By Howard Schneider
WASHINGTON (Reuters) - Several Democratic senators on Friday criticized the New York Federal Reserve Bank as too close to the mammoth financial institutions it regulates, taking particular aim at the hiring of Fed alumni at firms like Goldman Sachs - and vice versa.
"Is it any surprise?" that ties between the Fed and the banking industry are perceived as cozy, and arguably contributed to incidents like the large losses at JPMorgan associated with the so-called "London Whale" trade, West Virginia Democratic Senator Joe Manchin said in a Senate banking subcommittee hearing.
No Republicans were in attendance when the hearing convened.
"Troubling reports suggest that it is back to business as usual at the Federal Reserve Bank of New York," Ohio Democrat Sherrod Brown, the subcommittee's chairman, said as he kicked off the hearing.
New York Fed chief William Dudley, himself a former partner at Goldman Sachs, said he agreed that "regulatory capture" was a constant concern, but argued the Fed had improved its oversight markedly since the 2007-2009 financial crisis.
The Fed "has made significant changes to the substance and process of supervision," including establishment of a centralized committee to oversee the regional banks' oversight of the 15 institutions with more than $50 billion in assets.
Brown said recent reports that a former New York Fed employee and current Goldman Sachs employee received confidential information from the Fed reinforced his conclusion that loose oversight remained a concern.
"It is no wonder that Wall Street always appears to stay one step ahead of the sheriff," Brown said.
The hearing was called after a critical series of internal and external reports suggested the New York Fed's oversight of major banks was lax and that supervisors had become too close to the industry they are expected to oversee.
The Fed's Board of Governors on Thursday announced a review of its oversight of large banks, including a specific effort to ensure contrary views about a bank's health are not squelched, in an apparent attempt to preempt some of the congressional criticism.
(Reporting by Howard Schneider; Editing by Paul Simao)