Friedman defends NY Fed role

By Joseph A. Giannone

NEW YORK (Reuters) - Goldman Sachs Group (GS.N) director Stephen Friedman, who quit as Federal Reserve Bank of New York chairman on Thursday amid conflict-of-interest questions, said on Friday he did not break any rules, nor did he have inside information about Goldman.

Friedman, who served as senior partner of Goldman Sachs in the early 1990s, was the subject of a Wall Street Journal story that raised questions about his ties to Goldman at the same time he served on the board of the powerful regulator.

"I followed the rules as I always have," he said during the Goldman annual shareholder meeting on Friday.

As Lehman Brothers collapsed and credit markets churned, Goldman sought and quickly received Fed approval to become a bank holding company. The new status meant Goldman answered to the Fed, but also enjoyed permanent access to federal funds.

Friedman, a Goldman director since 2005, continued to sit on the New York Fed's board, where he was a "public" director and its chairman.

This week the Wall Street Journal reported on Friedman's purchases of Goldman stock in December and again in January. During that period, the U.S. Treasury and the Fed were drafting plans to bolster the nation's big banks.

Normally, a New York Fed director is not allowed to buy stock in a member bank, but the New York Fed requested -- and the Federal Reserve's board of governors approved -- a waiver that would let Friedman hold both posts for another year.

New York Fed also concluded Friedman's purchases of Goldman stock did not violate the Fed's rules.