Resignation Raises Questions About New York Fed

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This week's resignation of the chairman of the New York Fed is focusing new attention on the body's governance.

On Monday, a report in The Wall Street Journal raised questions about Stephen Friedman's role as chairman of the New York Fed, while also a shareholder and director at Goldman Sachs. Friedman had obtained a special waiver of Fed rules, allowing him to keep his position. But while awaiting the waiver, he also bought more Goldman stock. Thursday, he resigned, but defended his service. NYU Stern Professor Paul Wachtel says ever since the financial crisis hit, the New York Fed is much more intimately involved with the banks, with a heightened regulatory role and a 250 percent increase in lending from 18 months ago.

WACHTEL: Would I strengthen its independence from the banking system? Yes, I would in some respects.

The acting chairman of the New York Fed is now Denis Hughes, president of the New York State AFL-CIO.