May-08-2009NY Fed chair steps down amid Goldman Sachs stock uproar
(topic overview)
CONTENTS:- Goldman Sachs makes much of its ability to navigate deftly and legally all the conflicts of interest inherent in being a full-service investment bank - and one that is supported by $10bn of U.S. government capital - but it has a struggle to convince others. (More...)
- Ten of America's biggest banks have been ordered by the Obama administration to raise a combined $74.6 billion in order to protect themselves from a worst-case scenario of projected multibillion-dollar losses through the end of next year, the Wall Street Journal and New York Times report. (More...)
- Member banks appoint six of the nine board members of each of the 12 regional Federal Reserve Banks (the remaining three directors are indirectly selected by the government by way of the Federal Reserve Board of Governors, who are appointed by the president and confirmed by the Senate). (More...)
- Goldman Sachs late last year received quick Fed approval to become a bank holding company. (More...)
- The New York Fed said Denis M. Hughes, deputy board chairman, will serve as interim chairman, the Times reported. (More...)
- Goldman Sachs is known to attract the best and the brightest. (More...)
- "Today, although I have been in compliance with the rules," Friedman wrote, "my public service-motivated continuation on the Reserve Bank board is being mischaracterized as improper." (More...)
- Goldman Sachs ( GS Quote ) celebrated its tenth anniversary as a public company on Monday with an article alleging a huge conflict of interest posed by a regulator with deep ties to the institution. (More...)
- The former CEO of the NYSE, John Thain, is also a Goldman alumnus. (More...)
- Right now, you are either rolling your eyes or nodding. (More...)
- Friedman then bought another 15,300 shares in January, the day after the waiver was granted. (More...)
SOURCESFIND OUT MORE ON THIS SUBJECTGoldman Sachs makes much of its ability to navigate deftly and legally all the conflicts of interest inherent in being a full-service investment bank - and one that is supported by $10bn of U.S. government capital - but it has a struggle to convince others. The latest evidence of that is a long piece in the Wall Street Journal this morning about Stephen Friedman, the former Goldman senior partner who chairs the New York Federal Reserve's board of directors. The article details how the Fed had to give Mr Friedman a waiver from its own conflict of interest rules when Goldman became a bank holding company because members of its board are not allowed to hold shares in such institutions. As it says, the New York Fed's hybrid status means that it is routine for Wall Street bankers to sit on its board. Jamie Dimon, the chairman and chief executive of JP Morgan Chase, is one of the directors elected by member banks to represent them.
[1] Industries invest billions in securing industry-favorable regulations. In many cases, it's the mere perception that is wrong. I think many would agree that you can't put bankers in regulatory positions and expect them to all of a sudden take a hard line against the industry. They will likely be predisposed to protect what, to them, is wonderful and good and pro-American. Of course, they will say all the right things to get the job--"public service," "giving back"--but in their hearts they will always be pro-Wall Street. I'm not saying that's bad, but that's the way it is because they're human. The Wall Street Journal picked up on this theme with its article about former Goldman Sachs alum Stephen Friedman, who ran the bank in the early 1990s. While Goldman Sachs was being handed $10 billion in TARP funds, Friedman, who sat on Goldman's board, was the chairman of the New York Fed. The bank got expedited clearance to convert to a bank holding company, which put Friedman, with his large stock holdings, in violation of the rules. This was no problem, because the fed granted him a waiver so he could keep his Goldman share and remain a regulator. He also participated in the search for a new president of the New York Fed, which went to another Goldman alum. Friedman tells the Journal that there was never any conflict in owning so much Goldman stock and that he's planning to step down from the Fed anyway. Others think he should have stepped down earlier, to avoid the appearance of a regulator standing to profit from one of the banks he regulates.[2] Stephen Friedman, chairman of the board at the Federal Reserve bank of New York, abruptly resigned Thursday, days after The Wall Street Journal pointed out his approval of a request by Goldman Sachs was in violation of policy because of his considerable holdings in Goldman shares. '''Mr. Friedman was chairman of the New York Fed at the same time he was a member of Goldman'''s board. He also had a substantial stake in the firm as the Fed was crafting a solution to keep Wall Street banks afloat,''' reported The New York Times. '''Because the New York Fed approved a request by Goldman to become a bank holding company, the chairman'''s involvement in Goldman was a violation of Fed policy, The Wall Street Journal said in an article earlier this week,''' the Times noted.
[3] The type of scrutiny The Wall Street Journal focused on former Goldman head and New York Federal Reserve Chairman Stephen Friedman is perhaps the kind of thing Goldman could have avoided if it never had gone public in the first place. Friedman, wearing his central banker hat, helped Goldman gain quick approval for bank holding company status and generally "shaped Washington's response to the crisis." He also served on Goldman's board, owned stock in the company and even bought more shares in December -- a savvy move that has made him a bundle of money he almost surely didn't need. The New York Fed chairman isn't supposed to sit on bank boards or own bank stocks, but this was an unusual situation, because Goldman had to become a bank holding company very suddenly to save it from possible oblivion. Friedman and others at the New York Fed all say this was not a problem, but Friedman told the Journal he is stepping down from the New York Fed because he wants to keep owning Goldman shares and sitting on Goldman's board a special waiver allowing him to do while holding onto his position at the New York Fed so will expire at the end of the year.[4] The 12 regional Federal Reserve banks have conflicting practices regarding directors who are board members of banks and own shares of bank-holding companies, heightening calls to overhaul the policies at these financial institutions. Corporate-governance practices at the regional Fed bank system faced criticism this week following a page-one article Monday in The Wall Street Journal detailing how Stephen Friedman, chairman of the Federal Reserve Bank of New York and a Goldman Sachs Group Inc. director, was granted a waiver that allowed him to hold Goldman shares even after Goldman became a Fed-regulated bank-holding company in September. This week, some other.[5] Stephen Friedman, chairman of the Federal Reserve Bank of New York's board of directors, has resigned effectively immediately. Friedman was the subject of a recent Wall Street Journal story that raised questions about his ties to Goldman Sachs Group Inc. Goldman Sachs late last year received quick Fed approval to become a bank holding company.
[6] Stephen Friedman, chairman of the Federal Reserve Bank of New York's board of directors, has resigned effectively immediately. Mr. Friedman notified New York Fed President William Dudley and Fed Chairman Ben Bernanke of his decision, in a letter Thursday. Mr. Friedman, who was the subject of a recent Wall Street Journal article that raised questions about his ties to Goldman Sachs Group Inc., said his role at the central bank has been maligned.[7] Stephen Friedman has spent a 43-year career in the financial world wearing many hats, including investment banker, chief of Goldman Sachs Group Inc., private-equity executive and economic adviser to the president. His resignation Thursday as chairman of the powerful New York Federal Reserve Bank amid concerns about his lingering ties to Goldman shows the difficulty of playing overlapping roles in today's economic crisis. The 71-year-old Mr. Friedman stepped aside following disclosures in The Wall Street Journal that he was allowed to lead the board at the New York Fed and remain a Goldman director and shareholder, in violation of.[8]
The Fed issued a policy waiver requested by the New York Fed, but while the Fed considered the request, Friedman acquired 37,300 Goldman shares -- which have gained $1.7 million in value, the Times said. New York Fed General Counsel Thomas C. Baxter issued a statement Thursday saying "it is my view that these purchases did not violate any Federal Reserve statute, rule or policy." The Wall Street Journal reported this week that Friedman's role at Goldman constituted a violation of Fed policy. "Today, although I have been I compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being characterized as improper," Friedman wrote in his letter to Dudley. "The Federal Reserve System has important work to do and does not need this distraction."
