The Senate Banking Committee held a hearing on Thursday over President Donald Trump’s nomination on Randal Quarles to be a member of the Board of Governors of the Federal Reserve System and vice chairman for supervision of the Board of Governors of the Federal Reserve System, calling into question his ties to the financial industry and big banks.
If confirmed, Randal Quarles, an investment-fund manager and former Republican Treasury official, would be the first person to officially sit in the recently formed position on the Federal Reserve that has been referred to as the most powerful position in banking.
But Senate Democrats won’t let him lock in the title without a fight.
While Sen. Mike Crapo, R-Idaho, Chairman of the United States Senate Committee on Banking, Housing and Urban Affairs, welcomed Quarles, Democrats were quick to demand answers on where his loyalties fall.
Crapo explained, “As Vice Chairman for Supervision, Mr. Quarles would play a key role in developing regulatory and supervisory policy for the Federal Reserve System.”
“President Obama never designated anyone for this role. Instead, former Fed Governor Dan Tarullo acted as the de facto Vice Chairman for Supervision in various ways, including by chairing the Federal Reserve Board’s Committee on Supervision and Regulation, overseeing the Large Institution Supervision Coordinating Committee, and representing the Fed at the Financial Stability Board and in Basel, among other functions,” he said.
Tarullo shocked many in the industry when he announced his resignation in February. Tarullo joined the Fed Board on Jan. 28, 2009, and his term wasn’t set to expire until 2022.
But Tarullo officially stepped down from that role last April, opening the door for Trump to tap Quarles to the position.
Crapo praised Quarles’ “wealth of government and private sector experience dealing with both domestic and international financial markets.”
“He is no stranger to public service, having previously served in multiple top posts in the Treasury Department,” he stated.
On the other side of the aisle, Sen. Sherrod Brown, D-Ohio, ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, adamantly disagreed.
“Quarles served as Treasury’s Undersecretary for Domestic Finance in the years leading up to the 2008 financial crisis. It was his job to coordinate oversight of the financial industry and ensure government watchdogs were looking out for the best interest of American taxpayers,” said Brown. “However many of his statements leading up to the crisis lead me to wonder whether he was asleep at the switch or willfully turning a blind eye to Wall Street abuses.”
It’s this same background that Sen. Elizabeth Warren, D-Mass., attacked Quarles on.
Warren emphasized the power of the position, saying, “If you are confirmed to this position Mr. Quarles, you would have more influence than any other person over the regulation of the big banks.”
To Warren, his long tenure in the financial industry makes him unable to be bipartisan.
“Now, given that enormous power, the No. 1 thing we need from the Fed’s vice chair for supervision is to a demonstrated willingness to stand up to the interest of the big banks that threaten the financial institutions,” she said. “But when I look at your 30-year career, spinning through the revolving door of the private sector Mr. Quarles, I just don’t see it.”
Meanwhile, Quarles did step up for people in the industry who feel burdened by the onslaught of regulation, which is welcomed news for lenders.
Sen. David Perdue, R-Georgia, asked Quarles, “Do you think that there are regulations in place today that make it difficult for financial institutions to understand the directions the regulators expect them to go without going back in and asking for additional information time and time again?”
Quarles responded saying, “I think that in many areas of the current system that that is true.”
The hearing closed with both parties divided on the nomination, but given the Republican majority, he could still pass through to a full Senate vote. From here, the committee will vote on Quarles’ nomination, and if he passes, the vote moves on to the full Senate.