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‘Clandestine Goldman Sachs Group Inc (GS) Tapes’ lead to policy overhaul at Citigroup Inc (C)

Citigroup Inc (NYSE:C) had announced yesterday that it will be reviewing its conflict of interest policies for investment bankers. This information comes right after Goldman Sachs Group Inc (NYSE:GS) had notified its investment bankers that they would be barred from trading in individual stocks and bonds. Bloomberg’s ‘Market Makers’ Anchor, Erik Schatzker, talked about this development and the significance of its timing on the channel’s ‘In The Loop’.

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Schatzker explained that these policy changes at Citigroup Inc (NYSE:C) were fueled by the release of secret recordings made by Carmen Segarra, a former examiner of the Federal Reserve Bank of New York.

“These are the clandestine recordings made by the former bank examiner for the New York Fed and among other things, they have turned the spotlight on conflict of interest policies on Wall Street and found them to be wanting,” he said.

Segarra also claimed that she was pressured to alter her conclusion that Goldman Sachs Group Inc (NYSE:GS) did not have a conflict of interest policy in place and was fired following here refusal to comply.

Schatzker pointed out that though investment bankers working for banks such as Citigroup Inc (NYSE:C) and Goldman Sachs Group Inc (NYSE:GS) claim that they work for the benefit of their clients; they do try to reap personal benefits that might harm the bank or the clients. A conflict of interest policy exists to make sure that such a situation does not arise.

“The whole point of having a conflict of interest policy is to prevent employees from doing things for personal benefits that injure the company or its clients,” he explained.

So, if what they say is true, then all banks must have clearly defined conflict of interest policies in place. This, however, is not the case and a deadlock arises when employees start wondering why they should be denied the chance to trade in stocks or bonds.

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