[9] Stephen Friedman received a waiver to remain on the board of Goldman Sachs ( GS, Fortune 500 ), the Wall Street firm that became a bank holding company amid September's financial frenzy, according to a report in the Wall Street Journal on Monday. He also holds a substantial amount of shares in the company and continued to buy more even after Goldman came under the Fed's supervision. "Today, although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper," Friedman wrote in his resignation letter. "The Federal Reserve System has important work to do and does not need this distraction."[10] Stephen Friedman, chairman of the Federal Reserve Bank of New York, stepped down from his post late Thursday. The 71-year-old came under fire when a regulatory filing revealed that he upped his stake in
Goldman Sachs Group (NYSE:
GS ) during late 2008, when the bank holding company was under the New York Fed's supervision. "Today, although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper," wrote Friedman in his letter of resignation. "The Federal Reserve System has important work to do and does not need this distraction."[11] NEW YORK - Stephen Friedman, chairman of the New York Federal Reserve Bank'''s board of directors, resigned on Thursday amid questions about his purchases of stock in his former firm, Goldman Sachs. Friedman, a retired chairman of Goldman Sachs who has led the New York Fed'''s board since January 2008, said he quit to prevent criticism about his stock buying from becoming a distraction as the Fed battles a severe U.S. recession. '''Although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper,''' he said in a letter of resignation to New York Fed President William Dudley.[12]
Stephen Friedman steps down after questions are raised about his role as a director of Goldman Sachs and his purchases of stock in the company. The chairman of the Federal Reserve Bank of New York resigned Thursday 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. Stephen Friedman, a onetime chairman of Goldman and economic advisor to President George W. Bush, said his staying on would be a "distraction" for the central bank.
[13] NEW YORK, May 7 (UPI) -- The chairman of the Federal Reserve Bank of New York,
Stephen Friedman, resigned Thursday, rejecting suggestions his service on the board is "improper." Friedman simultaneously sat on the board of Goldman Sachs Group Inc. (
NYSE:GS-PA ) while serving as chairman of the New York Fed. In his resignation letter to board President
William Dudley, Friedman noted that he had agreed to remain on the board last fall after Goldman Sachs became a bank holding company.
[9] Last night Stephen Friedman resigned from his position as chairman of the board of the Federal Reserve Bank of New York, after questions were raised about his sizable collection of shares in Fed-regulated Goldman Sachs. Friedman's status as a shareholder in Goldman didn't become a violation of Fed policy until it became a bank holding company in December, whereupon he sought a waiver for himself so that he could remain chairman. This seems perfectly reasonable.
[14] Stephen Friedman picked his moment to resign as the chairman of the New York Federal Reserve. Mr Friedman
says he stayed on the NY Fed board despite Goldman becoming a bank holding company out of a sense of public duty, but his decision is "being mischaracterised as improper". I
noted in an earlier post that it was odd for Mr Friedman to be a Class C director of the Fed - representing the U.S. public - when he was formerly a senior partner of Goldman Sachs.
[15] Friedman's resignation letter, effective immediately, was decidedly unapologetic, claiming (whining) that his great public service stint serving on the NY Fed's board was " mischaracterized as improper." Since the advent of federal bailouts and government involvement in Wall Street, it's become apparent that Goldman Sachs' tentacles seem to reach everywhere, straight from Goldman's boardroom to the major players not only on the NY Federal Reserve Board, but also the U.S. Treasury. Both Hank Paulson and Robert Rubin, former Treasury Secretaries, were former members of Goldman Sachs and the list goes on. He ran Goldman in the 1990s; he still sits on the board of directors and owns Goldman stock. Friedman served on Goldman's board during his tenure as Chairman of the New York Fed board, one of several banks receiving substantial federal TARP funds.[16] Thomas C. Baxter, the general counsel of the New York Fed, contends that Friedman's two purchases of Goldman stock "did not violate any Federal Reserve statute, rule or policy." What's interesting here, is before Friedman purchased the additional Goldman stock, he first consulted with the board at Goldman'''s to check on the "timing" of his purchases. Friedman didn't bother to inform the NY Federal Reserve Board of his purchases, however. The NY Fed only learned of the stock purchases, when they came to light in a Wall Street Journal article. In light of Friedman's behavior while Chairman of the NY Federal Reserve Board, his resignation is long overdue. He continue to denies his actions were improper, insisting his job as chairman of the New York Fed wasn't a policy-making one, when the facts say otherwise. Friedman was in the perfect position to be the beneficiary of information relating to Goldman's financial status, both as a quasi regulator and a Goldman board member, and yet that didn't stop him from purchasing Goldman stock. The question remains, if his departure will make a bit of difference to potential conflicts of interest of many of the major players on the NY Fed board. Dudley's appointment to his position as president of the NY Fed was spearheaded by Friedman, who led the committee to hire a new president to replace Tim Geithner.[16] The NY Fed's executive vice president and general counsel Thomas Baxter says Friedman's purchases of Goldman Sachs stock in December 2008 and January 2009 "did not violate any Federal Reserve statute, rule or policy." In his resignation letter today, Friedman says, "The Federal Reserve System has important work to do and does not need this distraction." Former New York Attorney General Eliot Spitzer (no stranger to unfortunate financial transactions) writes this week in his Slate column that the NY Fed in its entirety is structurally flawed because 6 of the 9 seats on its board are appointed by the banks it oversees. The other 3 are appointed by the Federal Reserve Board to represent the publicFriedman was one of those. (Three of the seats appointed by the banks are also supposed to represent the public, but Spitzer points out that the public might not feel terribly well-represented by such past holders of those seats asDick Fuld.) I do not mean to suggest that any of these board members intentionally discharged their duties with the specific goal of benefitting themselves.[17]
Friedman, as Chairman of the NY Federal Reserve Board, was in violation of the Federal Reserve Act; the moment Goldman became a bank holding company. While waiting for a waiver from those rules, that specifically ban bank stock ownership by NY Fed directors, Friedman buys Goldman stock. Why would a NY Fed Chairman already in violation of Fed rules for owning stock of a bank holding company, purchase more of that stock, well before he received a waiver? Friedman bought the stock he said, because it was cheap. He also said, "I see no conflict whatsoever in owning shares." Why did Friedman immediately purchase additional Goldman stock before the ink was barely dry on his waiver, well because by then the stock was really, really cheap. Financial analysts say Friedman should have resigned from his position as Chairman of the NY Fed board; the moment Goldman became a bank holding company.[16] Friedman was in violation of the Fed's policy because, thanks in part to the urging of Geithner and the N.Y. Fed, Goldman Sachs was allowed to become a bank holding company, making it eligible for government bailout funds (an option that Geithner had denied to Goldman rival Lehman Brothers). That shift also put Goldman under more rigorous banking regulations that required Friedman as Class C director of the N.Y. Fed, a position in which he ostensibly represents the public instead of the banks who dominate the board, to step down as a Goldman director and divest his holdings. He stayed on the Goldman board and added additional shares while waiting for the Fed waiver. Nor did he inform the Federal Reserve of his additional purchases last December, and the lawyers for the N.Y. Fed didn't know about that purchase until the Journal raised questions in April.[18] The controversy over the conflict of interest prompted growing protests about the way Stephen Friedman was permitted to serve two masters, as a Goldman director and as chairman of the board of the Fed's key bank, which has oversight of the government rescue billions it gave Goldman. Friedman said after the markets closed yesterday he would step down immediately at the Fed, saying his role there has been maligned. Friedman, a retired chairman and current member of Goldman's board, had been granted a waiver to keep both jobs after Goldman Sachs became a bank holding company in September under Fed supervision. Normally, rules prohibit such a dual role and apparent conflict of interest. "Although I have been in compliance with the rules, my public service-motivated continuation on the Reserve Bank Board is being mischaracterized as improper," he said in his resignation letter to Fed chief Ben Bernanke, adding the Fed "does not need this distraction."[19] Friedman says he remained on the board of directors after Goldman Sachs became a bank holding company after receiving a waiver from the Board of Governors of the Federal Reserve System "to provide continuity during a time of financial instability." "Today, although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper," he said in a statement. "The Federal Reserve System has important work to do and does not need this distraction."[20] In a letter to Fed officials, Friedman said, "Today, although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper. The Federal Reserve System has important work to do and does not need this distraction." Earlier this week, The Wall Street Journal raised questions about the influence of Goldman Sachs, whose board Friedman sat on, in shaping Washington's response to the financial crisis.
[21] NEW YORK (AP) — Goldman Sachs director Stephen Friedman, who resigned Thursday as chairman of the Federal Reserve Bank of New York's board, defended his conduct Friday in serving in both posts. "I followed the rules as I always have," he said at Goldman Sachs' annual meeting Friday. Friedman was the subject of a Wall Street Journal story that raised questions about his ties to Goldman.[22] WASHINGTON (AP) — Stephen Friedman, chairman of the Federal Reserve Bank of New York's board of directors, has resigned effectively immediately. Friedman was the subject of a recent Wall Street Journal story that raised questions about his ties to Goldman Sachs Group Inc.[23] Looks like Wall Street's banks weren't the only ones getting a stress test this week. Stephen Friedman, chairman of the Board of the Federal Reserve Bank of New York, resigned Thursday amid criticism that his role at the institution conflicted with his position as a board member at Goldman Sachs Group Inc. (NYSE:GS).[24]
Since Goldman Sachs helped screw them up, it could be argued that what it really needs is not continuity but a new broom, but never mind that. Does he really think Wall Street investors and Goldman Sachs clients are so stupid that they think it will harm Goldman Sachs if he left the board to chair the board of the New York Fed ? Apparently so. Apparently others do, since he "agreed" to remain, which implies he was asked to. He thinks it's okay to simultaneously work for the Fed and for a regulated bank, but not only that, a majority of members of the Federal Reserve Board of Governor also think so, since a waiver was granted. Any normal person in the real world would take the view that it was wrong, that it was not even a gray area, and that all the waivers in the world wouldn't make it right, but in the Wall Street space this kind of thing seems to be all right. To me, this isn't about Friedman, particularly. He's resigned.
[25] We are so inured to tales of business corruption that even a devastating expose in the Wall Street Journal no longer shocks us. The fact that the chairman of the New York Federal Reserve Bank made millions off his secret purchase of Goldman Sachs stock, "in violation of Federal Reserve policy," as the Journal put it, at a time when the N.Y. Fed was ostensibly overseeing the antics of the Wall Street firm, has barely registered a blip of outrage.[18] Friedman has made a profit of about $3 million on the additional shares. The significance of this conflict of interest was summarized by the lead of the Journal story: "The Federal Reserve Bank of New York shaped Washington's response to the financial crisis late last year, which buoyed Goldman Sachs Group Inc. and other Wall Street firms.[18] Although he went down insisting that his relationship to Goldman Sachs had been "mischaracterized," New York Federal Reserve Chairman Stephen Friedman resigned on Thursday after The Wall Street Journal, among others, brought up the issue of a potential conflict of interest earlier this week.
[21] The father of the screenplay writer for the new "Wolverine" movie has resigned as president of the Federal Reserve Bank of New York, three days after the Wall Street Journal revealed that he was still on the board of a regulated bank in violation of Fed policy. Stephen Friedman is one of Washington's X-men ex-executives of Wall Street financial houses who are tapped for senior financial and economic posts because politicians worry that no one else understands the complexities of Wall Street financial markets, or if there are any outsiders who do, they wouldn't be able to get the captains of Wall Street to take their calls.
[25] "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."[26] The Journal revealed Monday that Federal Reserve Bank of New York Chairman Stephen Friedman also sat on Goldman's board, owned Goldman stock when the firm applied to become a bank holding company, then bought more without disclosing it.[27]
While the Federal Reserve Bank of New York led Washington's response to the financial crisis late fall, Friedman was on Goldman's board and owned a large amount of Goldman stock. When Goldman converted to a bank holding company, this stock holding became a violation of Federal Reserve policy.
[28] Like Obama economic lieutenant Robert Rubin, one of the guys who muzzled regulation of derivative financial instruments during the Clinton years, Friedman, a Bush appointee, is a former chairman of Goldman Sachs. He and Rubin chaired it together for awhile. Friedman accepted the chairmanship of the Federal Reserve Bank of New York board of directors, even though he was still on the board of Goldman Sachs, at a time when Goldman Sachs was converting from an investment house to an out-and-out bank, subject to bank regulations. In a letter to the man who is now acting president of the New York Fed bank, Friedman said he "agreed" to remain on the Goldman Sachs board "pursuant to" a waiver by the Federal Reserve Board of Governors "to provide continuity" during market instability.
[25] Stephen Friedman resigned as chairman of the board of the Federal Reserve Bank of New York, amid a controversy about his dual roles as a director of the regional Fed bank and a director and shareholder of Goldman Sachs Group Inc.[29] The ranking Republican on the Senate Banking Committee called it "deeply disturbing" that Stephen Friedman, who is chairman of the Federal Reserve Bank of New York and a director of Goldman Sachs Group Inc., bought Goldman shares in December and January. Sen. Richard Shelby (R., Ala.) said the purchases heightened his intention to increase oversight of the Fed's 12 regional banks.[30] The global recession continues to hurt Toyota (TM), which "tumbled into the red in the fiscal fourth quarter due to a strengthened yen and collapsed automobile demand worldwide," writes the WSJ. The world's biggest carmaker by volume posted a net loss of $7.7 billion in its first quarter ending March 30. It's official. Federal Reserve Bank of New York Chairman Stephen Friedman abruptly resigned on Thursday night issuing a statement that he's done nothing wrong, the WSJ reports. Friedman has been enveloped in controversy the past few days after it emerged that he held roles as a director both at the New York Fed and at Goldman Sachs, where he also holds shares.[31]
New York Federal Reserve Chairman Stephen Friedman resigned on Thursday in the wake of conflict of interest accusations, defending his purchases of Goldman Sachs Group, Inc shares last year.[20] NEW YORK (Reuters) - Stephen Friedman, chairman of the New York Federal Reserve's board of directors, resigned on Thursday amid questions about stock purchases in his former firm Goldman Sachs.[32] NEW YORK, May 8 (UPI) -- The chairman of the Federal Reserve Bank of New York has resigned due to controversy over his role at Goldman Sachs Group Inc. (
NYSE:GS-PA ), his resignation letter said. Stephen Friedman said he would resign effective immediately.
[33] The chairman of the
Federal Reserve Bank of New York has resigned, effective immediately. Friedman has come under scrutiny because he was a member of the Goldman Sachs board and held a large stake in the firm at the same time it was in line for federal bailout funds. He is the retired chairman of the firm.[34]
The Journal said while the waiver was under review Friedman bought 37,000 shares of Goldman Sachs. A Securities and Exchange Commission filing revealed he bought more shares the day after the waiver was granted in mid-January. "With respect to Steve's purchases. it is my view that these purchases did not violate any Federal Reserve statute, rule or policy," the New York Fed's attorney Thomas Baxter said.
[35] The New York Fed's executive vice president and general counsel, Thomas Baxter, says Friedman's purchases of Goldman Sachs stock in December 2008 and January 2009 "did not violate any Federal Reserve statute, rule or policy."[26]
'''We'''ve always made people leave (to avoid a conflict),''' said the official, who requested anonymity given the delicacy of the situation. New York Fed board ranks thin Of all the other regional Fed banks, only Minneapolis said that one of its directors had to apply for a waiver for bank shares he held last fall when a number of former non-bank financial firms sought banking holding company status. Minneapolis Fed board Deputy Chairman John Marvin, chief executive of Marvin Windows and Doors of Warroad, Minnesota, was granted a waiver for stock he held in Morgan Stanley and Goldman Sachs, a Minneapolis Fed spokeswoman said. Several regional Fed banks said that their internal practices would have prevented the problem cropping up in the first place. '''It is our policy to ask them to divest or resign,''' said a spokeswoman for the Kansas City Fed said.[12] "I've also got concerns about the role of the regional presidents on the FOMC," Mr. Frank said. "The fact that the local business community appoints these people, that is a concern." Mr. Frank said that he didn't intend to push the matter this year, because he doesn't want to hamstring the Fed while it is still fighting the crisis. Mr. Friedman was placed in an unusual position in September, when Goldman was allowed by the Fed to become a regulated bank-holding holding company to help halt its market slide. That put Mr. Friedman in violation of Fed rules that bar regional Fed bank board chairmen -- who are chosen to represent the public -- from owning bank shares or serving as directors or officers of banks. At the request of the New York Fed, the Fed in Washington granted him a waiver from the rule in January. He said last week he would step down from the New York Fed board at the end of this year.[30] Some of the regional directors are appointed by the Washington-based board. Those directors are not allowed to own shares of bank holding companies, a status that Goldman Sachs won in September to secure access to Fed lending facilities. Friedman bought Goldman shares in December 2008 and in January of this year, which became public with a Wall Street Journal report on Monday. Friedman obtained a waiver of the bank stock ownership rules, which the Journal said was granted just before he bought stock in January, that allowed him to hold them until the end of this year. Last week, he said he would resign by then.[12] Friedman stepped aside following disclosures in The Wall Street Journal that he was allowed to lead the board at the New York Fed and remain a Goldman director and shareholder. That was considered to be a violation of Fed rules, though the central bank sought a one-year waiver of that rule.[36] Until then Goldman had not been regulated by the Fed, but the application to become a bank holding company, which was approved immediately during the crisis, put Goldman under the Fed's authority. Friedman position on both boards was a violation of Federal Reserve policy, but he was given a waiver of the rules due to the seriousness of turmoil on Wall Street at the time.[24] Friedman, a director and shareholder at Goldman Sachs, was granted a waiver of the conflict of interest policy that came into play when Goldman Sachs converted from an investment bank to a holding company in September, The Wall Street Journal reported Friday. In his resignation letter, Friedman wrote that his dual roles were "being mischaracterized as improper." "the Federal Reserve System has important work to do and does not need this distraction," he wrote.
