Administration Discord
If confirmed by the Senate, Quarles would be the first ever Fed supervision chief. Dodd-Frank created the position in 2010, though former President Barack Obama never nominated anyone to fill it. Trump officials have been interviewing candidates since late last year, before the president took office. The choice had been bogged down by a lack of agreement among the president’s advisers and industry lobbying, people familiar with the matter have said.
General Electric Co. executive David Nason, who had been National Economic Council chief Gary Cohn’s favored pick, withdrew his name in early March. Other candidates who had emerged since then included Washington attorney Thomas Vartanian and Hal Scott, a Harvard Law School professor and noted critic of regulation.
The Fed vice chairman sits on the central bank’s seven-member board of governors, meaning the role gets a vote on U.S. interest rates. Quarles would likely be an advocate for rule-based monetary policy, in which rate decisions are formulaic and tied to changes in inflation, employment and other economic data. House Financial Services Committee Chairman Jeb Hensarling is among Republican lawmakers who’ve advocated for using that kind of approach for years in setting interest rates.
Crazy Policy
“If you’re going to be transparent in an activity like the Fed, you have to be much more rule-based in what you’re doing,” Quarles said in a November 2015 interview with Bloomberg Television. Basing decisions on the influence and views of Fed officials is “a crazy way to run a railroad for the Federal Reserve,” he said.
Though the Fed is one of several regulators that oversee the largest U.S. banks, it has the longest reach. During Obama’s presidency, it took the lead in implementing post-crisis reforms and dramatically ratcheting up Washington’s scrutiny of Wall Street.
Under Obama, Fed Governor Daniel Tarullo handled the vice chair of supervision’s duties on an unofficial basis until his departure earlier this month. He triggered endless consternation from Wall Street by pushing through tough capital standards, restricting risky trades and subjecting banks to rigorous stress tests to evaluate whether they could endure another severe economic slump.
Even though the position comes with the title of vice chairman, the supervision chief’s powers are not absolute. Fed Chair Janet Yellen controls what policies governors vote on, meaning she could easily thwart efforts to free banks from tough rules, at least until her term ends in February 2018.
This article was provided by Bloomberg News.