In the wake of the financial crisis, Sen. Chris Dodd, Democrat of Connecticut, tried to strip away the Federal Reserve’s regulatory power over banks and introduced legislation to create new agencies to police Wall Street.

The idea went nowhere. Congress — in the bill that bears Dodd’s name — eventually gave a great deal of power to the Fed to make sure banks were safe and sound.

Carmen Segarra, a former New York Fed bank examiner, thinks the Fed’s job of maintaining the economy is at odds with being a tough bank regulator.

Segarra created a sensation in 2014 when This American Life and Pro Publica released an audio documentary based on 46 hours of conversations that Segarra had taped while she was a New York Fed bank examiner embedded at Goldman Sachs GS, -1.33% .

Segarra said she made the tapes when she was frustrated with her colleagues for coddling Goldman and after she was asked to alter her minutes of a meeting. The recordings show a cozy relationship between regulators and watchdogs and led to a Congressional hearing.

See:The Secret Recordings of Carmen Segarra

“It is no wonder that Wall Street always appears to stay one step ahead of the sheriff,” said Sen. Sherrod Brown, a Democrat of Ohio, who convened a Senate Banking subcommittee on the tapes in 2014.

Segarra, who was fired by the New York Fed and lost a lawsuit seeking to be reinstated, calls herself a reluctant whistleblower. Segarra sat down with MarketWatch to discuss what she thinks should be done to make the U.S. financial system safer and her new book “Noncompliant A Lone Whistleblower Exposes the Giants of Wall Street.”

The interview was edited for length and clarity.

Both Goldman Sachs and the New York Fed disputed Segarra’s version of events.

“For decades we have had a dedicated team that reviews potential transactions to assess both potential conflicts and client sensitivities given the broad reach of our client franchise. The firm takes that responsibility seriously, and the head of that group sits on our most senior leadership team,” said Andrew Williams, a spokesman for Goldman Sachs.

A New York Fed spokesperson said: “We continue to categorically reject Ms. Segarra’s allegations from her brief seven-month tenure as a junior employee almost seven years ago. Ms. Segarra’s case, which she brought after having demanded a multi-million dollar settlement, was dismissed by the courts. In fact, in affirming the dismissal of her case, the federal appeals court described certain of her claims as ‘speculative, meritless and frankly quite silly.’ The staff of the New York Fed work diligently and with the utmost integrity in the fulfillment of their responsibilities.”

MarketWatch: What was the most egregious thing that happened when you were a New York Fed bank examiner embedded at Goldman?

Segarra: Of course, I was outraged by the request to destroy evidence but as somebody who has made a career out of cleaning up messes, this is not the first time I have encountered that. I know how to say no.

For me, the most outrageous thing was sitting down with the Goldman Sachs executives time and again and again and again and listening to them sort of insist they were not going to comply with the rule of law. America has enacted these banking laws and these securities laws to protect our system and here were these executives saying “we’re not going to do it.” For me, that was a revelation.

MarketWatch: One of those Goldman executives you are talking about was David Solomon, who has just been named the new CEO of Goldman.

Segarra: The mess in the division that David Solomon responsible for, the investment bank, the mess in the legal and compliance division was obvious. It didn’t take a lot to see it. And then when you see your colleagues allowing this man to be promoted despite all the tools they have to stop this from happening...for me it was not a good day. It will only be topped when Uncle Sam knocks on my door to ask me for my taxpayer dollars to pay for David Solomon’s and Goldman Sach’s next bailout during the next financial crisis. That is not going to be a good day.

MarketWatch: The story you tell is of a regulator scared of its own shadow. How did that come to be?

Segarra: Yes. I think it’s difficult to speculate exactly how it got there. One thing to remember is I come from outside the regulatory sector. In a sense, I was recruited to come in and help fix these issues, right. So there I am within days attending meetings with Goldman Sachs, where the executives are just double-speaking, lying, and misrepresenting left and right with no fear of repercussions. And then you have your colleagues and instead of them being shocked, what you find is that they are just proactively trying to suppress evidence and obstruct anybody whether from my group or other regulators from other agencies from doing their jobs. I think it’s hard to speculate why that is or how it got there. Everybody is afraid of the people on top. Where did the culture on top go south and when it is go south, I don’t know, but it clearly has.

MarketWatch: Did it seem like a lot of the people you worked with wanted to work at Goldman Sachs?

Segarra: For most people it works more like an escalator than a revolving door and there are two levels. If you are a junior person, what you are really hoping for is to move up the escalator. If you are a senior person, you just want a job to top up your retirement. So they are not really looking at working a regulatory department of a big bank to do anything other than top up their considerable pension funds already.

MarketWatch: To get up the escalator you had to keep quiet?

Segarra: That was very much the impression I got.

MarketWatch: If you stepped out of line, you got hammered.

