Try as they might to wriggle their way out of this disastrous and sickening conflict of interest, the New York Fed is going to have to accept that they really fucked this one up. Adding insult to injury, with now ex-Chair Stephen Friedman jumping ship in response to the revelation that he cleaned up to the tune of some $3 million on Goldman Sachs share purchases he made while already under NY Fed-sanctioned clearance, the NY Fed insists that they stand behind their decision to allow Friedman to keep his Goldman holdings. Well of course they do. Why oh why would FRBNY be so bold as to admit they blew it and big time? They may not be ethical but they certainly know how to play the game, don't they!

I sincerely hope the New York Fed doesn't think this one is just going to be allowed to be swept under the rug. They may have gotten away with treason and economic terrorism up to this point but I can't imagine America is much in the mood for a continued financial beating at the hands of the boys in New York. Whoopsie, should have really been more careful with those conflicts of interest!

Via Slate, further proof that the NY Fed may be forced to expose itself once and for all:

The kerfuffle about current New York Federal Reserve Bank Chairman Stephen Friedman's purchase of some Goldman stock while the Fed was involved in reviewing major decisions about Goldman's future—well-covered by the Wall Street Journal here and here—raises a fundamental question about Wall Street's corruption. Just as the millions in AIG bonuses obscured the much more significant issue of the $70 billion-plus in conduit payments authorized by the N.Y. Fed to AIG's counterparties, the small issue of Friedman's stock purchase raises very serious issues about the competence and composition of the Federal Reserve of New York, which is the most powerful financial institution most Americans know nothing about.

Given the power of the N.Y. Fed, it is time to ask some very hard questions about its recent performance. The first question to ask is: Who is the New York Fed? Who exactly has been running the show? Yes, we all know that Tim Geithner was the president and CEO of the N.Y. Fed from 2003 until his ascension as treasury secretary. But who chose him for that position, and to whom did he report? The N.Y. Fed president reports to, and is chosen by, the Fed board of directors.

So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for—but did not receive—harsh examination from the N.Y. Fed.

Huh! Isn't that funny?

Now the contrarians argue that due to the "complicated" make-up of the Federal Reserve System, it makes sense that the NY Fed board would be comprised of such high-ranking officials in the Wall Street Mafia network. That's just how these things work, who else would they have heading up the most powerful regional bank of the system? Some asshat from a community bank in the New York state suburbs? As if.

These contrarians are the same ones who argue that two-bit tax cheats like Tim Geithner are "most qualified" for positions at the helm of the United States Treasury due to their significant "experience" in complicated financial markets.

All it takes is a little bit of reflection for one to realize that these people are not "qualified," they are merely well-connected.

The New York Fed may be a larger fraud than Bernie Madoff could have ever dreamt up from the safety of his posh little penthouse.

So that being said, who is going to take them to task? Who has a pair of balls large enough to jump a buzzsaw and start asking the critical questions? I have heard some say Eliot Spitzer and I have argued that Andrew Cuomo will be too busy to take a stab at our favorite economic terrorists with TARP fraud and the BofA/Merrill mess to unravel.

It doesn't matter who. It only matters that someone steps up and gets it done. At a minimum, I hope the New York Fed realizes that some of us (*ahem* yours truly and the countless others who blow off our lunch hours and Happy Hour with the coworkers to report on the stuff MSM doesn't have the cojones to cover day in and day out) refuse to look the other way and act as if nothing is wrong here.

In fact, something is terribly wrong and it's about time something be done about it. Stephen Friedman's Goldman drama was not only unethical but knowingly conducted above the table with NY Fed's blessing. If this is how they deal with conflicts of interest, how in the hell can we expect them to fix our broken banking system?

Well we shouldn't. Duh.

Says Spitzer via the Slate article, "more fundamentally, perhaps it is time to take a hard look at the governing structure and supposed independence of this institution that actually controls the use of our tax dollars and, heaven help us, the fate of our economy."