President Donald Trump-nominated Randal Quarles has been confirmed by the Senate as the Federal Reserve Vice Chairman.
After months of deliberation, Quarles’ nomination was finalized with a 65-32 final tally of votes from the Senate. He will be in charge of overseeing the U.S. banking system, a role filled by Daniel Tarullo till April this year.
Tarullo unofficially held the title of the Fed’s key bank regulator, meaning that Quarles will be the first official vice chairman in charge of bank oversight. The position was made under the Dodd-Frank reforms which aimed for safer banking system after the near collapse during the financial crisis.
The Fed’s “stress testing” of large banks, a test intended to learn whether the large banks have enough strength to surpass unexpected financial events, will be overseen by Quarles. The banks must pass those tests – proving their abilities to increase dividends and return capitals to shareholders – in order for their capital plans to be approved.
Quarles also said, “I do think the Fed can look at being more transparent about those activities and do it in a way that doesn’t reduce the effectiveness of those tests.” The decision has been previously opposed by Tarullo, pointing out the transparency – a step that has been sought out by banking industries before – might let the banks to “game the system.”
Quarles is not expected to have immediate monetary policy influence, but according to an economist, “[Quarles] has criticized the Fed for trying too hard to stimulate the economy.” They also expect him to “favor raising interest rates more quickly.”
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Trump confirmed that he has been to four meetings discussing who should lead the Federal Reserve early next year, but refused to disclose who he had the meetings with.
A White House official who asked to remain anonymous shared to the media that Trump and Treasury Secretary Steven T. Mnuchin indeed met up with Kevin Warsh, a former Fed board member, and Jerome Powell, the only Republican in the Fed board, on two separate days.
Current Fed Chair Janet L. Yellen is said to still be considered for reinstatement by Trump even though he is still looking at other possible candidates for the position. Yellen has not said whether she is willing to extend her term longer if Trump asks her to or if she’ll settle and step down after her term ends in February next year.
Warsh’s possible appointment pushed both the U.S. Bond yields and the dollar to move higher.
Warsh continuously takes up the lead as the most favored candidate for the top Fed position, with Powell coming in second, and Yellen at third.
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