Randal Quarles, the Federal Reserve's vice chairman of oversight, will be removed from his role as the chief guardian of Wall Street lenders after his title officially expires this week.
The industry generally expected that even without the title of vice chairman, Quarles would effectively remain head of the central bank's oversight committee. However, according to a statement, the board has instead decided that no single governor will occupy this position.
While progressive groups and democratic lawmakers may have preferred Governor Lael Brainard to take over, they can watch their least favored governor be sidelined. Quarles, who has a seat on the Fed's Board of Governors, now shares oversight responsibilities with Brainard, the only senior Democrat on the Fed's Board of Directors, and Governor Michelle Bowman.
Randal Quarles is expected to remain Fed governor until December. Republican friends near Quarles reportedly asked him to stay until 2022.
"With the vice chairman's term expiring, he will no longer chair the committee on oversight and regulation," the Fed said. The committee will meet "without a chair" and only matters that all members can agree to will be referred to the full board, according to the statement released in anticipation of the issues likely to be raised on Wednesday when Quarles & # 39; 4. Annual term expires.
President Biden has not yet nominated a candidate for vice chairman oversight, who is also subject to Senate approval. The delay in replacing Quarles has not only prevented the Democrats largely from completing their agenda for Wall Street banks, but has also faced industry-friendly opposition. The Fed's chief banking regulator is the regulator with the greatest reach of any of the largest US lenders.
The vice chairman decision is also intertwined with Biden’s decision to nominate Jerome Powell for a second term as chairman, and the Democrats considering Powell can vote to remove Quarles from the chairmanship. Advisors to the president are considering a recommendation to re-nominate Powell and appoint Brainard as the ultimate regulator, Bloomberg previously reported.
Quarles hasn't said how long he will stay with the Fed as governor, but he is expected to serve until December. Republican friends near Quarles have asked him to stay through 2022, people familiar with the discussions said, but he hasn't made any commitments beyond the end of this year.
The presence of Quarles, a Trump-appointed person who has drawn the ire of progressives like Senator Elizabeth Warren for relaxing Wall Street rules, has posed a challenge to Biden. Powell, who has also come under pressure from the Democrats over the recent trade scandals involving Fed officials, has embraced Quarle's heat as a loyal ally of Quarle's.
However, Powell recently said he would continue to take the lead on regulatory issues as the next vice chairman, even if that successor is more suspicious of the financial industry.
Quarles has announced that he will end his tenure as chairman of the International Financial Stability Board, which ends in December, and allow him to attend the Fed's monetary policy meeting.
Quarles spent much of his time over the past two years on the Fed's contingency measures to cushion the blow from COVID-19 on the economy, including easing some regulatory restrictions on Wall Street. During this time, he is often beamed into digital conferences from the extensive library at his Utah home, where he spent much of the pandemic.
Although its FSB issued recommendations this week on the revision of money market funds, other priorities – including its work on completing a key set of capital controls that have already been internationally agreed – were
remain undone. For the time being, these efforts will be conducted by consensus and will be taken over by its future Vice-Chairman.
"Really important technical problems are on hold because everything the Fed is touching is called capital liberalization for big banks," said Karen Petrou, managing partner of Washington-based research firm Federal Financial Analytics.
Fed observers expect the Biden administration to assemble several nominees to reshape the governance of the central bank. So far, Powell is widely considered a favorite to keep his chairmanship.
The oversight function is "paramount," said Satish Kini, a partner who heads the banking group at Debevoise & Plimpton. Quarles' successor "will set the tone and agenda of the Federal Reserve on banking regulation, systemic risk and other issues," and installing a progressive candidate could mean difficult new positions on bank mergers, cryptocurrencies and financial technology company regulation.