The New York Fed, privately owned by the major banks in its region (which is itself something I have a hard time reconciling with their possibly being pretty much broke) is sometimes described as being more powerful than the central Federal Reserve. At a minimum, it's hugely powerful, and the sorts of conflicts of interest described here are highly disturbing.

Friedman says that he has done nothing wrong and just wants to prevent a "distraction" over bad appearances. His letter of resignation is here.

I expect that people will have a bit to say; I'll stick around to monitor developments.

For a good backgrounder on the New York Fed, here's an article from Eliot Spitzer. I'll quote three paragraphs of fair use:

The kerfuffle about current New York Federal Reserve Bank Chairman Stephen Friedman's purchase of some Goldman stock while the Fed was involved in reviewing major decisions about Goldman's future—well-covered by the Wall Street Journal here and here—raises a fundamental question about Wall Street's corruption. 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. A quasi-independent, public-private body, the New York Fed is the first among equals of the 12 regional Fed branches. Unlike the Washington Federal Reserve Board of Governors, or the other regional fed branches, the N.Y. Fed is active in the markets virtually every day, changing the critical interest rates that determine the liquidity of the markets and the profitability of banks. And, like the other regional branches, it has boundless power to examine, at will, the books of virtually any banking institution and require that wide-ranging actions be taken—from raising capital to stopping lending—to ensure the stability and soundness of the bank. Over the past year, the New York Fed has been responsible for committing trillions of dollars of taxpayer money to resuscitate the coffers of the banks it oversees. 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.

Go read the rest in Slate; it's worth your while.

UPDATE: Pluto wants you to see this.

Some investors in 401(k) retirement funds who are moving to grab their money are finding they can't. Even with recent gains in stocks such as Monday's, the months of market turmoil have delivered a blow to some 401(k) participants: freezing their investments in certain plans. In some cases, individual investors can't withdraw money from certain retirement-plan options. In other cases, employers are having trouble getting rid of risky investments in 401(k) plans.

Sigh.

Update 2: Since this is (most unexpectedly) on the Rec List, the answer is "FAN"! ;7)

Update 3: Taunter thinks that we're missing the big story and would like you to read this.

Update 4: kovie beat me to this and I have no idea why this diary remains on the Rec List and that one doesn't. So: check out those comments as well, if you're interested, as they are more plentiful.

Update 5: from truong son traveler's comment below (and before that, Greenwald):

I would like to think that the Fed's IG simply miscalculated the cost of not "giving up any details" in her testimony, but this is still incredibly ugly.