-interest policies didn't measure up, according toSegarra and one other examiner who was present.

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In May, members of the New York Fed team at Goldman met todiscuss plans for their annual assessment of the bank. Segarra wassick and not present. Silva recounts in an email that he wasconsidering informing Goldman that it did not have a policy when abusiness-line specialist interjected and said Goldman did have aconflict-of-interest policy – right on the bank's website.

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In a follow-up email to Segarra, Silva wrote: "In light of yourrepeated and adamant assertions that Goldman has no writtenconflicts of interest policy, you can understand why I wassurprised to find a "Conflicts of Interests Section" in Goldman'sCode of Conduct that seemed to me to define, prohibit and instructemployees what to do about it."

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But in Segarra's view, the code fell far short of the Fed'sofficial guidance, which calls for a policy that encompasses theentire bank and provides a framework for "assessing, controlling,measuring, monitoring and reporting" conflicts.

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ProPublica sent a copy of Goldman's Code of Conduct to two legaland compliance experts familiar with the Fed's guidance on thetopic. Both did not want be quoted by name, either because theywere not authorized by their employer or because they did not wantto publicly criticize Goldman Sachs. Both have experience as bankexaminers in the area of legal and compliance. Each said Goldman'sCode of Conduct would not qualify as a firm-wide conflicts ofinterest policy as set out by the Fed's guidance.

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In the recordings, Segarra asks Gwen Libstag, the executive atGoldman who is responsible for managing conflicts, whether the bankhas "a definition of a conflict of interest, what that is and whatthat means?"

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"No," Libstag replied at the meeting in April.

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Back in December, according to meeting minutes, a Goldmanexecutive told Segarra and other regulators that Goldman did nothave a single policy: "It's probably more than one document – thereis no one policy per se."

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Early in her examination, Segarra had asked for all theconflict-of-interest policies for each of Goldman's divisions as ofNov. 1, 2011. It took months and two requests, Segarra said, to getthe documents. They arrived in March. According to the documents,two of the divisions state that the first policy dates to December2011. The documents also indicate that policies for anotherdivision were incomplete.

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ProPublica and This American Life sent GoldmanSachs detailedquestions about the bank's conflict-of-interestpolicies, Segarra and events in the meetings she recorded.

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In a three-paragraphresponse, the bank said, "Goldman Sachs has long had acomprehensive approach for addressing potential conflicts." It alsocited Silva's email about the Code of Conduct in the statement,saying: "To get a balanced view of her claims, you should read whather supervisor wrote after discovering that what she had said aboutGoldman was just plain wrong."

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Goldman's statement also said Segarra had unsuccessfullyinterviewed for jobs at Goldman three times. Segarra said that sherecalls interviewing with the bank four times, but that itshouldn't be surprising. She has applied for jobs at most of thetop banks on Wall Street multiple times over the course of hercareer, she said.

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The audio is muddy but the words are distinct. So is thetension. Segarra is in Silva's small office at Goldman Sachs withhis deputy. The two are trying to persuade her to change her viewabout Goldman's conflicts policy.

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"You have to come off the view that Goldman doesn't have anykind of conflict-of- interest policy," are the first words Silvasays to her. Fed officials didn't believe her conclusion — thatGoldman lacked a policy — was "credible."

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Segarra tells him she has been writing bank compliance policiesfor a living since she graduated from law school in 1998. She hasasked Goldman for the bank's policies, and what they provided didnot comply with Fed guidance.

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"I'm going to lose this entire case," Silva says, "because ofyour fixation on whether they do or don't have a policy. Why can'twe just say they have basic pieces of a policy but they have todramatically improve it?"

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It's not like Goldman doesn't know what an adequate policycontains, she says. They have proper policies in other areas.

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"But can't we say they have a policy?" Silva says, a question heasks repeatedly in various forms during the meeting.

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Segarra offers to meet with anyone to go over the evidencecollected from dozens of meetings and hundreds of documents. Shesays it's OK if higher-ups want to change her conclusions after shesubmits them.

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But Silva says the lawyers at the Fed have determined Goldmanhas a policy. As a comparison, he brings up the Santander deal. Hehad thought the deal was improper, but the general counsel reinedhim in.

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"I lost the Santander transaction in large part because Iinsisted that it was fraudulent, which they insisted is patentlyabsurd," Silva said, "and as a result of that, I didn't get takenseriously."

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Now, the same thing was happening with conflicts, he said.

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A week later, Silva called Segarra into a conference room andfired her. The New York Fed, he told Segarra, who was recording theconversation, had "lost confidence in [her] ability to notsubstitute [her] own judgment for everyone else's."

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Producer Brian Reed of This American Life contributed reportingto this story. ProPublica intern Abbie Nehring contributedresearch.