This is an insightful article done by Eliot Spitzer – about who actually runs the New York Fed, what do they do, and whom does this person report to? His article titled Fed Dread is in Slate and here are a few interesting excerpts:
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.
When your hubris triggers a national financial panic as well, you’re a shoo-in for our top prize. Fuld’s reckless risk-taking may have been typical of Wall Street, but his refusal to acknowledge that his firm was in trouble—and take the steps necessary to save it—was beyond the pale. Since filing the largest bankruptcy in U.S. history ($613 billion in debts outstanding), Fuld has been belligerent and unrepentant.
He also signed off on a maze of convoluted transactions that formed the basis of a massive accounting fraud that would wipe out investors and bring down the corporation. Lay was convicted of securities fraud in 2006.