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The chairman of the Federal Reserve Bank of New York resigned yesterday after questions were raised about his role as a director of Goldman Sachs and his purchases of stock in the company, which is regulated by the New York Fed.
Goldman came under direct supervision of the New York Fed in September, when it was granted emergency permission to change its charter to become a bank holding company. Rather than step down from either board, Friedman requested a waiver from normal Fed rules to continue serving, actions that were reported Monday by the Wall Street Journal. He bought $3 million worth of Goldman Sachs stock in December, after the firm had come under the umbrella of the New York Fed.
It's detestable that people behave like this, but corruption always catches up with you.
FLASH: NY Fed President RESIGNS
About damn time.
It only took three days. I'll take it. From my previous Ticker:
And of course that's just The Car Czar. The Wall Street Journal, on A-1 (that'd be the top page) this morning is pointing out something much more uncomfortable - The Federal Reserve Bank of New York's Chairman, who was sitting on Goldman Sachs' board, continued to serve after they converted to a bank holding company and was in fact buying their stock.
Why is this important? Because The Federal Reserve Bank of NY is a policy-making body and the Federal Reserve System is a primary banking system regulator! Once Goldman converted to a bank holding company the firm fell under Fed jurisdiction.
During that time, the New York Fed's chairman, Stephen Friedman, sat on Goldman's board and had a large holding in Goldman stock, which because of Goldman's new status as a bank holding company was a violation of Federal Reserve policy.
The New York Fed asked for a waiver, which, after about 2½ months, the Fed granted. While it was weighing the request, Mr. Friedman bought 37,300 more Goldman shares in December. They've since risen $1.7 million in value.
The NY Fed says:
New York Fed officials disagree. Last fall, then-New York Fed President Timothy Geithner was President-elect Barack Obama's choice to head the Treasury, and New York Fed officials say that to have forced Mr. Friedman off the board while it sought a Geithner successor would have deprived it of two leaders at a crucial time.
"Steve Friedman is a very capable chairman," said Tom Baxter, the New York Fed's general counsel, "and was the kind of person who we needed to head the search" for someone to succeed Mr. Geithner.
So much for The Fed saying that "this was a nothingburger" eh?
Now prosecute him for insider trading and I'll be impressed.