Let's Not Forget about the NY Fed Connection and Goldman Sachs

Editors note: TheCenterLane often covers Wall Street Mafia issues and was also kind enough to do a guest post for me - coincidentally on the NY Fed - so I could run off to Washington to flip off the Treasury. Though this post is months old, it's worth reminding GS666 readers here that this issue is still painfully relevant. - JDA


Somebody really loves Goldman Sachs:

The recent article about Treasury Secretary "Turbo" Tim Geithner by Jo Becker and Gretchen Morgenson, appearing in the April 26 edition of The New York Times, seems to have helped fan the flames of the current outrage concerning the Federal Reserve Bank of New York. Turbo Tim was president of the New York Fed during the five years prior to his appointment as Treasury Secretary. Becker and Morgenson pointed out many of the ways in which "conflict of interest" seems to be one of the cornerstones of that institution:

The New York Fed is, by custom and design, clubby and opaque. It is charged with curbing banks' risky impulses, yet its president is selected by and reports to a board dominated by the chief executives of some of those same banks. Traditionally, the New York Fed president's intelligence-gathering role has involved routine consultation with financiers, though Mr. Geithner's recent predecessors generally did not meet with them unless senior aides were also present, according to the bank's former general counsel.

By those standards, Mr. Geithner's reliance on bankers, hedge fund managers and others to assess the market's health -- and provide guidance once it faltered -- stood out.

The New York Fed is probably the most important of the nation's twelve Federal Reserve Banks, since its jurisdiction includes the heart of America's financial industry. As the Times piece pointed out, this resulted in the same type of "revolving door" opportunities as those enjoyed by members of Congress who became lobbyists and vice versa:

A revolving door has long connected Wall Street and the New York Fed. Mr. Geithner's predecessors, E. Gerald Corrigan and William J. McDonough, wound up as investment-bank executives. The current president, William C. Dudley, came from Goldman Sachs.

[Who among you would listen to Dudley knowing where he comes from? Interest rates must stay low and small business is the problem? That seems odd, don't you think beasts like Goldman Sachs are the problem, Bill?]


Calculated Risk:

Atlanta Fed research economist Melinda Pitts writes at Macroblog: Prospects for a small business-fueled employment recovery

In a speech yesterday, William Dudley, the president of the Federal Reserve Bank of New York, identified financial constraints for small businesses as a restraint on the pace of economic recovery.

Awww, it feels like just yesterday I started off here on GS666 with dumbass Stephen Friedman. Blatant, kids, it's blatant and you're taking it. Sad. Just remember who we are dealing with and eventually it will make sense to you.