Case in point, we have a bank examiner fired by the NY Fed because she refused to ignore the law to help Goldman Sachs:

In the spring of 2012, a senior examiner with the Federal Reserve Bank of New York determined that Goldman Sachs had a problem.

Under a Fed mandate, the investment banking behemoth was expected to have a company-wide policy to address conflicts of interest in how its phalanxes of dealmakers handled clients. Although Goldman had a patchwork of policies, the examiner concluded that they fell short of the Fed’s requirements.

That finding by the examiner, Carmen Segarra, potentially had serious implications for Goldman, which was already under fire for advising clients on both sides of several multibillion-dollar deals and allegedly putting the bank’s own interests above those of its customers. It could have led to closer scrutiny of Goldman by regulators or changes to its business practices.

Before she could formalize her findings, Segarra said, the senior New York Fed official who oversees Goldman pressured her to change them. When she refused, Segarra said she was called to a meeting where her bosses told her they no longer trusted her judgment. Her phone was confiscated, and security officers marched her out of the Fed’s fortress-like building in lower Manhattan, just 7 months after being hired.

“They wanted me to falsify my findings,” Segarra said in a recent interview, “and when I wouldn’t, they fired me.”

Today, Segarra filed a wrongful termination lawsuit against the New York Fed in federal court in Manhattan seeking reinstatement and damages. The case provides a detailed look at a key aspect of the post-2008 financial reforms: The work of Fed bank examiners sent to scrutinize the nation’s “Too Big to Fail” institutions.

Segarra does not allege that Goldman was involved in the Fed’s decision to fire her, and I’m inclined to agree.

The nature of regulatory capture is that the regulators do the bidding of those that they regulate without being asked.

The question is how we fix this.

^*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.