U.S. progressives frustrated by White House delay on Fed regulation
chief
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[November 23, 2021]
By Pete Schroeder and Michelle Price
WASHINGTON (Reuters) -While Wall Street
banks cheered the renomination of U.S. Federal Reserve chair Jerome
Powell on Monday, Democratic progressives were frustrated that the White
House did not announce a tough new regulatory chief to crack down on
banks on issues such as climate change and fair lending.
"President Biden’s renomination of Jerome Powell...is a major
disappointment to those of us who have fought for tougher regulation of
Wall Street as a key tool for protecting financial stability and
building a more just and sustainable economy," progressive group
Americans for Financial Reform said in a statement.
The Fed's current head of supervision Randal Quarles stepped down in
October from that powerful role overseeing the country's largest
lenders, and is due to leave the central bank next month. Biden said
that and other Fed picks would be announced in early December.
Washington insiders had seen Lael Brainard, a fellow Fed governor and
Treasury official under former President Barack Obama's administration,
as the leading candidate to replace Quarles due to her vocal stance on
the Fed's regulatory agenda.
But Brainard, who had opposed Quarles' efforts to ease rules introduced
following the 2007-2009 global financial crisis, did not want the
supervision post and was looking for a more senior role, according to
two people with knowledge of the matter.
Instead, she will step up to become Fed Vice Chair, the White House
said.
A Fed spokesman for Brainard did not provide comment.
Progressive groups, eager for the Fed to reverse its Wall
Street-friendly stance and accelerate efforts to tackle climate change
and overhaul community lending rules, criticized the reappointment of
Powell, a Republican appointee who had backed Quarles' changes, and
called for a tough new regulation chief.
"This position must be filled by a strong regulator with a proven track
record of tough and effective enforcement - and it needs to be done
quickly," Democratic Senator Elizabeth Warren said in a statement.
Whoever gets the supervision role faces a packed agenda, which will also
include reviewing new capital rules and how banks are able to handle
cryptocurrencies.
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Federal Reserve Chairman Jerome Powell testifies before the Senate
Banking Committee hearing on Capitol Hill in Washington, U.S.,
December 1, 2020. Susan Walsh/Pool via REUTERS/File Photo
“It’s problematic,” said Todd Phillips, director of
financial regulation at the Center for American Progress, a liberal
think tank. Following an announcement, it could take until February
for the new supervision chief to be confirmed by the Senate, at
which point the post would have been empty for around five months,
he said.
“It's going to be a long time until that position is filled.”
Brainard voted against many of Quarles' changes, arguing they would
increase systemic risk. Among the most contentious were revisions to
the “Volcker Rule” curbing speculative bank investments; scrapping a
requirement for big banks to hold capital against certain swap
trades; and easing the Fed's annual “stress tests."
Brainard acted as a moderating influence on the Fed's deregulatory
agenda, Reuters has previously reported, winning applause from
progressive Democrats.
The S&P 500 bank index rose 2.8% on news of Powell's reappointment,
but progressives said they hoped to win a more left-leaning
supervision pick. They have voiced frustration that the White House
has been slow to fill key regulatory posts, and have said the
administration is not moving quickly enough to address climate
financial risks.
Other names floated for the role according to Washington insiders
include: Sarah Bloom Raskin, a former Fed governor; Atlanta Fed
President Raphael Bostic; acting Comptroller of the Currency Michael
Hsu; U.S. Treasury under-secretary Nellie Liang; and law professor
Mehrsa Baradaran.
Raymond James analyst Ed Mills said the supervision pick will likely
have "very progressive views" but that "Powell’s leadership likely
softens the impact.”
(Reporting by Michelle Price, Editing by Nick Zieminski and David
Gregorio)
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