Senate Panel to Scrutinize Bank Regulators

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Carmen M. Segarra, a former New York Fed examiner, contended in a lawsuit that she was fired for being too hard on Goldman Sachs. A federal judge dismissed her suit this year.    Credit Earl Wilson/The New York Times

A Senate subcommittee plans to hold a hearing in November into whether banking regulators are beholden to the institutions that they are meant to police.

The hearing is scheduled for Nov. 21 before the Senate Banking Committee’s Financial Institutions and Consumer Protection Subcommittee, whose chairman is Senator Sherrod Brown, Democrat of Ohio and a frequent critic of large banks. The hearing was prompted by recent media reports that described interactions between employees of the Federal Reserve Bank of New York and bankers at Goldman Sachs. The reports described a situation in which a New York Fed examiner appeared not to challenge Goldman on a deal after earlier telling his colleagues that he would. Some Wall Street critics said the interaction, along with other incidents in the reports, suggested that the New York Fed might be too close to the giant firms that it oversees.

“American taxpayers deserve regulators who will fight each day on their behalf, rather than cozy up to the very industry that they are meant to police,” Senator Brown said in a statement announcing the hearing.

The subcommittee did not disclose the witnesses that it expects to be at the hearing. Andrea Priest, a spokeswoman for the New York Fed, said that it would be sending a witness but declined to identify the person.

ProPublica, an investigative journalism organization, and the radio program “This American Life” released the reports that prompted the hearing. The reports were based in part on secret audio recordings made by Carmen M. Segarra, a former New York Fed examiner. The New York Fed fired Ms. Segarra in 2012. She then sued the Fed, contending that it had dismissed her for being too hard on Goldman. A federal judge dismissed her suit this year.

Linda Stengle, a lawyer for Ms. Segarra, said in an email, “To my knowledge, we haven’t gotten a request from the Senate for Carmen to testify.”

William C. Dudley, the president of the New York Fed, defended his institution after the reports on the recordings came out. “We will continue striving to improve, but I don’t think anyone should question our motives or what we are attempting to accomplish,” he said. Mr. Dudley has also recently pressed Wall Street firms to clean up their ethical culture after a string of scandals at big banks.

The New York Fed failed to spot big risks building in the financial system before the 2008 financial crisis. As a result, its fiercest critics have contended that the Fed may be “captured” by large banks, by which they mean it has become institutionally predisposed to the interests of Wall Street.

“The recent media reports are troubling because they raise new questions about regulators being captured by the financial institutions they regulate,” Senator Tim Johnson, Democrat of South Dakota and the chairman of the Senate Banking Committee, said in a statement. “It is important that the committee further examine this issue and push regulators to address concerns about regulatory capture and to improve supervision.”

Mr. Dudley, however, has pointed to steps the New York Fed has taken since the crisis to overhaul its banking supervisory efforts. “These people are completely dedicated to the safety and soundness of the financial system,” he said about the New York Fed’s supervisors in early October. “They are operating completely in the public interest.”