Perhaps it was the public shaming of Iceland's diametrically opposite approach to 'dealing' with its bankers, or perhaps Janet Yellen needs a distraction from her own 'Fed Leak' problems, or finally perhaps Carmen Segarra's 2013 whistleblowing over the cozy relationship between Goldman and The New York Fed was just too conspicuous to brush under the carpet. Despite Bill Dudley's insistence that The New York Fed is not a subsidiary of Goldman, The NY Times reports, federal prosecutors are preparing to announce a criminal case this week against a former Goldman banker suspected of taking confidential documents from a source inside the government. As we previously detailed, this is what happened in July 2014: From his desk in Lower Manhattan, a banker at Goldman Sachs thumbed through confidential documents — courtesy of a source inside the United States government. The banker came to Goldman through the so-called revolving door, the symbolic portal that connects financial regulators to Wall Street. He joined in July after spending seven years as a regulator at the Federal Reserve Bank of New York, the government’s front line in overseeing the financial industry. He received the confidential information, lawyers briefed on the matter suspect, from a former colleague who was still working at the New York Fed. As a reminder, the NY Fed is also the world's biggest hegde fund, as it is the place where, at Liberty 33, the Fed's market moving operations are executed. It is also where the legendary PPT is located. Continuing: The previously unreported leak, recounted in interviews with the lawyers briefed on the matter who spoke anonymously because the episode is not public, illustrates the blurred lines between Wall Street and the government — and the potential conflicts of interest that can result. When Goldman hired the former New York Fed regulator, who is 29, it assigned him to advise the same type of banks that he once policed. And the banker obtained confidential information, along with several publicly available facts, in the course of assignments from his bosses at Goldman, the lawyers said. What exactly data was one current NY Fed staffer leaking to a former NY Fed staffer, currently working at Goldman? The information provided Goldman a window into the New York Fed’s private insights, the lawyers said, including details about at least one of Goldman’s clients, a midsize bank regulated by the Fed. Although it is unclear how Goldman bankers used the information, if at all, the confidential details could have helped them advise the client. And the biggest irony is that Bansal's illegal abuse of confidential NY Fed data only was noticed for the first time... when Carmen Segarra's allegations hit the public for the second time on September 26 as noted above: At the request of his bosses, Mr. Bansal gathered information about how regulators might view various issues facing Goldman’s banking clients, the lawyers briefed on the matter said. Much of what Mr. Bansal learned, the lawyers said, was fair game. But in an email to his supervisor, Joseph Jiampietro, Mr. Bansal shared some potentially confidential supervisory information about a Goldman banking client. Mr. Jiampietro — a managing director at Goldman who was once a senior adviser to Sheila Bair, the former F.D.I.C. head — has since told colleagues he had no idea the information was subject to regulatory restrictions. “Mr. Jiampietro never knowingly or improperly reviewed or misused” confidential supervisory information, his lawyer, Adam Ford, said in a statement. “He should not have been terminated. Any compliance failings regarding Mr. Bansal had nothing to do with Mr. Jiampietro.” It was not until the morning of Sept. 26 that Goldman executives objected to some of Mr. Bansal’s information, the lawyers briefed on the matter said. During a conference call with Mr. Jiampietro and two higher-ranking Goldman executives, Mr. Bansal circulated an email with a spreadsheet attached. The email apparently set off alarms within Goldman. Within hours, the bank opened an internal investigation and alerted the New York Fed. Goldman determined that the spreadsheet contained confidential bank supervisory information. Federal and state rules classify certain records, including those generated during bank exams, as confidential. Unless the Federal Reserve provides special approval, it can be a federal crime to share them outside the Fed. Of course, had the Segarra story not resurfaced, Bansal would still be at Goldman. As for the leaker at the NY Fed, we know this: "Some of Mr. Bansal’s information, the lawyers said, may have come from Jason Gross, who worked at the New York Fed at the time." * * * And now, a year after Carmen Segarra's whistleblowing over The New York Fed's regulatory capture by Goldman Sachs - amid 47.5 hours of secretly recorded tapes, a rare criminal action on Wall Street appears imminent, as The New York Times reports, against a former Goldman Sachs banker suspected of taking confidential documents from a source inside the government... The banker and his source, who at the time of the leak was an employee at the Federal Reserve Bank of New York, one of Goldman’s regulators, might plead guilty to misdemeanor theft charges rather than fight the case at trial, according to lawyers briefed on the matter who were not authorized to discuss private deliberations. The men, who were both fired in the wake of the leak, would face up to a year in prison if they accept the plea deals. In a statement, a Goldman spokesman emphasized that the banker worked for the firm for less than three months, and that the bank “immediately began an investigation and notified the appropriate regulators” once it detected the leak. Nonetheless, the bank is expected to pay a significant price for the leak. Under a tentative deal with New York State’s financial regulator, the lawyers said, Goldman would pay a fine of $50 million and face new restrictions on how it handled delicate regulatory information. The settlement would also force Goldman to take the rare step of acknowledging that it failed to adequately supervise the former banker - thrusting the bank back into the spotlight just as it was shedding a popular image as a firm willing to cut corners to turn a profit. For Goldman and the New York Fed, the charges will give new life to an embarrassing episode that illustrated the blurred lines between their institutions. Perhaps more than any other bank, Goldman swaps employees with the government, earning it the nickname “Government Sachs.” If the plea is accepted, Goldman Sachs would face new restrictions on handling regulatory information and would acknowledge failure to supervise staff adequately... In addition to the fine, and the admission that it failed to supervise Mr. Bansal, Goldman will accept a three-year suspension from conducting certain consulting deals with banks in New York State. The prohibition denies Goldman a special privilege — legally accessing confidential information about a banking client with permission from regulators. Goldman, though, has rarely if ever done consulting deals that require such information, one of the lawyers briefed on the matter said, so that aspect of the deal is unlikely to dent the bank’s business. As The New York Times concludes, In a statement, the Goldman spokesman, Michael DuVally, said that the bank had “reviewed our policies regarding hiring from governmental institutions and have implemented changes to make them appropriately robust.” Bruce Barket, a lawyer for Mr. Gross, said, “We have a meritorious legal argument that my client did not violate federal law,” and added that even if prosecutors disagreed, “it would be a relatively minor infraction by a young man who we think would be a deserving candidate of a nonprosecution agreement.” Scott Morvillo, a lawyer for Mr. Bansal, declined to comment. Finally, as one ponders this action in light of the 74 years in jail given to Icelandic bankers, it is rare that a Wall Street banker faces criminal charges. After the financial crisis, not one Wall Street chief executive was charged, and prosecutors have charged bankers or traders in only a handful of investigations. * * * As we previously noted, Bill Dudley (President of The New York Fed)'s defense (not denial) so far: Mr. Dudley in 2013 unnerved some Wall Street executives when he said he saw “evidence of deep-seated cultural and ethical failures at many large financial institutions.” "We understand the risks of doing our job poorly and of becoming too close to the firms we supervise. Of course, we are not perfect. We sometimes make mistakes." But how are we to believe in the central planners' omnipotence if they keep 'making mistakes'? Here is William Dudley, formerly of Goldman Sachs and president of the New York Fed, saying "I don’t think anyone should question our motives." It may have been an order.