Former Fed analyst questions M1 currency component spike prior to 9/11
by Ed Haas
March 22, 2007 – William Bergman worked at the Federal Reserve Bank of Chicago from July 1990 until early 2004. He served as an economist for eight years, and then moved to a senior analyst position in a new department researching financial market and payment system risk policy issues. In late 2003, he was asked to consider an assignment in the money laundering area. Bergman accepted the assignment, underwent a background check, received credentials affording access to confidential banking information, and began working in the area. He was told that he was “part of the fight against terrorism” and that he “had been asking good questions.”
One aspect of the assignment to the money laundering area was for Bergman to develop a paper that, if accepted, could serve as a reference source for the Federal Reserve System.
Bergman decided to begin his new assignment by developing a 40 question Q&A in order to introduce himself and anyone else new to the money laundering area to the topic. He thought that the Q&A could serve as a primer that dealt with the fundamentals, including some history on money laundering, recent legal developments in the area, and the role of banking regulators.
After submitting his draft to a supervisor, Bergman received approval of his work and was told that it could be considered as a reference. However, in his Q&A, Bergman left one question without an answer. That is to say that Bergman submitted his 40 question Q&A with 40 questions, but only 39 answers. The supervisor that reviewed the draft told Bergman that he should continue his work by answering the only remaining unanswered question in the draft.
What prompted the unanswered question that Bergman incorporated into his draft? Bergman had noted that the Board of Governors of the Federal Reserve had issued supervisory letters to the 12 Reserve Banks in the weeks after September 11, 2001 urging scrutiny of suspicious activity reports in tracking terrorism activity and financing. However, Bergman also noticed that the Board of Governors had issued a similar letter, albeit one that did not refer explicitly to terrorism, on August 2, 2001. According to Bergman, terrorism and terrorist financing were known to be part of ‘suspicious activity’ however, and the August 2, 2001 supervisory letter clearly called for scrutiny of suspicious activity, which implies and includes the tracking of terrorism activity and financing. The unanswered question on Bergman’s 40 question Q&A asked why the Board had issued the August 2, 2001 letter – a very fair, logical, and important question that has yet to be answered to this day.
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