Quarles, his role over as top supervisor at Fed (and the first), decides to resign from board

Randal K. Quarles – the first and so far only vice chair of the Federal Reserve Board for supervision – announced his retirement from the agency board Monday, effective in late December.

In a letter to President Joe Biden (D), Quarles said after four years as a member of the central bank’s board, and end of his term last month as vice chair of supervision, it was time for him to leave.

“It has been a great privilege to work with my colleagues on the Board, throughout the Federal Reserve System, and among the global central banking and regulatory committee,” Quarles wrote.

Quarles’ resignation will leave two open seats on the Fed Board; no successor has yet been named to him as top supervisor for the agency and the White House has made no nominations to fill the now-two open board seats.

Quarles’ four-year term as vice chair for supervision ended last month. He now serves as chairman of the international Financial Stability Board (FSB), which works to coordinate financial stability regulatory programs across the globe. However, the term for that office ends at year’s end.

A former banker, Wall Street lawyer and Treasury Department official, the 64-year-old Quarles was nominated to the position by President Donald Trump (R) in September 2017; he joined the board in October. His current term was to run until 2032.

Quarles was the first to assume the new position of vice chair for supervision at the Federal Reserve. Although the position was mandated by the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd–Frank), it had never been filled.

Quarles boasted long experience in government prior to his Fed service. He served in the administration of President George Herbert Walker Bush from 1990-93 as special assistant to the Treasury Secretary for banking legislation and as Deputy Assistant Treasury Secretary for financial institutions policy.

From 2001-06, he served in the administration of President George Walker Bush as U.S. Executive Director, International Monetary Fund, Assistant Secretary of the Treasury for International Affairs, and Under Secretary of the Treasury for Domestic Finance.

Most recently, he was a founder and partner of the Cynosure Group of Salt Lake City, a private equity investment company.

Quarles emerged as a strong proponent for revisiting many of the regulatory provisions enacted after the economic crisis of 2008-10, in particular improving “efficiency, transparency, and simplicity of regulation,” he noted in an early 2018 speech. Critics said he was weakening bank regulation. Quarles argued that his views did not affect the “core regulatory reform” made in response to the financial crisis, saying those reforms “produced a stronger and more resilient system and should be preserved.”

He also vigorously supported the transition away from the soon-to-be-defunct LIBOR (London Interbank Offered Rate) reference rate. In an October speech, Quarles said the “year of magical thinking” is over, and market participants should act now to accelerate their transition away from LIBOR. Use of the rate for new contracts would “create safety and soundness risks for counterparties and the financial system,” he said. “We will supervise firms accordingly.”

But he was also caustic in his disdain for programs and proposals he thought frivolous. In criticizing suggestions that the Fed consider adopting a “central bank digital currency” (CBDC) – a fast-growing concept among some central bankers – he equated the digital currency to 1980s-era “parachute pants.”

In a speech to bankers in his home state of Utah, Quarles noted that America has a long enthusiasm for novelty that he said has served the country well. But, he indicated, there are limits. “Especially when coupled with an equally American susceptibility to boosterism and the fear of missing out, (novelty) has also sometimes led to a mass suspension of our critical thinking and to occasionally impetuous, deluded crazes or fads,” he said.

He compared today’s interest in CBDCs to the fashion craze of a year in the 1980s “when millions of Americans suddenly started wearing parachute pants,” he said.

Randal K. Quarles submits resignation as a member of the Federal Reserve Board, effective at the end of December