Serious conflict of interest at the Fed
October 25, 2011
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The Government Accounting Office has just released a report: FEDERAL RESERVE BANK GOVERNANCE Opportunities Exist to Broaden Director Recruitment Efforts and Increase Transparency. The report finds serious conflict of interest among several of the directors on the boards of the regional Federal Reserve banks, not the least in New York. The most prominent one is Goldman Sachs’ Stephen Friedman:
During the end of 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap loans from the Federal Reserve. During this time period, Stephen Friedman, the Chairman of the New York Fed, sat on the Board of Directors of Goldman Sachs, and owned shares in Goldman’s stock, something that was prohibited by the Federal Reserve’s conflict of interest regulations. Mr. Friedman received a waiver from the Fed’s conflict of interest rules in late 2008. This waiver was not publically disclosed. After Mr. Friedman received this waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009. According to the GAO, the Federal Reserve did not know that Mr. Friedman continued to purchases Goldman’s stock after his waiver was granted.
For a short version of the report, see this summary on Senator Sander’s web site, where you will also find a link to the GOA report.
For more info on the Friedman case, see this article by Rolling Stone reporter Matt Taibbi.