WASHINGTON - The Federal Reserve has tightened the conflict-of-interest restrictions governing directors of its 12 regional banks.
The new rules deal with potential conflicts such as one that involved Stephen Friedman, a former chairman of Goldman Sachs Group. They spell out the obligations of directors with ties to financial institutions that change status.
Friedman got a waiver to continue serving as chairman of the board of the New York Federal Reserve Bank even though Goldman had switched its status to become a bank holding company, which is regulated by the Fed. It had been an investment bank. Friedman quit the Fed position after The Wall Street Journal raised questions about his ties to Goldman Sachs.
The Fed regional banks are governed by nine-member boards. Three of the board members are elected by the banks that belong to the Federal Reserve system in that particular district. The other six are selected to represent the public and may not be officers, directors, or employees of any bank. New rules require any director serving in one of the positions representing the public to sever ties to a financial institution that comes under the central bank’s jurisdiction, or resign from the Fed board.