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NY Fed Chairman Stephen Friedman Pockets $1.7 from GS Shares

|Includes: Goldman Sachs Group Inc. (GS)

Guess which investment bank has done the best under the patronage of Team Obama? Hint: It’s the same bank whose former CEO wrote the rules of the $700 billion TARP. The same bank that has had the good fortune of seeing two of its former employees fill the role of the past and current head of the New York Fed.

The same bank whose employees were Wall Street’s biggest contributors to President Obama’s electoral campaign.

Still stuck? Here’s another hint: It rhymes with “Golden Sacks.” That’s right! Since Team Obama took over the reins of power, shares in Notes’ favorite whipping boy, Goldman Sachs, are up 132%. Now, there’s a coincidence.

And if you aren’t convinced that there are certain “perks” tied to the close relationship between Goldman Sachs and the government, consider the case of New York Fed chairman Stephen Friedman.

According to The Wall Street Journal, Friedman, who once ran Goldman, made a tidy $1.7 million from the purchase of 37,300 of the bank’s shares while chairman of the New York Fed.

Why is this noteworthy? Because last September the New York Fed speedily approved Goldman’s application to become a bank holding company and therefore qualify to receive a $10 billion tax-funded cash injection. And members of the New York Fed’s board are prohibited from owning shares in bank holding companies.

Not that this ban worried Friedman too much. While the Fed considered an application for a waiver on the rule, Friedman not only kept his existing holding Goldman shares, but also bought 37,300 more Goldman shares in December. Friedman says there was no conflict of interest in his purchase of the shares. He is stepping down as chairman of the New York Fed at the end of the year, when the waiver allowing him to own the shares expires. Presumably, he wants to hold onto his $1.7 million gain.

Disclosure: No positions