In the wake of the financial crisis, when members of Congress and others raised questions about conflicts of interest within the Federal Reserve banking system and individual banks, the Federal Reserve should take concrete steps to become more transparent, reports the General Accountability Office (GAO) in a report issued today.

"[W]ithout more complete documentation of the directors’ roles and responsibilities with regard to the supervision and regulation functions, as well as increased public disclosure on governance practices to enhance accountability and transparency, questions about Reserve Bank governance will remain," reads the report.

Today's report is the second part of an audit mandated by the Dodd-Frank financial law. The GAO's previous report, published in July, examined the details of the Fed's emergency lending programs, amounting to more than $1 trillion, during the financial crisis. (See story about what we know about emergency lending and how here.)

The GAO's transparency recommendations center on making both on documenting and publicizing the governmance rules of the Fed and reserve bank. It also recommends that in cases where directors obtain waivers under ethics policies, that such waivers be publicly disclosed "to the extent disclosure would not violate a director's personal privacy."

The GAO examines certain case examples from the financial crisis when questions of conflicts arose. For example, the CEO of JP Morgan Chase & Co., Jamie Dimon, served on the Federal Reserve Bank of New York (FRBNY) board of directors while the bank sought and received help through the Fed's emergency lending office.

In another case, in 2008, when Goldman Sachs became a bank holding company–a step necessary so it could receive assistance from the Fed–then New York Fed board chairman was Stephen Friedman, who also sat on Goldman's board. As a result, he became ineligable to serve as a director, since he was also a director and stockholder of a bank holding company. The Federal Reaserve Bank of New York sought–and received–a waiver to allow him to continue to serve on the board.

"We have previously reported that good governance, transparency, and accountability are critical in both the private and public sectors….In the public sector, they are essential to the effective and credible functioning of a healthy democracy and to fulfilling the government’s responsibility to citizens and taxpayers," notes the GAO.