Source: AllGov
David Wallechinsky and Noel Brinkerhoff
Now that congressional auditors have gained access for the first time to the financial records of the Federal Reserve,
their assessment has turned up serious conflicts of interest for the
board members overseeing the branches of the national bank.
The Government Accountability Office (GAO) states in a new report
that the directors of the 12 regional Fed banks and Fed-supervised
firms are risking the system’s reputation by maintaining ties to the
industry they regulate.
For instance, at least 18 former and current directors were
affiliated with financial institutions that relied on the Fed’s
emergency assistance programs during the crisis that swept Wall Street.
In September 2008, the chairman of the New York Federal Reserve was
Stephen Friedman, who also happened to be a member of the board of
directors of Goldman Sachs. When Goldman applied to become a bank
holding company in order to gain access to cheap credit from the Federal
Reserve, the New York Fed approved, and Goldman came under the
regulatory purview of the New York Fed, which gave Friedman a waiver to
continue in his position despite the obvious conflict of interest. After
it was revealed that Friedman, in December 2008, purchased 37,300
additional shares of Goldman Sachs, he was forced to resign.
The audit was one of several required under the Dodd-Frank
financial reform law that, among other things, opened up the Fed to GAO
scrutiny.
For the record, another section of the GAO report concluded that in
2010, of the 108 head office directors of the Federal Reserve, 72% were
white men, whereas white men constitute only 36% of the general
population of the United States.