Segarra: I think what I remember most is just the fear. You were breathing fear day in and day out.

MarketWatch: What were they scared of?

Segarra: It is hard to speculate. Some people were scared of losing their jobs.

MarketWatch: Were they scared of Goldman?

Segarra: I think that too, absolutely. I think part of the reason is because they saw how other regulators lost their jobs because of pressure from Goldman. So I think they were very much afraid they would suffer the same fate.

MarketWatch: It’s amazing how it seems Goldman had the whip hand.

Segarra: Yes, they very much did.

MarketWatch: The Fed had helped rescue Goldman during the crisis.

Segarra: Yes. Which makes it all the more baffling. Not just that, at the time of these events you had Occupy Wall Street protesting around the world. There was a lot of pressure on regulators to deliver and to deliver more than just a slap on the wrist.

After seeing what I have seen, I think from my perspective it is clear we have to strip the supervision powers from the Federal Reserve. I think we just have to. The book makes a very compelling case for that. I think we need to revisit how we run our central bank - how we supervise our banks. We have other options and I think we should very much look into them.

MarketWatch: So a separate regulator for banks?

Segarra: There are definitely several options. Typically I don’t get asked this question. The U.S. has chosen to separate its supervision into various agencies. You have the SEC, the FDIC, the Consumer Financial Protection Bureau and you have state regulators. You could strengthen all those agencies and tell them to go at it. I think another option, which is the option you see countries like Australia, Canada and the Netherlands pursue is that they have separated supervision of conduct rules from monetary policy and taken the conduct rules and house them in one agency. You would have to consolidate them.

By separating it from the Federal Reserve, then you really are allowing people to do what they are really good at as opposed to being asked to do things they are not good at.

MarketWatch: The Fed was just caught up...

Segarra: I think they had conflicts of interest. If you really think about it, their mandates are conflicting. They are supervising the banks and at the same time have to deal with monetary policy. And sometimes those things can be in conflict. When you are dealing with rescuing the banks it is very easy to turn the other way and not look when banks take a bunch of money from drug lords in order to recapitalize themselves. So I think it is very difficult to switch that one and switch that off. And I don’t think it is a situation that America should find itself in. I think we’re big enough. There are plenty of people who are talented who can do this and do it right. We are not starving for talent. And we’re not starving for people who are ready and willing to do each of these jobs in the way they are needed to be done.

MarketWatch: The key moment in the book is when you decided to tape all of the meetings. Life would have been so different if you hadn’t decided to do that.

Segarra: Yes.

MarketWatch: What are some of the lessons you have for whistleblowers about that decision?

Segarra: I was very lucky because I am a lawyer and had access to lots of lawyers and colleagues. And so, in meeting after meeting, the end result was the same: New York is a one-person consent state and you absolutely should [tape]. There was a general concern — of a group I call the allies — was that this is not a Democratic problem or a Republican problem: this is an American problem with worldwide consequences.

And what everybody was genuinely shocked about was just, after everything that had happened, they really thought the Fed was above all this. That they were different. That they got it. That they were going to actually supervise the banks. They saw me get hired. They said it must be serious because who would hire you. In the industry, if you hire an actual professional at cleaning up messes, they must be serious.

As time passed, they really pushed me to take this to Congress and not just sit on it but to share it. For me the journey was very much about reconciling my personal desire to lead a meaningful life with also not fooling myself into thinking that I was sort-of doing something I wasn’t meant to do. There was a lot of soul searching that went into it. My life would be better from a personal standpoint if I hadn’t done it. So there is definitely a little bit of a disregard for myself interest in doing it. Things that matter and that are meaningful demand sacrifices.

Having been through that experience, I would just say “really think about it” and understand there is going to be a lot of joy but also a lot of sadness. It is going to have a negative impact on your life, no matter what. The thing for me, I was very lucky because my husband was very supportive and so were lots of friends. When I went in to do that job that is not what i thought I would be doing. They all understood that it was not a great place to be...the person left holding the bag. But in the end, I kept coming back to it and saying “sometimes things happen for a reason.”

They kept telling me “you have to” [tape], it is important.” And they are right. I think there is great value to it and great importance, because I think the American people have rightfully lost confidence in their banking system. The banking system is very interconnected to the rest of the world. The U.S. dollar is a reserve currency. In order to preserve our standing, as a nation, we need to cherish that and take care of it and trust it. We can’t trust it when we have had the shenanigans that are going on as I describe them in the book. It is not possible to trust the system. I think we really need to push for change. You can’t clean up a mess unless you understand exactly what the mess is. And what I hope this book does is sort of give people a real sense of the depth and the scope and the complexity. This isn’t going to be cleaned up by replacing one person. These are cultural issues. These are structural issues. It is going to take 10-15 years and it is better to do it now when things are relatively ok. You can’t change that leaky roof in the middle of a hurricane. You got to fix it when the sun is shining.