The Fed’s choices leave open questions about how the central bank will regulate Wall Street


The extent to which the Fed will spend the next few years tightening its regulatory policy – after loosening the rules under officials appointed by Trump – will depend on who Mr. Biden ultimately chooses to succeed Randal Quarles, the outgoing central bank governor who served as a point of regulation. man until last month.

Mr Powell said he would defer to anyone who fulfills that role in shaping the central bank’s approach to regulation. Mr Biden said on Monday he would appoint a new chief oversight soon.

“I respect the fact that this is the person who will set the regulatory agenda for the future,” Powell told reporters in September. and suggest appropriate changes. “

During Mr. Powell’s nearly four years at the helm of the Fed, the central bank reorganized the stress tests of the big banks, including eliminating pass-fail ratings, adapting its rules to U.S. lenders based on their Size and simplify key post-crisis regulations such as the Volcker Rule Ban on proprietary trading.

Mr. Powell and proponents of these changes called them adapting complex rules. Some Democratic critics say the changes, while individually small, have in their entirety significantly weakened the original redesigns.

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Ms Brainard, a key ally of Mr Powell on monetary policy, has regularly opposed his decisions to relax banking regulations enacted after the 2008-09 financial crisis. Ms Brainard has generally said that the Fed’s actions to ease regulation have gone too far. If confirmed as deputy chairman of the Fed’s board, Ms Brainard would have a vote on regulatory matters at the central bank, but would not set her regulatory agenda.

Industry officials welcomed the Fed’s appointments on Monday.

“We expect regulators to continue to force the biggest banks to meet the high regulatory and supervisory standards that have remained in place to support a resilient and vital part of the US financial system,” Kevin Fromer, chief financial officer Services Forum, which represents the largest US banks, said in a written statement.

In addition to the vacancies at the Fed, several senior financial positions remain vacant. These include the vice president of the Federal Deposit Insurance Corp. and a full-time director of the Federal Housing Finance Agency, which oversees government-controlled mortgage giants Fannie Mae and Freddie Mac.

Willow Omarova, Mr Biden’s candidate for head of the Office of the Comptroller of the Currency, which oversees national banks, faced bipartisan skepticism in a hearing last week and faces an uncertain path to confirmation . Another candidate, Rostin Behnam, awaits confirmation to head the Commodity Futures Trading Commission, America’s largest derivatives supervisor. Mr. Behnam is currently Acting Chairman of the CFTC.

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Gary Gensler, who as chairman of Mr. Biden’s Securities and Exchange Commission laid out an aggressive program that threatens to squeeze financial sector profit margins, was confirmed in April. Rohit Chopra, former adviser to Senator Elizabeth Warren (D., Mass.) And Mr Biden’s choice to head the Consumer Financial Protection Agency, was confirmed on September 30.

If Mr. Powell and Ms. Brainard get Senate approval for their posts, there would be three vacancies on the Fed’s board: the post of vice president for oversight and two separate governor seats.

The reconstituted Fed board will be tasked with approving or rejecting a slew of banking deals announced over the past year. Bank mergers and acquisitions are underway in 2021 for their biggest year since at least 2008, when some major banks were forced to sell in the face of the collapse.

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The vice president responsible for oversight could spearhead a review of the central bank’s framework for reviewing banking transactions. This approach is more likely if the candidate shares Ms. Brainard’s view that the Fed should take a closer look at bank mergers.

“The Fed probably won’t be in a big rush to approve mergers until the new applicants are installed and develop a strategy on what they want to do with bank mergers,” Jeremy Kress said, Assistant Professor of Business Law at the University of Michigan studying financial regulation.

In July, Mr Biden issued an executive order asking banking regulators and the Justice Department to conduct a “more rigorous review” of banking transactions.

The Fed’s regulatory agenda also includes what steps to take to deal with the financial risks posed by climate change, the level of regulation needed around cryptocurrencies, and how banks should treat treasury bills and deposits that they need. ‘they hold at the central bank.

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