Fed Chairman Calls it Quits

Chairman of the Federal Reserve Bank of New York, Stephen Friedman, resigned unexpectedly Thursday, days after media reports surfaced questioning his ties to former employer, Goldman Sachs (GS). “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,” read Friedman’s resignation letter to William Dudley, president and CEO of the New York Fed. Friedman lead the board at the New York Fed while also serving as a Goldman director and holding sizeable stake in the company. The overlapping roles violate Federal rules. The New York Fed, however, obtained a one-year waiver of the rule in January. Regardless, Friedman said “The Federal Reserve System has important work to do and does not need this distraction.” Denis Hughes, deputy chair of the board, immediately takes over as interim chairman of the board, according to a statement from the New York Fed. “My colleagues and I appreciate Steve’s vital service to the Bank during this time of great economic stress,” says Hughes. “We value his contributions and I know the Bank’s leadership acknowledges his unique perspectives on the economy and his financial market expertise.” Since, 1990, Friedman worked at Goldman in various departments as co-head or head. He served on Fannie Mae’s board and as a senior principal of the investment arm of insurance broker Marsh & McLennan. In 2002, the Bush administration called upon him to succeed Lawrence Lindsey as director of the National Economic Council. And in 2005, Friedman became a senior adviser to Stone Point Capital, where he remains chairman. Stone Point is a private-equity firm in Greenwich, Conn. formed by principals of MMC, a March & McLennan unit. Write to Kelly Curran.