Analysis-Biden’s new Fed regulation chief faces dilemma over Trump rules rewrite

President Joe Biden is expected soon to nominate the Fed’s new vice chair for Supervision. Names in the mix include former Fed Governor Sarah Bloom Raskin, Atlanta Fed President Raphael Bostic, U.S. Treasury Under-Secretary Nellie Liang and former consumer watchdog chief Richard Cordray, among others.

Influential Democratic lawmakers and progressive groups are eager for the new pick to get tough on Wall Street and start tightening up rules eased by Fed Board member Randal Quarles, a Republican appointee who stepped down from the supervisory role in October.

But they also want the Fed to ramp up climate change financial risk management, overhaul community lending rules and create a regulatory roadmap for financial technology companies, changes in large part opposed by Republicans.

A major effort to overhaul Quarles’ work will suck up the resources and political oxygen needed to address these other priorities. It also may be opposed by fellow regulators and even some centrist Democratic lawmakers, said Washington insiders.

“It’s important for whoever the next vice chair for supervision is to really take a holistic look at the entire regulatory landscape,” said Todd Phillips, a director with the Center for American Progress, a liberal think tank.

“They’re going to have to make some tough decisions.”

Progressives opposed Quarles every step of the way, accusing him and former President Donald Trump’s administration more broadly of eroding safeguards created after the 2007-2009 crisis.

Among the most contentious changes he spearheaded were revisions to the “Volcker Rule” curbing speculative bank investments; scrapping a requirement for big banks to hold capital against certain swap trades; stripping the Fed of its power to fail banks on their annual “stress tests” based on subjective concerns; and easing capital, leverage and liquidity rules for all but the biggest lenders.

Quarles said he tailored the rules to banks’ risks and that the industry’s stellar performance amid the pandemic’s economic crisis shows he did not weaken the system. In fact, he took a moderate approach specifically to improve the odds that his changes will survive a new administration, he told Reuters.

“I came in with the intention of trying to make changes that would be durable,” he told Reuters in an interview last month.

“If you come in with a measured, analytically sound consequential but not revolutionary approach, that will last and I think that’s likely to be the case.”

Unraveling his work will be challenging, regulatory experts said. Many of the rules are highly complex and revisions would be time-consuming, especially given major changes are subject to public feedback and, in many cases, must be agreed by other regulators.

It took 3.5 years, for example, for the Fed, along with four other agencies, to craft the original Volcker Rule and another 2.5 years to tweak aspects of it.

That inter-agency process is even trickier given one of those regulators, the Federal Deposit Insurance Corporation, is still run by a Republican appointee, Jelena McWilliams, who has said she plans to stay on until her term ends in June 2023.

Democrats themselves are not united when it comes to prudential banking rules, analysts say. While they generally agree on the need for more consumer protections, some centrists have backed the notion that post-crisis rules overshot.

Several of Quarles’ most significant changes, for example, were ordered by a 2018 bank de-regulation law that prescribed simpler capital and liquidity requirements for all but the nation’s largest banks, for which several Democrats voted.

That could make a big overhaul politically risky.

“Some progressives have called for wholesale changes to Trump-era policy shifts, but we are skeptical given that many of those changes were congressionally mandated and relatively modest,” wrote Isaac Boltansky, director of policy research for brokerage BTIG.


Still, Quarles’ successor may be able to score some quick wins to keep progressives at bay, analysts said.

Quarles used discretionary powers Congress granted the Fed in the 2018 law to extend relief to some larger banks. Those breaks could be reversed without crossing lawmakers, they said.

Regulatory experts also expect the next Fed regulation chief to toughen up stress tests, which are not regulations and can be changed by the central bank on an ad hoc basis.

Similarly, lawyers expect the Fed to take a tougher line when scrutinizing big bank mergers, which progressives say hurt consumers, as well as in conducting big banks’ everyday supervision.

“There’s only so many staff, there’s only so many hours in the day,” said Phillip Basil, director of banking policy with the Wall Street reform group Better Markets.

“But there are very basic safety and soundness items that do have to be addressed.”

(Reporting by Pete Schroeder; Editing by Michelle Price and Dan Grebler)

Source link

0 0 votes
Article Rating

Notifier de
0 Commentaires
Commentaires en ligne
Afficher tous les commentaires
Reset Password

Avertissement sur les risques :

Le trading peut vous exposer à des risques de pertes supérieures aux dépôts et ne convient qu’à une clientèle avisée ayant les moyens financiers de supporter un tel risque. Les CFD sont des instruments complexes et présentent un risque élevé de perte rapide en capital en raison de l’effet de levier. Entre 74 et 89% des comptes de clients de détail perdent de l’argent lors de la négociation de CFD. Vous devez vous assurer que vous comprenez comment les CFD fonctionnent et que vous pouvez vous permettre de prendre le risque élevé de perdre votre argent. Ce site n’est en aucun cas une offre de conseil en investissement ni une incitation quelconque à acheter ou vendre des instruments financiers. Trader le Forex et/ou les CFD’s implique un niveau de risque élevé, et peut ne pas être approprié car vous pouvez subir des pertes supérieures à votre dépôt. L’effet de levier peut être en votre défaveur.

Vous devez être conscient et avoir une compréhension complète de tous les risques associés au marché et au trading. Le site peut être amené à produire des commentaires d’ordre général, ce qui ne constitue pas des conseils en investissement et ne doit pas être interprété comme tel.

Veuillez recourir aux conseils d’un conseiller financier extérieur. Le site décline toute responsabilité pour les erreurs, inexactitudes ou omissions et ne garantit pas l’exactitude ou le caractère complet des informations, textes, graphiques, liens ou autres éléments contenus dans cette documentation. Toute information et toute mise à disposition sur le site ont un caractère privé.