[35] The WSJ, which initially broke the potential conflict-of-interest story, writes that "when Goldman converted from an investment bank to a Fed-regulated bank holding company in September, Mr. Friedman's status as a Goldman director and shareholder was in violation of Fed policy that bars certain Fed-bank directors from being shareholders, directors or officers of commercial banks." Friedman contends he was not in the wrong. He did secure permission from the Fed to continue as a director for both throughout the entirety of 2009. While he waited for approval to come through, Friedman bought still more Goldman shares, netting himself a cool $3 million on paper. In a separate profile on Friedman, nicknamed "Mr. Inside," the WSJ paints an impressive picture of a man with powerful ties to both Wall Street and Washington built over his 43-year career in finance.[31]
The reason given; with the expected departure of Geithner to serve as President Obama's Treasury Secretary, and other directors leaving, Friedman was needed on the NY Fed board. Friedman's next action is the one that got him in hot water and it illustrates not only just how incestuous the relationship is between Goldman and the New York Fed, but also shines a light on the naked greed of many of these financial "Masters of the Universe." While waiting for his waiver to come through, Friedman purchased "more" Goldman stock. On December 17, he bought 37,300 Goldman shares at an average price of $80.78, totaling $3 million.[16] During the highpoint of the financial collapse in the fall of 2008, Friedman worked closely with Tim Geithner, then president of the NY Fed in fashioning the bailout of AIG, which poured $8.1 billion of the TARP funds straight from AIG to Goldman. Friedman's most egregious actions involve his additional purchase of Goldman shares, totaling in the millions, during his time as Chairman of the NY Fed. Friedman came to his position at the NY Fed already owning a substantial stake of Goldman stock, but that apparently wasn't enough for the wealthy Friedman. Friedman's ties to Goldman were bad enough, but he decided to make two additional Goldman stock purchases while serving as Chairman of the NY Fed, a quasi regulatory agency, where he served as a Class C public director, supposedly watching out for the public interest.[16]
Denis Hughes, the deputy chair of the New York Fed'''s board and president of the New York State AFL-CIO, will now be the acting chair, the New York Fed said. While the Fed was deciding whether or not to grant Friedman a waiver, he bought 37,300 Goldman shares on December 17, for an average price of $80.78, according to regulatory filings. On January 22, he bought 15,300 more shares for average prices of $66.19 and $67.12, according to filings with the U.S. Securities and Exchange Commission. The January purchase brought his total holdings to 98,600 shares.[12] Friedman has deep ties to Goldman. He has served as a director on the bank's board since April 2005, after working for the firm since 1966. When Goldman became a bank holding company last fall under the aegis of the New York Fed, Friedman received a waiver allowing him to stay on as a director, in order "to provide continuity during a time of financial market instability," in his own words. As of March 9, Friedman reportedly owned 111,516 shares of GS. He purchased 37,300 of those shares in December 2008, and another 15,300 shares in January 2009.[11] Late last year, GS received rather quick approval to become a bank holding company and received an injection of $10 billion in capital soon after the approval. There is nothing suspicious about this relationship, until you learn that the New York Fed's chair Stephen Friedman was on GS's board at the time -- and held a large amount of GS stock. Flat out, this is a violation of the Fed's policy.[37] When Goldman rushed to become a bank holding company in the midst of the meltdown following the bankruptcy of Lehman Brothers Holdings Inc., Friedman found himself in the awkward position of being the New York Fed's chairman and well as a member of the former investment bank's board and a large holder of Goldman's stock.[24]
As Kate Kelly prepares to launch her new book, she can add another scalp to that of Jimmy Cayne: Stephen Friedman, the chairman of the New York Fed, has
resigned in the wake of her front-page article on Monday. His
resignation letter is unapologetic ("although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper") but if he really felt sure about that, it seems unlikely he would have timed his resignation to coincide exactly with the release of the stress-test results, thereby ensuring the absolute minimum amount of coverage. The New York Fed is a peculiar institution: it's highly profitable, and dividends substantially all of its profits to Treasury, yet is technically owned not by the government but by some of America's largest banks.[38] '''In a letter to Fed officials, Friedman said, '''Today, although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper. The Federal Reserve System has important work to do and does not need this distraction,'''''' reported
USA Today.
[3] Consistent with the Federal Reserve Act, Denis M. Hughes, deputy chair of the board, will exercise the powers and duties of the chair. '''Today, although I have been in compliance with the rules, my public service-motivated continuation on the Reserve Bank Board is being mischaracterized as improper,''' Friedman wrote in his letter of resignation, referring to questions about stock purchases he made in his former firm Goldman Sachs. '''The Federal Reserve System has important work to do and does not need this distraction,''' his letter continues.
[39] A waiver had been granted, however, allowing Friedman to serve with the NY Fed Board for the remainder of the year. "The Federal Reserve System has important work to do and does not need this distraction," he wrote. In his letter of resignation, Friedman said that his relation with Goldman Sachs is being "mischaracterized as improper." His former Fed colleagues issued statements praising Friedman, including Vice Chairman Donald Kohn, who thanked him for his service.
[40] Friedman's Goldman holdings weren't a problem at first - Goldman was an investment bank, and the NY Fed regulates commercial banks. When the financial sector crisis began last year, the Federal Reserve quickly converted Goldman to a bank holding company, putting Friedman, by dint of his Goldman holdings, in violation of NY Fed policy. Friedman asked the Federal Reserve Board in Washington for a waiver of the policy for the remainder of his term.[17] Since at that time Goldman had recently converted to bank holding company status -- putting it under the NY Fed's purview -- the joint chair/board seats was against the rules (Friedman won a waiver after applying for one). It certainly doesn't look all that great, but in the end there's not a whole lot to this story. There's no allegation that Friedman did anything actually improper relating to Goldman or his responsibilities to the NY Federal Reserve. It mainly just looks bad.
[41] When N.Y. Fed Chairman Stephen Friedman bought stock in the company that he once headed, and where he still serves as a director, he was already in violation of Federal Reserve policy and was hoping for a waiver to permit him to hold his existing multimillion-dollar stock stash and to remain on the Goldman board.[18] Prior to his resignation Friedman bought stock in Goldman Sachs, a company that he once headed and where he still serves as a director. The purchase violates Federal Reserve rules, and he did not obtain the waiver that would allow him to hold the stock, worth several million dollars.
[40] The Federal Reserve Act prohibits Class C public directors from owning bank stocks or serving as directors or officers at banks. Friedman violated both of those rules, as soon as Goldman became a bank holding company.[16]
The Goldman Sachs director who was allowed -- by an odd bending of the rules -- to simultaneously run the Federal Reserve Bank of New York has resigned.[19] "The Federal Reserve Bank of New York shaped Washington's response to the financial crisis late last year, which buoyed Goldman Sachs Group Inc. and other Wall Street firms.[26] Reports
have surfaced from Wall Street about the relationship between the Federal Reserve Bank of New York and
Goldman Sachs (NYSE:
GS ).[37]
Friedman held a substantial stake in Goldman Sachs while the Fed developed a strategy to help Wall Street banks survive the financial crisis, The New York Times reported Thursday.
