NY Fed chair resigns amid stock purchase questions
NEW YORK (Reuters) - 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.
"The Federal Reserve System has important work to do and does not need this distraction," Friedman said.
The U.S. central bank is comprised of a seven-member Board of Governors in Washington, and 12 regional Fed banks.
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.
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.
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. [more]
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