Some have cited, although incorrectly as others have noted,[92] that Goldman Sachs received preferential treatment from the government by being the only Wall Street firm to have participated in the crucial September meetings at the New York Fed, which decided AIG's fate. Much of this has stemmed from an inaccurate but often quoted New York Times article. The article was later corrected to state that Blankfein, CEO of Goldman Sachs, was "'one of the Wall Street chief executives at the meeting" (emphasis added). Bloomberg has also reported that representatives from other firms were indeed present at the September AIG meetings.[93] Furthermore, Goldman Sachs CFO David Viniar has stated that CEO Blankfein had never met with his predecessor and then-US Treasury Secretary Henry Paulson to discuss AIG;[94] Paulson was not present at the September meetings at the New York Fed. It is also a lesser known fact that Morgan Stanley was hired by the Federal Reserve to advise them on the AIG bailout.[95]
According to the New York Times, Paulson spoke with the CEO of Goldman Sachs two dozen times during the week of the bailout, though he obtained a ethics waiver before doing so.[96] While it is common for regulators to be in contact with market participants to gather valuable industry intelligence, particularly in a crisis, the Times noted he spoke with Goldman's Blankfein more frequently than with other large banks. Federal officials say that although Paulson was involved in decisions to rescue A.I.G, it was the Federal Reserve that played the lead role in shaping and financing the A.I.G. bailout.[96]
Former New York Fed Chairman's ties to the firm
In May 2009, it was reported that the Chairman of the New York Fed, Stephen Friedman, was a former director at, and shareholder of, Goldman Sachs, having retired from the firm in 1994 and retained substantial stock.[97] The controversy and criticism caused by what was seen as a conflict of interest between Friedman's new role as supervisor and regulator to Goldman Sachs (due to its conversion from securities firm to a bank holding company), and, in particular, his purchase of shares in the firm when it traded at historical lows in Q4 2008, forced him to resign on May 7, 2009. Although Friedman's purchases of Goldman stock did not violate any Fed rule, statute, or policy, he stated that the Fed did not need this distraction. He also claims his purchases, made while approval of a waiver was pending, were motivated by a desire to demonstrate confidence in the company during a time of market distress.[98]
Friedman was named Chairman of the New York Fed in January 2008. However, Goldman's conversion to bank holding company in September 2008 meant it was now regulated by the Fed and not the SEC. When it became apparent that Timothy Geithner, then-New York Fed president would leave his role at the Fed and become Treasury Secretary, a temporary one-year waiver of a rule was granted to Friedman that would otherwise forbid Fed board members from direct interest with those it regulated ('class C' directors).
Friedman therefore agreed to remain on the board until the end of 2009 to provide continuity in the wake of the turmoil caused by Lehman Brothers' bankruptcy. Had the waiver not been granted, the New York Fed would have lost both its president and its chairman (or Friedman would have had to divest his Goldman shares).[97] This would have been highly disruptive for the New York Fed's role in the capital markets, and Friedman claims he agreed to stay on the NY Fed board out of a sense of public duty, but that his decision was "being mischaracterised as improper".[99]
http://en.wikipedia.org/wiki/Goldma..._September_15_at_the_New_York_Federal_Reserve