[9] The New York Fed asked for a waiver, and the Fed granted it. Many believed that this intertwined relationship was a conflict of interest, raising questions about whether Goldman was receiving favorable treatment from the Fed. Friedman denied his relationship with Goldman Sachs created any conflict of interest. Last week Friedman told the Wall Street Journal he would step down from the New York Fed at year end.
[28] Former New York Governor and tireless Wall Street watchdog Eliot Spitzer might beg to differ. In
his Slate column on Wednesday, Spitzer bemoaned the fact that the New York Fed's board is riddled with bankers and corporate executives. "So is it any wonder that the N.Y. Fed. has given -- with virtually no strings attached -- practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees?" asked the former Attorney General. Of course, this kind of collusion doesn't necessarily end with the New York Fed. Henry Paulson, the former Treasury Secretary who presided over last fall's massive bailout initiative, had
a few Goldman Sachs ties of his own.[11]
The resignation follows a Monday Wall Street Journal story highlighting Friedman's "tangle of overlapping interests" as NY Fed Chair: namely, he was also serving on the board of Goldman Sachs, in which he had a large holding. It was during his chairmanship, of course, that Goldman got a huge government bailout.[17] The Wall Street Journal described Mr. Friedman's private and public entanglements in a page-one story Monday. After Goldman became a Fed-regulated bank-holding company, the Fed granted Mr. Friedman a waiver from rules that would have prevented him from holding any Goldman shares.[30]
I don't know why anyone would be upset that the director of the regional fed bank also is on the board'' of directors at goldman sachs. This became illegal when GS was granted designation as a bank holding company last fall but Mr. Friedman was allowed to keep his shares and his jobs. Mr. Friedman was nice enough to resign so that he wouldn't be a distraction at the Fed.''
[42] Willard explained that Friedman was able to profit after Goldman was approved to be a bank holding company in late 2008, making it eligible for a $10-billion capital injection. "This guy, he was the head of Goldman Sachs," Willard said. "He went and bought more Goldman Sachs stock at $60 and $70 a share, when behind the scenes, he was meeting with Tim Geithner, Obama and all kinds of other very powerful guys who actually wrote him a check for tens of billions of dollars at Goldman Sachs and his stock went from $60 to $70. He's now up three or four million dollars. He says he sees no problems, no conflicts of interest."
[43] Friedman, a former Goldman Sachs ( GS Quote ) chief, was under scrutiny as Goldman gained quick approval for bank holding-company status. He also served on Goldman's board, owned stock in the company and bought more shares in December.[44]
We still have a Federal Reserve Board of Governors that thinks it was okay to leave Friedman in place on the Goldman Sachs board while running the federal government's most important bank. They approved this patently unethical situation. They thought it was all right. They also thought, as near as I can figure out, that this needed to be done because bad things would happen if Friedman left the Sachs board, or perhaps they thought that what has now happened he's leaving the Fed would be bad for the damaged financial system. Such thinking is surreal. It's like something out of a badly-written movie. We're just in the system to pay up when they can't.
[25] NEW YORK (Dow Jones)--Stephen Friedman has resigned as chairman of the Board of Directors of the Federal Reserve Bank of New York, saying his role had been at the central bank has been maligned. Friedman notified New York Fed President William Dudley and Fed Chairman Ben Bernanke of his decision, effective immediately, in a letter.[45] Defenders and detractors The top lawyer at the New York Fed said Friedman had done nothing wrong. '''It is my view that these purchases did not violate any Federal Reserve statute, rule or policy,''' the bank'''s general counsel, Thomas Baxter, said in a statement.[12] New York Fed executive vice president and general counsel Thomas C. Baxter said the purchases in December of 2008 and January of 2009 "did not violate any Federal Reserve statute, rule or policy." This article is copyrighted by International Business Times.[20]
The New York Fed's general counsel, Thomas Baxter Jr., defended Friedman's recent stock purchases, which occurred while the Federal Reserve was weighing the waiver request.[10]
The announcement came from the New York Fed on Thursday evening, shortly after the Federal Reserve in Washington released results of stress tests on 19 of the largest bank holding companies. Goldman was among the 19, but the report says it does not need to raise its capital cushion.[26] NEW YORK, May 8 (UPI) -- The chairman of the Federal Reserve Bank of New York has resigned due to controversy over his role at Goldman Sachs Group Inc. (
NYSE:GS-PA ), his resignation letter said.
[35] New York Fed Board Chairman Stephen Friedman has resigned, effective immediately. Friedman had come under fire for his connections with Goldman Sachs. He ran the firm in the early nineties.
[28] Governance there is always going to be tricky. Right now is not the time to cut corners on that front, and grant waivers, especially when Friedman was actively buying Goldman stock during his tenure as chairman of Goldman's most assiduous regulator. He should never have done that, and it's good that he has resigned. Update :
Eliot Spitzer has a great column this week on the way the New York Fed is run, which is well worth reading.[38] The New York Fed's general counsel Thomas Baxter says Friedman's purchases of Goldman stock didn't violate the Fed's rules.[22]
Friedman bought 37,300 shares worth $3 million in December, according to the Journal. He didn't check with the Fed, and lawyers at the New York Fed told the Journal they were not aware of the purchases until the newspaper contacted them last month.[10] Goldman shares closed on Thursday at $133.73, meaning Friedman has profited handsomely, earning more than $3 million in total on the two purchases. '''Clearly he should not have done that (bought more Goldman shares), and probably even before he did that, he should have gotten off the board,''' said Alfred Broaddus, former president of the Federal Reserve Bank of Richmond.[12] The two blocks of stock have risen a total of $3 million in value. "With respect to Steve's purchases of Goldman shares in December of 2008 and January of 2009, which have been the object of some attention lately, it is my view that these purchases did not violate any Federal Reserve statute, rule or policy," Baxter said in a statement.[10] Goldman stock has rallied, giving Mr. Friedman a $3 million paper gain on the purchases. According to Friedman, he sees "no conflict whatsoever in owning shares" of Goldman, which is, of course, absurd;
Molly the Cow could see there is a conflict there. In his resignation letter, Friedman said he was leaving because "the Federal Reserve System has important work to do and does not need this distraction."
[14] A Goldman director since April 2005, Friedman worked at Goldman since 1966 before retiring as a senior partner and chairman of the management committee in 1994. He serves as chair of the Wall Street firm's audit committee and received $308,000 in stock awards in 2008 as compensation, according to federal filings. As of March 9, he owned 111,516 shares, which are worth nearly $15 million as of Thursday.[10] '''While was weighing request, Mr. Friedman bought 37,300 more Goldman shares in December. They'''ve since risen $1.7 million in value,''' reported
The Wall Street Journal on May 4.
[3] While the Fed was considering the decision to grant the waiver, Friedman bought 37,300 more Goldman shares, which have gone up $1.7 million in value, according to the Journal.
[43] In addition to that capital injection, which at least carries some expectation of being repaid, Goldman received an additional $8.1 billion that will not have to be returned to taxpayers. This is a result of the bailout engineered by then-N.Y. Fed President Geithner of AIG, which listed Goldman as its top insured credit-swap customer. As Jerry Jordan, former president of the Fed Bank in Cleveland, told the Journal in reference to Friedman's obvious conflict of interest, "He should have resigned." Unfortunately, this was not the view during the reign of Geithner, who argued that Friedman needed to remain chairman of the N.Y. Fed board to find a suitable replacement for Geithner as he moved on to be secretary of the treasury.[18] Sure, the president appoints and the Senate confirms the chairman of the Federal Reserve and its seven governors, but the member banks hold a great deal of sway in policymaking given the fact that along with the Board of Governors, five of 12 regional presidents hold rotating votes on the Fed's Federal Open Market Committee, which sets monetary policy. If your head is swimming from this organizational chart, you're not alone. One thing is clear: Friedman isn't a government official, therefore he doesn't answer to the president or Congress. He also wasn't involved in policymaking or rescues, which the Journal treats lightly and moves on.[27] '''Mr. Friedman also was overseeing the search for a new president of the New York Fed, an officer who has a critical role in setting monetary policy at the Federal Reserve.
