NY Federal Reserve chief: We can’t catch everything on Wall Street

New York Federal Reserve President William Dudley on Monday said that it’s impossible for regulators to find all bad actors on Wall Street.

{mosads}The comments are the latest in what’s become an unapologetic defense from Dudley, who serves as one of Wall Street’s top regulators, as he faces intense scrutiny for how he’s policing the financial system.

A ProPublica report has raised concerns that regulators at the New York Fed were subject to “regulatory capture,” a term used when businesses infiltrate regulators and end up policing themselves.

“Can you say that these sorts of things that have not been found by the New York Fed previously will be found in the future?” CNBC’s Steve Liesman asked Dudley in an interview on Monday.

“I think that there’s always things that are going to happen that we’re not going to find. This idea that somehow the New York Fed or any supervisor is going to prevent all bad things from happening — I don’t think that’s a realistic standard,” Dudley answered.

Dudley said that a “realistic standard” would be that “when bad things happen, do these institutions have sufficient capital and liquidity resources so the problem that they encounter doesn’t lead to financial stability consequences for the broader economy.”

The ProPublica story, published in September through NPR, was based on more than 46 hours of taped recordings of meetings at the New York Fed.

Former New York Fed bank examiner Carmen Segarra taped the meetings, during which her colleagues were reluctant to regulate Goldman Sachs.

“The issue of regulatory capture is a real issue and something that we really have to guard against,” Dudley said. “So, we’ve done a lot of things and we’re going to continue to guard against this issue to make sure we’re not subject to regulatory capture.”

Dudley also said that he thought that the U.S. banking system was safer than it was before the 2008 economic collapse.

At a Senate Banking subcommittee hearing last month chaired by Sen. Sherrod Brown (D-Ohio), Democratic senators criticized Dudley for not doing enough to police Wall Street.

Brown, along with Sens. Jack Reed (D-R.I.) and Elizabeth Warren (D-Mass.), criticized Dudley, who testified at the hearing, for his leadership.

“You need to fix it, or we need to get someone who will,” Warren told Dudley at the hearing.

Reed introduced legislation last month that would make the New York Federal Reserve chairman a presidential appointee, meaning nominees would go through Senate confirmation hearings.

When asked whether he’d support such a proposal, Dudley declined to offer a position.

“It’s not for me to decide,” Dudley said. “However the Congress wants to do it — it’s their prerogative.”