WASHINGTON — President Trump’s selection of Jerome “Jay” Powell to head the Federal Reserve early next year means the central bank’s post-crisis regulatory structure — often cited as a damper on economic growth — will be tested under new leadership for the first time.
The Fed is not the only bank regulator, but under the Obama administration it played a pivotal role in conceptualizing and executing the new macroprudential rules and processes that have arisen since the financial crisis. Many aspects of those rules and regulations have been the source of considerable opposition from Congressional Republicans for years.
So now that a Republican president has made his appointment to lead the Fed, what do we know about the direction he will take the institution and what regulatory changes he will support?
It’s important to note that, while Powell has been nominated as Fed chair, Randal Quarles — Trump’s first appointment to the central bank — is already serving as the vice chair of supervision, whose job it is to “develop policy recommendations for the Board” and who “shall oversee the supervision and regulation” of firms subject to Fed oversight.
There isn’t much precedent
for how the Fed chair and vice chair for supervision interact on regulatory matters; Quarles is the first to formally hold the position. And what precedent there is — namely between current chair Janet Yellen and former Gov. Daniel Tarullo — suggests that the Fed chair will largely stick to monetary policy while the vice chair will stick to regulatory matters, with each standing by the others' positions in public.
But Powell has opinions of his own on regulatory matters all the same, and has been serving
as chair of the board’s supervisory committee since Tarullo resigned in April (Quarles will eventually take this role but it has not been formally handed off yet). And ultimately, Powell will be holding the gavel and what he thinks will make a significant difference for banks under the Fed’s supervision.
Following is a summary of those positions: