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Fed nominee Quarles: Time to step back from some banking regulations

  • Randal Quarles has been nominated to serve as the first-ever vice chair for supervision at the Federal Reserve.
  • The post was created by the Dodd-Frank reforms but never formally filled by former President Barack Obama.

President Donald Trump's choice to oversee the national banking system indicated Thursday that it's likely time to roll back some of the regulations put in place after the financial crisis.

That didn't sit well with some of the people who will have to vote on his nomination.

Randal Quarles, nominated to be the Federal Reserve's first-ever vice chair for supervision, appeared at his confirmation hearing before the Senate banking committee and discussed the direction in which he thinks reform should take.

"Regulatory policies enacted since the financial crisis have improved the safety and soundness of the financial system," he said in his prepared remarks. "But as with any complex undertaking, after the first wave of reform, and with the benefit of experience and reflection, some refinements will undoubtedly be in order."

Asked later to be more specific, he said he would endorse virtually all the reforms proposed earlier this year in a Treasury report, including changing the part of stress tests that examines whether banks can withstand a major crisis, and exempting smaller banks from more intense scrutiny.

He took it a step further and said regulators need to eliminate "the lack of transparency" surrounding the stress test process.

However, his views weren't well-received by some on the committee.

Sen. Elizabeth Warren, the Massachusetts Democrat who has been a vocal critic of the Wall Street culture that helped create the 2008 financial crisis, grilled Quarles and said she feared putting him in charge of the banking system.

Quarles is founder and head of The Cynosure Group, a private investment firm, and previously was a partner at private equity firm The Carlyle Group. He also has served as undersecretary of the Treasury during George W. Bush's administration.

Citing his business experience, Warren said, "That's not a record that should give Americans as a whole a lot of confidence in you."

"We just went through a devastating financial crisis less than a decade ago because powerful people in government let powerful institutions call the shots," she later added. "We can't go down that road again."

Quarles found some allies on the committee, though, and most of the questioning was cordial. Sen. Thom Tillis, a North Carolina Republican, speaking of Quarles' background, said, "I actually find that refreshing." He compared the nominee's experience to "bureaucrats" who "regulate, regulate, regulate more."

In addition to the Quarles nomination, the committee also heard from Joseph Otting, the president's pick to run the Office of the Comptroller of the Currency, a separate agency that oversees stability of the banking system.

Otting is former CEO of OneWest, the California bank where Treasury Secretary Steven Mnuchin also worked. He faced questions about the bank's foreclosure practices during the financial crisis.

"I hope you all will get in there and right-size regulation ... in a way that is responsible, predictable and as lean as possible," Tillis said.