Under a very wussy, New York Times-y headline, “New York Fed Chairman’s Ties to Goldman Raise Questions,” the Wall Street Journal reports that the chair of the New York Fed, Stephen Friedman, added to his already large stock position in Goldman Sachs, a firm he once headed. (Thanks, Paul Whalen, for the pointer.) Friedman’s purchase of the shares came after Goldman turned itself into a bank holding company, a transition that brought it under the direct supervision of the New York Fed. Earlier, of course, Goldman had gotten a $10 billion capital injection from Washington. But even before Goldman became a commercial bank, it had deep and intimate relations with the New York Fed, as does the rest of Wall Street.

Friedman, unsurprisingly, says there’s no conflict of interest. In a deep sense, he’s right: there’s a perfect harmony of interest between Goldman and the U.S. government.

Not that the New York Fed is exactly part of the U.S. government. The regional Feds are formally owned by the member banks in their districts, and their executives, while appointed by the Federal Reserve Board in Washington, aren’t subject to Senate confirmation. Yet they perform regulatory and other functions as if they were government agencies. 

Returning to the micro-level of personal ethics: Friedman’s holdings in Goldman were against Fed rules. He asked for, and got a waiver from the Fed to allow his holdings—and he added to his position while the waiver was being deliberated. According to the WSJ piece: “Because he was wasn’t [sic] allowed to own the stock he had, the Fed doesn’t consider his additional December purchase to be at odds with its rules at the time.” Beautiful.

[That “was wasn’t” is in the original. See Liza Featherstone’s piece on the new WSJ forthcoming in the Columbia Journalism Review, which takes the new Journal to task for axing its copy-editors.]