Stephen Friedman Resigns As Chairman of the Board for NY Fed

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The Chairman of the board of the board of directors of the New York Federal Reserve Bank resigned Thursday amidst allegations of improper conduct due to a purchase of Goldman Sachs (GS) stock.

Prior to his resignation Friedman bought stock in Goldman Sachs, a company that he once headed and where he still serves as a director. However, 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. 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.
"I particularly appreciate the very rigorous process Steve established to select the new president of the New York Fed," Kohn said in a statement.
Denis M. Hughes, deputy chair of the board, will assume the chairmanship. He praised Friedman's "vital service" during the economic crisis.

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. "We were fortunate to have Steve as our chairman during that time, especially in view of Mr. Geithner's decision to accept President Obama's nomination to become Secretary of the Treasury."

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.

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