[3] The New York Fed chair is influential, and the president of the New York Fed is a permanent member of the Federal Reserve's policymaking Open Market Committee. It meets eight times a year to decide the direction of interest rates and money supply.[26]
Regional Fed banks are hybrid institutions, created by Congress in 1913, with boards of directors chosen from the private sector by commercial banks and the Federal Reserve Board. They play an important role in public policy, helping the Fed to set interest rates and supervising commercial banks. "If we were setting up the system from scratch today, we would never consider this kind of private-sector involvement," said Louis Crandall, economist with Wrightson ICAP LLC, a Wall Street firm specializing in money markets.[30] What we have seen is disastrous groupthink, a way of looking at the world from the perspective of Wall Street and Wall Street alone. Whether or not Spitzer is correct in his cynicism about the NY Fed board's public respresentatives, one thing is worrying: right now, with Friedman's departure, half of their seats are currently vacant, according to the New York Fed's website.[17] Stephen Friedman, chairman of the board of directors of the New York Fed, has informed William C. Dudley, president and chief executive officer of the New York Fed, and the Board of Governors of his decision to resign effective immediately.[46] Stephen Friedman, chairman of the New York Fed, announced his resignation, effective immediately,
the bank announced Thursday.[44] Fox Business Network host Cody Willard's "Shot Clock" segment on "Happy Hour" is always good for a sound byte, because you're never sure what he's going to say. Willard, on FBN's May 4 "Happy Hour" used part of his segment to call for the jailing of the New York Fed's chairman, Stephen Friedman. "New York Fed Stephen Friedman this guy belongs in jail," Willard said. "This is the head of the New York Fed Stephen Friedman guys."
[43] Pease and Patterson are not the only ones to pass through the revolving door between Washington and Goldman. Bush'''s Treasury secretary, Hank '''The Hammer''' Paulson is a former Goldman CEO. And his replacement, Tim Geithner, was mentored by Gerald Corrigan, a former New York Fed president and current partner and managing director of the Office of the Chairman of Goldman Sachs.
[47] Just as it was probably coincidental that on September 15, 2008, then New York Fed president Tim Geithner pressed for AIG'''s biggest counterparty, Goldman Sachs, to help the insurer raise capital after it became clear that AIG was at risk of going bankrupt. That on the same day Goldman'''s current CEO, Lloyd Blankfein, was at the New York Fed. And that Goldman ended up in receipt of about $12 billion in tax dollars thanks to AIG'''s wholesale credit-default swap unwinds after the government bailed out the insurance giant.
[47] Friedman chose a fellow former Goldman Sachs exec for the job. All of which calls into question the unique power of Goldman Sachs over the federal government, as described in another important, but largely ignored, article from the New York Times last October headlined, "The Guys From 'Government Sachs.' " Their power is vast, no matter which party controls the White House.[18] Under Paulson, the bailout of Wall Street was dominated by Goldman Sachs alums, and as the Times noted, "Indeed, Goldman's presence in the (Treasury) department and around the federal response to the financial bailout is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs." That power continues unabated in the Obama administration.[18] Willard was referring to a report
in the May 4 Wall Street Journal that questioned Friedman's current ties to Goldman Sachs (NYSE: GS ) while playing an instrumental role in shaping Washington's response to the financial crisis late last year.[43]
The Journal explained that Friedman, who sat on the Goldman Sachs board and had a large holding in Goldman Sachs stock, but was granted a waiver from the Fed for the conflict of interest.[43] Rather than immediately resign, a waiver was procured for Friedman by the NY Fed's legal counsel, from the federal government, allowing Friedman to stay on at the NY Fed, while still serving on Goldman's board and owning Goldman stock.[16]
Now the Fed is a complex beast, so it isn't entirely clear if Friedman in fact violated Fed policy, or did anything untoward. The Fed has policies regarding stock ownership at member banks, and Friedman sought a waiver for them because of the unusual circumstances of Goldman's sudden decision to become a bank.[27]
During that time, Friedman sat on Goldman's board and had a large holding in the company, a violation of Fed policy, the Journal reported.[6] 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.[13] At the time, Friedman had the task of finding a replacement for Timothy Geithner, the New York Fed president who had left to become Obama's Treasury secretary, and the two finalists turned out to be Goldman alum.[27] Friedman, 71, has served as chairman of the New York Fed since January 2008, and led the bank's search for a new president after Timothy Geithner stepped down in November to become President Obama's Treasury Secretary.[10] Friedman, who was overseeing the search for a new New York Fed president (he is stepping down at year's end),. chose a former GS exec. Friedman contends that none of these events involved any conflicts, as his job at the New York Fed isn't a policy-making role. He also notes that he purchased the GS shares because they were "very cheap."[37] Thomas Baxter, general counsel of the New York Fed, defended Friedman's purchases of an additional 37,300 Goldman shares in December and January.[19] Geithner'''s replacement as president of the New York Fed, William C. Dudley, is also a former Goldman employee.[47] GE chief Jeff Immelt is the only sitting board member elected by the banks to represent the public, while Columbia University president Lee Bollinger and New York State AFL-CIO president Denis Hughes are the two public representatives selected by the Fed board.[17] Denis Hughes, the deputy chair of the board, will take over Friedman's role, the New York Fed said.[32]
With Friedman's departure, the New York Federal Reserve Bank says Denis Hughes, deputy chairman, "will exercise the powers and duties of the chair."[26] NEW YORK (CNNMoney.com) -- The chairman of the Federal Reserve Bank of New York resigned Thursday, days after coming under attack for his continuing involvement in a company regulated by the institution.[10]
Ten of America's biggest banks have been ordered by the Obama administration to raise a combined $74.6 billion in order to protect themselves from a worst-case scenario of projected multibillion-dollar losses through the end of next year, the Wall Street Journal and New York Times report. [31] There is some indication in the Journal story that Geithner was aware of the circumstances, and took no action. This will further advance those who argue that Geithner is too close to Wall Street -- best exemplified by last week's New York Times feature. Then again, when you think about the Fed, and its structure, none of these alleged shenanigans should surprise anyone.[27]
Rather than step down from either board, Friedman requested a waiver from normal Fed rules to continue serving, actions reported Monday by the Wall Street Journal.[13]
Friedman joined the Fed in January 2008. "It is my view that these purchases did not violate any Federal Reserve statute, rule or policy," he said.[19] While the Fed wasn't aware of the stock purchase, general counsel Thomas Baxter Jr. defended the ex-chair's ethics. In a statement, Baxter said, ". it is my view that these purchases did not violate any Federal Reserve statute, rule, or policy."[11]
Member banks appoint six of the nine board members of each of the 12 regional Federal Reserve Banks (the remaining three directors are indirectly selected by the government by way of the Federal Reserve Board of Governors, who are appointed by the president and confirmed by the Senate). [27] Each of the Federal Reserve's 12 regional banks has nine directors. Their duties include setting their district's discount rate and appointing their bank's president. Other responsibilities include approving their bank's budget, overseeing operations, and appointing the bank's officers.[10]
Overlooked by most people is the fact that member banks actually own the regional Federal Reserve Banks that comprise the Federal Reserve System.[27]
Goldman Sachs late last year received quick Fed approval to become a bank holding company. [23] The purchases of Goldman Sachs occurred after the firm became a bank holding company.[32]
The stock purchases may have just raised eyebrows, but you see last fall Goldman was converted from an investment bank to a bank holding company, capable of receiving cash deposits, and that changed everything.[16]
Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after," the Journal story said.[26]
