The Most Powerful Financial Institution You’ve Never Heard Of – The New York Fed

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.

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The Top Ten Worst CEO’s In American History

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1.  Dick Fuld.   His nickname was the Gorilla – the brawler known as the scariest man on Wall Street.

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.

2.  Angelo Mozilo.  When Mozilo left Countrywide, after being rescued by Bank Of America – they had to spend $8.7 billion to settle predatory lending charges filed by 11 state attorneys general.

Mozilo’s once-secret, now-infamous “Friends of Angelo” program provided loans on favorable terms to politically influential borrowers, including Senators Kent Conrad and Chris Dodd.

3.  Ken Lay. When it comes to bad CEOs, Lay was the complete package: He was not only dishonest but disastrously inept as a manager as well.

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.

Thousands of former Enron employees saw their retirement funds disappear when the energy giant collapsed–but Kenneth Lay has millions socked away in lawsuit-proof investments.

4.  Jimmy Cayne.  He has been described by all as out-of-touch and asleep at the switch.  Mr. Cayne is the one that enjoyed 3 1/2 day golf and bridge tournaments.

Cayne was playing bridge when two Bear Stearns hedge funds collapsed in July 2007, and was again the following March when a liquidity crisis at the firm led to its emergency sale to J.P. Morgan.

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