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. 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. 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 favourable 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.