Fed's Quarles To No Longer Chair Committee On Supervision, Setting Stage For Brainard Ascent

Tyler Durden's Photo
by Tyler Durden
Tuesday, Oct 12, 2021 - 10:30 PM

While Fed watchers are on edge over the fate of Fed vice chair Richard Clarida, and whether the recent revelations about his stock trades will make him the third senior Fed official to step down as a result of his potentially illicit stock trades (as a reminder, he traded out of $1-$5 million in a Pimco bond fund on Feb. 27, 2020, and on the same day bought between $1 and $5 million of the Pimco StocksPlus Fund, one day before an emergency market-moving announcement by Chair Powell), moments ago the Fed announced that Fed Vice Chairman for Supervision Randal Quarles will be removed from his role as the main watchdog of Wall Street banks after his title officially expires Wednesday. The Fed made the announcement in a statement that seeks to answer key questions for banks and Democrats about how the Trump appointee’s era of oversight will end.

“In light of the expiration of the vice chair’s term, he will no longer chair the committee on supervision and regulation,” the Fed said in a statement. The committee will meet “on an unchaired basis,” and only matters that all the members can agree on will be forwarded to the full board, the statement said.

Quarles - who also sits on the Fed’s board of governors - will cease to be chairman of the central bank’s supervisory committee, leaving the panel without a leader. That means Lael Brainard, the board’s lone Democrat who has more seniority at the Fed, and Governor Michelle Bowman will equally share responsibilities with Quarles. Joe Biden has yet to nominate a candidate for the supervision role, which would also be subject to Senate confirmation.

Quarles hasn’t said how long he will stay at the Fed as governor but it is likely he will step down shortly.

As Bloomberg previously reported, Biden’s advisers are considering a recommendation that the president renominate Chair Jerome Powell and appoint Brainard as the vice chair for supervision. The Fed’s bank-supervision chief is the regulator with the longest reach into Wall Street banking. The decision on the vice chair is entangled with Biden’s decision about whether to nominate Powell for a second term. 

With Quarles imminent departure, yet another hawk is set to part ways with the Fed. If he is replaced by Brainard it means that the balance of power will tip further toward the Doves.