NEW YORK — Stephen Friedman has resigned as chairman of the Board of Directors of the Federal Reserve Bank of New York, saying his role had been at the central bank has been maligned.
Friedman notified New York Fed President William Dudley and Fed Chairman Ben Bernanke of his decision, effective immediately, in a letter Thursday.
At the end of April, Friedman, a former Goldman Sachs Group chief executive and White House economic adviser, said he would leave his post at the N.Y. Fed by the end of 2009, a year before his term ends.
The sudden move Thursday follows controversy over Friedman's continued presence on the board of Goldman Sachs last autumn, and his large holdings of stock in the firm when its status switched to that of a bank holding company. In November, when then-president of the New York Fed Timothy Geithner was nominated as Treasury Secretary in the Obama Administration, Friedman led the search committee for his replacement.
The NY Fed had secured a waiver from the Fed's Board of Governors to allow Friedman to stay to the end of 2009 while remaining a Goldman director and shareholder. To remain beyond that, he would have to sell his Goldman shares and leave the Goldman board; he has chosen to leave the Fed board instead.
"Although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper," Friedman wrote in his resignation letter. "The Federal Reserve System has important work to do and does not need this distraction."
Executive vice president and general counsel at the New York Fed Thomas Baxter said in a press release published on the central bank's Web site that, "there is no doubt that 2008 was one of the most challenging years in the New York Fed's history," and "we were fortunate to have Steve as our chairman during that time."
Referring to Friedman's purchase of additional Goldman shares in December and January, Baxter wrote "it is my view that these purchases did not violate any Federal Reserve statute, rule or policy."
Representing the Fed's Board, vice chairman Donald Kohn thanked Friedman for his service, adding in the press release, "I particularly appreciate the very rigorous process Steve established to select the new president of the New York Fed."
In keeping with the Federal Reserve Act, Deputy Chair of the board Denis Hughes will take over the immediate vacancy.