There is nothing you can teach Wall Street titans regarding the timing of news flow. Stephen Friedman, the former head of Goldman Sachs, resigned last night as chair of the New York Fed’s board, after committing essentially a rookie error. In December/January, he traded the stock of a company (Goldman) overseen by the NY Fed, while helping to pick a new head of the Fed (formerly from Goldman), and presumably being aware of other potentially nonpublic information regarding bank rescues (benefiting Goldman both directly and indirectly). The real error, given the Federal Reserve System’s incredibly lax rules on potential conflicts of interest at this level, was failing to disclose this information to the NY Fed – they learned it from WSJ reporters and that cannot have been a good moment.
If you have to resign, pick your time of day carefully, and Friedman is obviously advised by the best people in the business. I’m looking at the hard copies of four newspapers. The news of his departure does not make the front page of the NYT (not even the small stuff at the bottom) or the front page of their Business Day section. There is nothing on the front page of the FT or Washington Post. Even the WSJ only manages three paragraphs on the front page, before sending you to look for p.A10. (It was on cnn.com from 5:55pm last night, together with his resignation letter.)
I haven’t checked who first broke the news, but Friedman’s resignation was of course the major development of yesterday. The bank stress test results were hard-baked a long time ago, and almost all the icing on that cake had already been leaked. But the stress test for bankers is still underway. Continue reading “The Other Stress Test (For Bankers)”