Fed’s Randal Quarles to resign at the end of December
WASHINGTON, Nov. 8 (Reuters) – Randal Quarles, who until last month was the U.S. Federal Reserve’s vice chairman for oversight and the most powerful banking regulator, on Monday announced he would step down as bank governor in the end of the year, thus closing a four-year term. term in which critics said he was too friendly towards Wall Street.
Quarles’s exit will also open up another niche for President Joe Biden to fill what could be a large remake of the Fed’s seven-member board. Biden faces upcoming decisions on whether to reappoint current Fed Chairman Jerome Powell for a second four-year term, a replacement for Quarles and another governor to fill a vacant seat.
Vice President Richard Clarida also has a term on the board ending in January, potentially giving Biden the chance to make his mark on the majority of board positions.
Quarles’ departure could see the Fed resuming the stronger stance it took on the banking sector after the 2007-2009 financial crisis, as it tackles thorny issues such as related risks. climate change, bank capital requirements and fair lending.
But in an interview with Reuters on Monday, Quarles said the resilient performance of banks during the COVID-19 pandemic crisis had proven he was right to make changes that had eased compliance burdens, which he said , would not be reversed.
“I came up thinking that we could make the regulatory system a lot more efficient… while still keeping it as strong as ever. I think the performance of the system during COVID demonstrated that, so I think we passed the test.” , did he declare. noted.
“If you come up with a measured, analytically sound, consistent but not revolutionary approach, it will last,” he said. “I think it probably is.”
Appointed in 2017 by then-Republican President Donald Trump, Quarles served as the senior vice president of oversight, a role created after the financial crisis but never officially fulfilled under President Barack Obama’s administration.
His term as head of the Financial Stability Board, an international regulatory group, expires in early December. Quarles officially stepped down as the head of the Fed’s internal regulatory committee when his term as vice chairman of oversight expired in October.
CUT RED RIBBON
As a former Wall Street lawyer and private equity investor, he was initially widely seen as an industry ally who would carry out the Trump administration’s pledge to cut red tape.
With the backing of Fed Chairman and friend Jerome Powell, Quarles continued to relax a series of post-crisis rules, arguing they were too brutal and onerous, angering Democrats who said the changes had allowed Wall Street to save tens of billions of dollars while increasing systemic risk.
Among the more controversial changes, Quarles spearheaded revisions to the “Volcker rule” limiting speculative banking investments; the removal of the requirement for large banks to hold capital against certain swap transactions; deprive the Fed of its power to fail banks in their annual “stress tests” based on subjective concerns; and the relaxation of capital, leverage and liquidity rules for all lenders except the largest.
Quarles, 64, has often said he has tailored the rules to the specific risks of banks, a position supported by some regulatory experts.
As Chairman of the Multilateral Financial Stability Board since 2018, Quarles has wielded global influence. Under his watch, the agency stepped up its review of the burgeoning non-banking sector, particularly money market funds.
Wall Street executives, for their part, have often been disappointed with Quarles, privately saying he did not go far enough in post-crisis relaxation of rules, a complaint shared by some congressional Republicans .
Several of its revisions met opposition from fellow Fed governor Lael Brainard, who said they went too far and increased systemic risk, a rare public crack for an institution known for its consensus. Brainard is seen as a top candidate to replace Quarles as vice president.
“If that happens, we would expect a gradual push towards stricter capital requirements for banks. It should also mean tighter reviews of regional bank mergers,” wrote Jaret Seiberg, analyst at Cowen Washington Research Group. , in a note.
FULL AGENDA FOR THE SUCCESSOR
Whoever succeeds Quarles will have a busy agenda to tackle the whole gamut, from equity rules and fair lending to digital assets, fintech and climate change. Read more
When it comes to monetary policy, Quarles has generally taken Powell’s example. He backed the president’s quick introduction of an extraordinary monetary stimulus as the pandemic raged last year, and endorsed Powell’s push for a monetary policy that allows for higher inflation.
In a May political speech, Quarles appeared more eager to start a discussion about cutting Fed bond purchases than some of his colleagues, due to inflation fears. But he added that he agreed with core Fed officials who expected much of the recent pressure for higher prices to pass.
“I’m not worried about going back to the 1970s,” he said.
Utah-raised Mormon, amateur pilot and multimillionaire, Quarles was not a typical Washington insider, preferring to spend time at home with his family rather than frequent the capital’s cocktail circuit.
Described by several executives and associates as thoughtful, principled, and highly scholarly, Quarles frequently sprinkled his speeches with classic and cultural references, including the occasional Star Trek analogy.
Quarles’ wife, Hope Eccles, is the great-niece of Marriner S. Eccles, Fed chairman from 1934 to 1948, a close family connection that Quarles says imbued him with a deep respect for the central bank. .
Reporting by Michelle Price and Pete Schroeder, editing by Franklin Paul, Andrea Ricci, Peter Graff
Our Standards: Thomson Reuters Trust Principles.