In fact, Friedman has deep ties to Goldman. He has served as a director on the bank's board since April 2005, after working for the firm since 1966. When Goldman became a bank holding company last fall under the aegis of the New York Fed, Friedman received a waiver allowing him to stay on as a director, in order "to provide continuity during a time of financial market instability," in his own words.

As of March 9, Friedman reportedly owned 111,516 shares of GS. He purchased 37,300 of those shares in December 2008, and another 15,300 shares in January 2009. While the Fed wasn't aware of the stock purchase, general counsel Thomas Baxter Jr. defended the ex-chair's ethics. In a statement, Baxter said, " . . . it is my view that these purchases did not violate any Federal Reserve statute, rule, or policy."

Former New York Governor and tireless Wall Street watchdog Eliot Spitzer might beg to differ. In his Slate column on Wednesday, Spitzer bemoaned the fact that the New York Fed's board is riddled with bankers and corporate executives. "So is it any wonder that the N.Y. Fed . . . has given -- with virtually no strings attached -- practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees?" asked the former Attorney General.

Of course, this kind of collusion doesn't necessarily end with the New York Fed. Henry Paulson, the former Treasury Secretary who presided over last fall's massive bailout initiative, had a few Goldman Sachs ties of his own.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.