The revelation "set off an immediate scramble by major institutions for more capital," the NYT notes. While nine of the stress-tested banks'''including major players like JPMorgan Chase & Co. (JPM) and Goldman Sachs (GS)'''have adequate capital, big names like Bank of America (BAC), Wells Fargo (WFC),''and Citigroup (C) were told they would have to come up with a whopping $54 billion collectively.[31] Without having received that waiver, Friedman went ahead in December and purchased 37,300 additional shares. With shares he added in January, after the waiver was granted, he ended up with 98,600 shares in Goldman Sachs, worth a total of $13,330,720 at the close of trading on Monday.[18] While the waiver was being considered, Friedman bought $3 million more in Goldman shares (which have since risen $1.7 million in value).[17] The very next day, Friedman purchased an additional 15,300 of Goldman shares for $1 million dollars, at average prices ranging from of $66.19 to. $67.12. This second purchase brought his combined total of Goldman holdings to 98,600 shares.[16]
Since Friedman's purchases of Goldman stock, the stock prices have gone way up, lining Friedman's pockets with gains of nearly $2.7 million.[16] The resignation was welcomed by many who saw the conflict of interest as untenable. "But right now is not the time to cut corners on that front, and grant waivers, especially when Friedman was actively buying Goldman stock during his tenure as chairman of Goldman's most assiduous regulator. He should never have done that, and it's good that he has resigned."[24]
Friedman served as the Goldman Sachs co-chief operating officer from 1987 to 1990 and was the company's co-chairman from 1990 to 1992. From 1992 to 1994 he was Goldman Sachs sole chairman, and he remains on the company board.[40] Given the institution's existing close links with Wall Street, perhaps the public ought to be represented by someone other than a Goldman Sachs board director.[1] Did you hear the news that Oliver Stone and Michael Douglas are revisiting Wall Street for their next movie? It's a timely move because conspiracy theories have stepped up as of late, especially when it comes to Goldman Sachs. It used to be something taken lightly: Goldman Sachs is bent on inter-galactic domination! Now, it seems that more people are taking the idea that Goldman Sachs runs the economy--or at least wields inordinate influence over Wall Street--more seriously.[2]
Conspiracy theories involving Goldman, Sachs & Co. (NYSE:GS) are a dime a dozen, and The Wall Street Journal may have added another to the list.[27]
A front-page story in Monday's Wall Street Journal put a spotlight on the situation, prompting Friedman's resignation.[24]
Government Sachs has been exploiting the Wall Street and Washington axis for too long. The whole herd of them need to be dropped in the middle of Montana without shoes.[2] Clearly, the people running Wall Street are running Washington. To them self dealing is not a conflict of interest, but a right of their position.[28]
John Dunbar, a senior fellow at the Center for Public Integrity, a nonprofit watchdog group in Washington, said the stock purchases were a '''complete conflict of interest.''' '''It is almost comical. If you tried to do that in a more traditional Washington bureaucracy, there is no way on earth you would get away with that,''' he said. Fed insiders were also troubled over the situation, which they felt cast a question mark over ethical standards at the central bank.[12] The article spends a lot of time looking at the timing of the purchase. Really, all he did was make a big buy at a period of distress for the bank -- a move that's turned out well. There's no indication that he had any special inside knowledge at either Goldman or the NY Fed that he was trading on.[41] To be sure, the bailout was hardly Friedman's decision. It was made at the federal levelin consultation with a certain Timothy Geithner, then president of the NY Fed. (The NY Fed board ostensibly plays a strictly advisory role to the NY Fed president.)[17] At the very least, Friedman should not have purchased "additional" stock to further enrich himself, while serving on the NY Fed board.[16]
The New York Fed said Denis M. Hughes, deputy board chairman, will serve as interim chairman, the Times reported. [9] The New York Fed is considered the most important and influential of the regional Fed banks.[44] Dudley oversees the operations of the New York Fed, which is considered very powerful because it supervises some of the nation's largest banks.[10]
Thomas C. Baxter, Jr., executive vice president and general counsel, echoed that sentiment. "There is no doubt that 2008 was one of the most challenging years in the New York Fed's history," he said.[40] "I particularly appreciate the very rigorous process Steve established to select the new president of the New York Fed," Kohn said in a statement.[40]
A year ago, the company posted a record profit of $17.3 billion, The New York Times reported Friday.[33] Consumer credit fell $11.1 billion, almost three times more than forecast and the most since records began in 1943, to $2.55 trillion, according to a Federal Reserve report.[6] Reserve System, to provide continuity during a time of financial market instability. The Federal Reserve System has important work to do and does not need this distraction."[24]
Goldman Sachs is known to attract the best and the brightest. It now turns out they are also the greediest, selfish, lacking any ethical or moral values, lying scumbags. They have perfect qualifications to work for the federal government. Or serve time in other federal institutions. [2] As the Times noted, two leaders of Goldman Sachs - Robert Rubin, who co-chaired Goldman with Friedman, and Henry Paulson - had become secretaries of the Treasury in the Bill Clinton and George W. Bush administrations, respectively.[18] Geithner is a protege of former Goldman Sachs Chairman Rubin. It was therefore not surprising when he picked Mark Patterson, a registered lobbyist for Goldman Sachs, to be his chief of staff at the Treasury Department. That appointment was made on the same day that Geithner announced new rules for limiting the influence of registered lobbyists.[18] Contrary to the prevailing analysis, we believe that the Obama and Bush administration insistence on protecting banks at the expense of the taxpayer is the result of a Machiavellian effort by Goldman Sachs and other major banks to influence U.S. economic policy by infiltrating the corridors of power. Today, we duly note that Goldman Sachs has just hired former Barney Frank staffer Michael Paese to be its top Washington lobbyist. This position was formerly held by Mark Patterson, the current chief of staff at the Treasury.[47]
The board ultimately chose William Dudley, an executive vice president of the bank who had worked at Goldman Sachs for 21 years, as president.[10] When we say by far the biggest, we mean by far the biggest. As you can see from the above chart, last week latest Goldman Sachs traded for their principal account (i.e. using the bank'''s own funds) more than the next 14 largest institutions in the world combined! Goldman traded 1,028,100,000 shares versus 953,000,000 for all other reporting institutions.[47]
Friedman steps down after report that he remains on board and holds shares of Goldman, a regulated bank.[10] In December, before the waiver was granted, and again in January, after it was granted, Mr. Friedman bought additional Goldman shares.[30] While the waiver was under consideration, Mr. Friedman in December bought 37,300 more Goldman shares. He also bought more shares the day after the waiver came through.[14]
Friedman then purchased more Goldman shares. Now that certainly seems fishy, or at least unwise, but again, he may have not broke any rules.[27]
Friedman purchased more than 37,000 shares of GS in December -- while the Fed was considering GS's request for a waiver. Since Friedman purchased the shares, they have increased $1.7 million.[37] While Friedman sees "no conflict whatsoever," former Cleveland Fed president Jerry Jordan feels that Friedman "should have resigned." Not surprisingly, Timothy Geithner had no issue with Friedman when this took place, noting that forcing Friedman out would have taken two leaders out of the mix during a crucial time.[37] Although the financial crisis is prompting a re-examination of Fed governance by members of Congress, one key player said Monday that he doesn't anticipate changes this year. Rep. Barney Frank (D., Mass), chairman of the House Financial Services Committee, said he plans to examine the regional Fed banks with an eye toward altering their unusual structure and the role their presidents play in making monetary policy, but only after the financial crisis is over.[30] In the Journal's narrative, the feeling was that the NY Fed had just lost another director (Dick Fuld, who left just before the collapse of Lehman Brothers) and couldn't afford to lose another in the midst of a financial crisisso the waiver was granted.[17] Ummm didn't he use the recent waiver he got from the Fed that allowed him to own GS stock to PURCHASE additional stock after GS became a holding company? Hope his money keeps him warm, his integrity is out the door.[28] Friedman's waiver came through a month later on Jan. 21, granted by Fed Vice Chairman Donald Kohn.[16]
"Today, although I have been in compliance with the rules," Friedman wrote, "my public service-motivated continuation on the Reserve Bank board is being mischaracterized as improper." [25] Three of the directors work for banks, but Friedman's role is to represent the public.[10] Confidence in the big banks is low, and the timing of the move and Friedman's windfall could make matters worse. Of course, the public perception doesn't matter, as both Geithner and Friedman see no issues -- and those are the only two opinions that really matter.[37]
