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Latest Exit From Fed’s Board Gives Biden Three Slots to Fill 

Randal Quarles announced Monday that he will resign from the Federal Reserve’s Board of Governors at the end of the year after completing a four-year term as its top bank regulator, opening up another vacancy on the Fed’s influential board for President Joe Biden to fill.

Quarles has served as the Fed’s first vice chair of supervision, which gave him wide-ranging authority over the banking system. In that role, he oversaw a broad loosening of some of the financial regulations that were put in place after the 2008-2009 global financial crisis and recession. 

Quarles’ deregulatory approach prompted criticism from some on the Fed and from many progressives. It has also sparked resistance from progressives to the potential re-nomination of Jerome Powell as Fed chair, who has voted in favor of Quarles’ regulatory changes.

With Powell’s term as chair ending in February, an announcement is expected sometime this month on whether Biden will offer him a second four-year term. The president is considered likely to renominate Powell, although he could decide instead to elevate Lael Brainard, who is the lone Democrat on the Fed’s seven-member board, to the position of chair.

Besides Quarles’ soon-to-be vacated position on the board, a second slot is vacant and a third will open up in January, when Vice Chair Richard Clarida’s term will expire. Counting the seat held by the Fed chair, that gives Biden a total of four potential slots to fill.

The president may decide to renominate Powell while also promoting Brainard to replace Quarles as vice chair for supervision. That move could potentially mollify at least some of Powell’s critics. Brainard cast some dissenting votes against Quarles’ deregulatory efforts.

With several vacancies to fill, Biden has an opportunity to shift the Fed’s board toward a more Democratic-dominated one. That would undercut one key argument against Powell: That even if Biden elevated Brainard to the Fed’s top bank supervisory post, Powell could ignore or override efforts she might take to toughen financial rules. If Biden were to successfully appoint three new governors to the Fed’s board, Democratic appointees would outnumber Republican ones. 

Late last month, in an appearance on CNN, Treasury Secretary Janet Yellen defended Powell against any notion that he has weakened bank rules. Yellen asserted that financial regulations were “markedly strengthened” under Ben Bernanke’s Fed leadership, during her own subsequent term as chair and under Powell, as well.

Members of the Board of Governors have permanent votes at each Fed meeting on interest-rate policy, a powerful tool that affects hiring and the economy. The 12 regional Fed bank presidents also attend policymaking meetings, though only five of them are able to vote on the Fed’s decisions. The New York Fed president holds a permanent vote, and the regional bank presidents hold four votes that rotate among them each year.

The Fed governors also vote on financial regulations, and they could take steps to regulate some cryptocurrencies, known as stablecoins. Some of the officials, including Brainard and Powell, have discussed incorporating climate change considerations into the Fed’s bank oversight, a possibility that has met with opposition from congressional Republicans.

With four slots open, the Biden administration could nominate several candidates as a package. Potential nominees for the three vacancies on the Fed’s board include Lisa Cook, an economist at Michigan State University who would be the first Black woman to serve as a Fed governor, and Sarah Bloom Raskin, who previously served as a Fed governor and as a financial regulator in Maryland. 

Another potential nominee is William Spriggs, chief economist at the AFL-CIO and an economics professor at Howard University. 

Karine Jean-Pierre, a White House spokeswoman, declined to say how Quarles’ departure might influence Biden’s selections for the board. 

“All I can say is this is incredibly important to the president, and he’s taking this seriously,” Jean-Pierre said at Monday’s briefing. 

At a Senate hearing in September, Senator Sherrod Brown, an Ohio Democrat who chairs the Senate Banking Committee, which oversees Fed nominations, said, “It’s time we had a Black woman on the Board of Governors.” 

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