Senate Banking Committee Chair Brown urges Fed to stop deregulation until Biden picks nominees

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  • The Senate’s top Democrat in charge of banks wants Fed chief Jerome Powell to hold off deregulation until President Joe Biden nominates members to the central bank.
  • Sen. Sherrod Brown urged Powell to halt the regulation rollback until Biden names a replacement for outgoing Fed vice chair for overseer Randall Quarles.
  • Quarles’ departure comes months before Fed Vice Chairman Richard Clarida’s term ends in January and Powell’s term expires in February.

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The Senate’s top Democrat in charge of oversight of the bank wants Federal Reserve Chairman Jerome Powell to withhold any financial controls until President Joe Biden nominates new members to the central bank.

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Sherrod Brown, chairman of the Senate Banking Committee, urged Powell to hold off on rolling back industry regulations until the president has had a chance to select a replacement for the outgoing Fed vice chair for overseer Randall Quarles.

“When Vice Chair Quarles was confirmed for his position, banking lobbyists rejoiced. They not only planned to shift the post-crisis rules to benefit industry interests over protecting working families, they dutifully continued its regulatory efforts even as the economy was shaken by a global pandemic,” wrote Brown A letter dated 13 October.

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“A new direction for financial regulation must be chosen by the president, and Congress ratified for key leadership positions on the board,” the Ohio Democrat said.

Quarles’ term as the Fed’s top bank regulator ends Wednesday and opens up another high-profile position at the central bank to fill the White House in the coming months. His position will remain unfilled until Biden is nominated, and the Senate confirms, a new candidate to oversee the nation’s lenders.

“In light of the expiration of the vice chair’s term, he will no longer chair the Committee on Oversight and Regulation,” a Fed spokesman told CNBC. “That committee shall meet as necessary without a chair. Matters within the responsibility of the committee shall proceed to the full board, where there shall be broad consensus among the members of the committee.”

Quarles’ separate term as governor on the Fed’s board lasts another 10 years.

Many Democrats see Quarles’ departure from the role of vice chair as an opportunity to better police merger applications, capital requirements and other regulatory issues facing banks.

Elizabeth Warren, a Massachusetts Democrat and fellow banking committee member, lambasted Quarles in May for what she and other Democrats deemed his dangerous and relaxed approach to financial oversight.

“Instead of protecting the system, you spent your time piercing holes in the Fed’s safety net wherever you could,” he said at the time. “Your term as president is over in five months. And when you leave our financial system will be safe.”

Quarles was the first to fill a supervisory role, a position created by the 2010 Dodd-Frank law that redesigned financial sector oversight after the Great Recession. The position was left unfinished until 2017, when former President Donald Trump named him as one of Powell’s deputies.

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Quarles’ vacancy comes months before Fed Vice Chairman Richard Clarida’s term ends in January and Powell’s term ends in February. Combined with the current vacancy on the seven-member Fed board, Biden will have many opportunities to reshuffle the leadership at the country’s central bank.

The White House has not offered comment on when it plans to announce its candidates, although Deputy Press Secretary Karine Jean-Pierre said last week that Biden “trusts Powell at this time.”

Powell is still favored by lawmakers from both sides of the political aisle for a second term and could face an easy re-confirmation vote in the Senate. He has bipartisan support in large part for the Fed’s swift work to secure the US economy and ensure businesses have access to liquidity during the COVID-19 crisis.

Trump nominated Powell to head the Fed in 2017, when former President Barack Obama first tapped him to serve on the central bank’s board. His nomination is supported by almost every Republican.

That hasn’t stopped some progressive Democrats from pressuring Biden to choose a nominee they see as tough on the banks and more focused on issues like climate change and income inequality.

Progressive Representative. Alexandria Ocasio-Cortez, Rashida Tlaib, Ayana Pressley, Mondaire Jones and Jesus “Chuy” Garcia Made his case in late August.

“To move forward with a holistic government approach that eliminates climate risk while keeping our financial system safe, we need a president who is committed to these objectives,” the quintet wrote. “We urge President Biden to re-imagine the Federal Reserve focused on eliminating climate risk and advancing racial and economic justice.”

Wall Street widely expects the White House to tap Fed Governor Lyle Brainard for a promotion. He is a strong contender to fill Quarles’ position if he is not asked to serve as Powell’s replacement if Biden decides to replace the Fed chief.

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