Friedman Resigns as NY Fed Chairman, Had Been Buying Goldman Stock in 2008-9

It just keeps getting more blatant and more brazen.

"And, 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."

Let's see, it is perfectly all right for a Fed Chairman to buy shares in one of the banks he is 'regulating' especially when he is helping to make critical policy decisions directly involving them.

Who writes the Fed's conflicts of interest policy, Alberto Gonzalez?

Yes the Fed would certainly make a very good systemic regulator...

Federal Reserve Bank of New York
Stephen Friedman Resigns as Chairman of the New York Fed’s Board of Directors
May 7, 2009

NEW YORK—The Federal Reserve Bank of New York announced today that Stephen Friedman, chairman of the board of directors of the New York Fed, has informed William C. Dudley, president and chief executive officer of the New York Fed, and the Board of Governors of his decision to resign effective immediately. Consistent with the Federal Reserve Act, Denis M. Hughes, deputy chair of the board, will exercise the powers and duties of the chair.

“My colleagues and I appreciate Steve’s vital service to the Bank during this time of great economic stress,” said Mr. Hughes. “We value his contributions and I know the Bank’s leadership acknowledges his unique perspectives on the economy and his financial market expertise. We all join in thanking him for his service and leadership.” Mr. Hughes added, “This is a remarkable organization at the center of helping the nation through the most difficult economic period since the 1930s. I have watched as the people of the Fed managed the unprecedented financial storms with creativity, energy and integrity.”

Thomas C. Baxter, Jr., executive vice president and general counsel, said, “There is no doubt that 2008 was one of the most challenging years in the New York Fed’s history. 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. When the President announced his decision to nominate now-Secretary Geithner on November 24, 2008, Steve immediately stepped into action and formed a search committee of the New York Fed’s board of directors.

During the committee’s often intense deliberations over the next two months, I was privileged to observe closely Steve’s dedication, professionalism and work ethic. He was extraordinary. And, 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. I enjoyed working with Steve, and will miss his contributions in the boardroom.”

“I would like to thank Steve Friedman and his fellow directors on the New York Fed’s board for their service,” said Donald L. Kohn, vice chairman of the Board of Governors of the Federal Reserve System. “I particularly appreciate the very rigorous process Steve established to select the new president of the New York Fed.”

New York, NY 10022
May 7, 2009
Mr. Wiliam C. Dudley
President
Federal Reserve Bank of New York
33 Libert Street
New York, NY 10045

Dear Bill:

By copy of this letter to Chairman Bernanke, I hereby resign as a Class C Director and
Chairman of the Board of the Federal Reserve Bank of New York, effective immediately.
Last Fall, after Goldman Sachs Group, Inc. became a bank holding company, I agreed to
remain on the Board, pursuant to the waiver authority of the Board of Governors of the Federal
Reserve System, to provide continuity durng a time of financial market instability. Today,
although I have been in compliance with the rules, my public service motivated continuation on
the Reserve Bank Board is being mischaracterized as improper. The Federal Reserve System has
importnt work to do and does not need this distraction.

Please convey my appreciation and respect to my fellow Directors and the Reserve Bank
staff for their cooperation and their service. It has been a pleasure to work with you, your
predecessor, and our distinguished Board, as well as the dedicated, hard-working men and
women of the New York Fed. The New York Fed plays an extraordinary and vital role in
restoring stability to the financial system durng this very critical period, and it has been an honor
to be part of the institution's effort. I also am grateful to Chairman Bernanke and the other
Members and staff of the Board of Governors for their advice and support in connection with the
search for a new Chief Executive Officer for the New York Fed.


Stephen Friedman


cc: The Honorable Ben S. Bernane
Chairman
Federal Reserve Board of Govemors
Federal Reserve System
Washington, DC 20551

SP Futures Hourly Chart at the Close

The Problem With Our Regulatory Process

There have been and still are three obvious problems with our regulatory structure.

1. Influence Peddling

2. Conflicts of Interest

3. Corruption

Reorganizing to more fully centralize the regulatory process is exactly the wrong thing to do.

It was often individuals and the individual States, standing against the pressure of federal regulators, which exposed unethical and illegal practices.

And as for the idea that the Fed can take on more of these functions, just remember what will happen the next time a Greenspan gets in that position.

The Fed is a private organization owned by the banks, too often opaque, and with a highly questionable independence and objectivity.

Reorganization to centralize bad decision making and conflicts of interests is right out of the 1990's corporate playbook.


If Obama has a pair of his own he will appoint someone like Eliot Spitzer, Ron Paul, or Dennis Kucinich as the new Chairman of the SEC or the CFTC.

Red Pill or Blue Pill?

You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe.

You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes."

Morpheus in The Matrix

Blue Pill

Dick Bove was on Bloomberg Television this morning justifying a bullish outlook for the big banks, and the Bank of America in particular.

As you know, the story is that Bank of America has to raise many billions of dollars in additional capital according to the stress tests.

Dick Bove reasons that Bank of America will raise this additional capital, handwaving the costs and any contingencies a bit.

This additional capital will be leveraged, so Dick believes, in profitable transactions in trading, lending, and the extension of credit.

These transactions will generate a spectacular boom in bank profits. Mo' capital, mo' profits. Just do the math and including plenty of leverage.

And as we all know, more credit means economic growth and national prosperity.

Red Pill

The problem that the financial system has is an outsized financial sector with too much capacity for credit and financial assets. This excess capacity led to speculation and extension of credit in deals where the risk was not adequately balanced.

Hot money chases unreasonable risks. Too much capacity lowers the bars for deals which cannot possibly be profitable in any realistic model. Bubbles tend to distort the models for growth assumptions.

The only way to achieve a sustained recovery is to reform the financial system, break up the big banks, and return to a more balanced economy.

The elite and their acolytes seem to believe that by sustaining the illusion of the Financial Matrix that we create a confidence that will support a national economic system that is based on a credit bubble and a mass illusion of wealth based on paper.

The money center banks are the instruments of national policy, and the power to control not only the domestic economy but the nations of the world.

All we have to do is believe, and act as though it were true. After all, its so confusing, who can understand it? Better to just believe.

Can we delude ourselves to prosperity? Can a powerful nation and otherwise intelligent people be that venal, faithless and craven?

Yes we can. We have been doing it for years. And it can only continue if we gain more control over the real world and the people in it, and bend them to our increasingly irrational will.

The triumph of the will.