Stephen Friedman, chairman of the New York Federal Reserve’s board of directors, abruptly resigned last week amid questions about stock he had purchased from his former employer, Goldman Sachs.
Under Fed policy, regional Fed bank directors appointed by the central bank’s board of governors are not allowed to own shares of bank holding companies. But at the time that Goldman Sachs had gained such a status, Friedman obtained a one-year waiver regarding his shares, so that he could remain chairman of the New York Fed’s board, a position he has held since January 2008.
Controversy arose, however, when Friedman purchased several more shares in December 2008 and January 2009, ultimately leading to his sudden resignation. “[A]lthough I have been in compliance with the rules, my public service-motivated continuation on the Reserve Bank Board is being mischaracterized as improper,” Friedman said in his resignation letter. “The Federal Reserve System has important work to do and does not need this distraction.”
Thomas Baxter, executive vice president and general counsel of the New York Fed, spoke in defense of Friedman: “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."
Serving as acting chair is Denis Hughes, the deputy chair of the board and president of the New York State AFL-CIO, a large public employee union.
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