“This is a moment similar to what happened in the late 1990s and early 2000s, with huge technological shifts in the financial sector,” Amarova said in an interview, referring to the years leading up to the 2008 financial crisis. year. “At that time, a lot of what was happening was allowed to happen because there was not enough tuned and careful supervision.”
The administration’s difficulties in getting candidates for bank cops through the Democrat-controlled Senate underscore the rift within the party in how to approach financial regulation. In 2018, a full third of the Democratic Assembly voted in favor of bipartisan legislation aimed in part at curtailing provisions on regional creditors that were introduced after the financial crisis, a bill that was strongly opposed by progressive Democrats as distribution to major banks. .
Biden’s election is now facing new battle lines in emerging issues such as the government’s role in regulating cryptocurrency and other financial technologies and how banking regulators need to tackle climate change risks, problems that have sunk both potential and official candidates.
“This raises real questions about how narrow the path is for appointments to these positions,” said Catherine Judge, a professor at Columbia Law School.
Fed Chairman Jerome Powell, when asked at a news conference last week about how the central bank is coping with regulation in the absence of a deputy supervisor, said: “We are coping with the situation.”
The White House spokesman called “disappointment” the availability of vacancies as currency controller and deputy chairman of the Fed for supervision “at this important stage of our economic recovery.”
“It is critical to reaffirm leadership in these two important positions, so it is disappointing that members of the Republican Banking Committee ignored the licenses, experience and experience of the two female Biden presidents nominated for these positions and instead decided to subject them to baseless personal attacks.” The man added.
The official said the White House would not “sit for long” by recruiting someone else to the Fed, but stressed the need to continue through the Senate four of Biden’s four remaining candidates for the central bank, including Powell.
Saint. Elizabeth Warren (D-Mass.) In a statement to POLITICO said that the absence of someone in this role means that “the Fed is ill-prepared to ensure our financial stability in times of heightened threats.”
“We need regulators who will fight hard against the climate crisis, who are growing risks for our economy because of cryptocurrency, and who will oppose industry lobbyists to secure our economy,” she said.
In a sense, the vacancies represent a victory for Republicans who fiercely opposed Ruskin’s nomination because she advocated a more careful analysis of fossil fuel funding. They also considered Amarova a radical because she wrote well that the Fed provides bank accounts for Americans. Without the Fed’s new regulatory king, the status quo set by the last Trump-appointed Randall Quarles would largely prevail.
Saint. Pat Tumi (R-Pa.), A senior Republican on the Banking Committee, told reporters last week that he was not worried about the job remaining unoccupied. “Banks and large financial institutions are extremely resilient and very, very capitalized,” he said. “So I don’t think it’s a very dangerous time for financial institutions.”
Republican lawmakers have also warned that the Fed is going beyond its statutory mission on issues such as climate change and racial justice.
“I think rushing to appoint someone who doesn’t have a consensus on how to use the Fed would be much more problematic for the institution and the economy if it didn’t work out,” said Christina Skinner, a financial expert. regulation at the Wharton School. at the University of Pennsylvania. “The best we can hope for is to have a deputy chairman of oversight who is clearly committed to being apolitical.”
Former Minneapolis Fed President Narayan Kocherlakot in a Bloomberg Opinion article this week wrote that the White House should depoliticize this role by appointing a longtime central banker.
Since October, any regulatory action by the Fed has been guided by full board. The central bank still has a full staff of staff appointed to oversee the banks; they took an unusual step in December, publicly scolding major banks over the collapse of Archegos Capital Management investment fund with excess credit.
But the central bank’s oversight committee is currently inactive, and there is no specific board member to run the day’s long-term program.
However, the uncertain vacancy may be of some concern to Republicans. The Fed is an institution in which employees already have great power, both because of their long tenure and because of their experience. Many Republican lawmakers have decided to seek greater accountability at the central bank.
“This is one of the main reasons for concern due to the lack of a vice chairman,” Skinner said. “Decisions are simply made in a more opaque process.”
Dennis Keleher, head of the Better Markets advocacy group, expressed disappointment that there was little attention to banking supervision in the debate over Ruskin’s candidacy, accusing the oil and gas companies of “capturing” her nomination process. He referred to the hidden financial risks when the Fed starts a campaign to raise interest rates, which, he said, should be monitored by the Deputy Chairman for Supervision.
“No matter how much banks prepare for a different rate environment, they simply cannot predict everything that may happen not only to them, but to all their customers and counterparties,” he said. “The Fed needs to be very deeply involved in overseeing stress testing of all the assumptions that banks make for their own balance sheets.”
Both the FDIC and the Office of the Currency Controller – Martin Grünberg and Michael Hsu – are acting officials, respectively, and the Biden administration is not expected to change them any time soon. Grunberg, who headed the FDIC in early February after his Republican chairman resigned under pressure, outlined priorities that coincide with what Biden’s appointees are likely to do, including focus on climate change, bank mergers and cryptocurrencies.
Xu, who has been in office since May last year, has already published a draft guide for major banks, which suggests that climate change could pose a significant threat to their health.
But the three federal banks that regulate tend to follow political steps together, and the Fed is unlikely to plan a new course without political leadership, even when the industry may require more clarity. It can also complicate the work of fellow agencies.
“Formal approval by the Senate is not necessarily a prerequisite and is not a guarantee that people will do what needs to be done and do it well,” said Amarova, a Cornell law professor. But she stressed the benefits of having “government officials checked and publicly questioned about their political views and evaluated.”
“It gives the regulator a greater sense of legitimacy and democratic acceptance,” she said, adding that they face “new issues of legislation and policy that are likely to shape the trajectory of financial markets for years or even decades.”