Goldman Sachs ( GS Quote ) celebrated its tenth anniversary as a public company on Monday with an article alleging a huge conflict of interest posed by a regulator with deep ties to the institution. [4] Believers in the grand Goldman Sachs (GS) conspiracy to manipulate U.S. policy and the financial markets will have to add this one to their list.[41] Goldman Sachs had 10 days in Decemeber and 34 days in the first 3 months of 2009 where they earned $100 million.'' Breaking their previous record. On those off days when they couldn't hit the 100 mil mark they still didn't do too shabby.'' They were profitable on 56 days and were losers on 8 days.''[42] Friedman's December purchases of Goldman are now up big, to the tune of $2.7 million.[41]
Former Goldman senior partner Stephen Friedman headed Bush'''s National Economic Council in the first term.[47]
Goldman'''s close ties with Washington are important because during the recent '''junk-stock rally''' that has pushed up the value of bank stocks and taken pressure off a beleaguered White House, Goldman has been by far the biggest program trader by volume on the NYSE (where former Goldman boy Niederauer is CEO).[47] Three big U.S. banks raced to sell stock after the U.S. government said top financial firms have a $75 billion hole in their capital, while first-quarter.[20] Wells Fargo wasted no time in announcing it was seeking to sell $6 billion in shares, while Morgan Stanley (MS) said it will try to raise $2 billion by selling stock and $3 billion by selling bonds, BusinessWeek reports. One of the stressed-out financial institutions is GMAC, the financing arm of General Motors, but it's the ailing automaker that faces a greater threat after posting a $5.8 billion first-quarter loss.[31]
At the time, Goldman's shares were taking a tumble, trading well below book value.[16]
Quigley Corp., the Doylestown maker of COLD-EEZE lozenges, has urged shareholders to reject a slate of director nominees proposed by dissident shareholder Ted Karkus. It said that Karkus was seeking control of the company but "has no strategic plan" and that his nominees had "little or no relevant experience" in the pharmaceutical industry. Karkus, of Woodmere, N.Y., nominated seven people, including himself, to the company's board and said they collectively owned 10.1 percent of Quigley's outstanding shares.[6] Google (GOOG) on Thursday admitted that, yes, the company is under a federal investigation. According to the NYT, Google asserts it's done nothing wrong in having two board directors splitting time between Google and Apple. One of those directors under fire, Google CEO Eric Schmidt, calmly told reporters there is simply no potential for an antitrust violation.[31]
I do find it odd that Mr Friedman is a Class C director, a class of director that is " appointed by Board of Governors to represent the public".[1]
The U.S. central bank is comprised of a seven-member Board of Governors in Washington, and 12 regional Fed banks.[12] I seem to remember aomeone being skeptical about my earlier assertion of a coming divergence of agenda, and disintegration of connections, between the Feds and the banks.[7]
Great, now just get rid of Geithner and put Goldman down like the mangy, law-breaking dog that it is and then we might finally begin to work our way out of the hole we have dug ourselves into. It is quite telling that he resigned the Fed post and kept his Goldman post.[28] The Fed ought to be able to find someone less closely tied to Wall Street. He may have done his best to act appropriately, but he was right to depart.[15] Our editors will guide you from the investment basics to the more advanced (yet easily-understandable) "out-of-the-box" trading strategies that immediately show you how to enjoy consistently bigger, faster gains than the average crowd that acts on Wall Street spin and mainstream media fluff. The Penny Sleuth reveals what small-cap stocks the insiders are buying right now, the best online brokers availble and the advantage you have that Warren Buffett says is so great he could use it to make 50% a year -- every year.[47]
The former CEO of the NYSE, John Thain, is also a Goldman alumnus. His replacement, Duncan Niederauer, spent 22 years of his career at the bank. Of course, these high-level appointments are probably just coincidental. [47] If it'''s a conspiracy to believe that Goldman Sachs gets preferential treatment from White House administrations that are 1) in receipt of major funding from Goldman Sachs employees and 2) populated by former Goldman Sachs insiders, we'''d love to know what the official explanation is.[47] How is this not the lead story on here? Regardless though does this mean a one-week clusterstock moratorium on making fun of supposed Goldman Sachs conspiracy theorists.[28]
Right now, you are either rolling your eyes or nodding. Everyone has an opinion on this. I think it's fair to say that more people who are not on some kind of lunatic fringe are buying in. A commentary in MarketWatch now holds that "with all their people, programs, lobbyists and connections left behind like landmines inside Washington's new administration, the power of the 'Goldman Conspiracy' may now be absolute, as in Lord Acton's historic warning that 'power corrupts and absolute power corrupts absolutely.'" [2] I live in New York so there is a bias towards U.S. topics but I range more widely.[1] NEW YORK, May 8 (UPI) -- U.S. markets rose early Friday in spite of labor news that put the unemployment rate at 8.9 percent.[33]
Friedman then bought another 15,300 shares in January, the day after the waiver was granted. [10] The waiver was requested last October by Timothy Geithner, then the president of the N.Y. Fed and now Treasury secretary.[18]
SOURCES
1. FT.com | John Gapper's Business Blog | Representing the American public, Goldman Sachs
2. Does Goldman Sachs have a PR problem? - FierceFinance
3. New York Fed chairman Friedman abruptly resigns
4. Today's Outrage: Happy Anniversary, Goldman! | Opinion | Financial Articles & Investing News | TheStreet.com
5. Fed Directors' Ties to Banks Spur Calls for Changes - WSJ.com
6. Business news in brief | Philly | 05/08/2009
7. New York Fed Chairman Stephen Friedman's Resignation Letter -- Seeking Alpha
8. Friedman's 43-Year Storied Career Has Taken Many Twists and Turns - WSJ.com
9. N.Y. Fed chief resigns 'immediately' - UPI.com
10. New York Fed chair Friedman resigns amid criticism - May. 7, 2009
11. NY Fed chair steps down amid Goldman Sachs stock uproar - BloggingStocks
12. N.Y. Fed Chairman Friedman resigns - Stocks & economy- msnbc.com
13. Chairman of New York Federal Reserve resigns - Los Angeles Times
14. New York Fed Chairman Resigns Despite Being Totally Innocent -- Daily Intel -- New York News Blog -- New York Magazine
15. FT.com | John Gapper's Business Blog | Stephen Friedman slips out of the New York Fed
16. New York Fed Chairman Quits: Goldman Stock Purchases Revealed | ChattahBox News Blog
17. WNYC - WNYC News Blog » Thursday Resignations: New York Fed Chairman Edition
18. Cashing in on 'Government Sachs'
19. New York Post
20. New York Fed Chairman Resigns, Defends Goldman Sachs Share Purchases - International Business Times -
21. New York Fed Chairman Steps Down :: Elites TV
22. The Associated Press: Goldman director Friedman defends role at NY Fed
23. The Associated Press: New York Fed Chairman Stephen Friedman resigns
24. N.Y. Fed chair chooses Goldman over governance (Dealscape)
25. Stephen Friedman and Washington's X-men | Howzit Howard
26. New York Fed chairman quits over Goldman Sachs ties - USATODAY.com
27. No Goldman conspiracy to see here (Dealscape)
28. New York Fed Boss Resigns Over Goldman Controversy
29. Chairman of N.Y. Fed Quits Amid Questions - WSJ.com
30. GOP Senator Criticizes New York Fed Chairman - WSJ.com
31. $75 Billion or Bust | Green Business | Reuters
32. NY Fed chair Friedman resigns | U.S. | Reuters
33. UPI NewsTrack Business - UPI.com
34. N.Y. Fed chairman resigns abruptly - On Deadline - USATODAY.com
35. N.Y. Fed chairman resigns - UPI.com
36. Friedman Says "Followed The Rules" In Goldman, NY Fed Ties
37. Did the New York Fed Chairman engage in inappropriate behavior with Goldman Sachs? - BloggingStocks
38. Felix Salmon » Blog Archive » Stephen Friedman's welcome resignation | Blogs |
39. Mortgage Orb: Content / Residential Mortgage / N.Y. Fed Chair Friedman Resigns
40. RTTNews - Latest Earnings,Upcoming Earnings, Pos Pre Announcements, Pos Pre Announcements , Positive Surprises, Negative Surprises, Hot Stocks, Stock Split Calendar, Stock Buybacks, Dividends, Negative, Positive PreAnnouncements,Surprises .
41. Another Goldman Conflict Of Interest Story At The NY Fed
42. Goldman Sachs is the best caps player EVAR!
43. FBN's Willard: Jail the Head of New York Fed
44. New York Fed Chairman Quits | Market Features | Financial Articles & Investing News | TheStreet.com
45. Article - WSJ.com
46. New York Fed: Stephen Friedman Resigns As Chairman Of The Board Of Directors - Global Custodian
47. Economic analysis | Is Goldman Sachs Controlling Washington? - Contrarian Stock Market Investing News - Featuring Bargain Stocks
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