Aurelia Butler

WASHINGTON (Reuters) – While President Joe Biden said last month that he would renominate U.S. Federal Reserve chair Jerome Powell, he left Washington guessing as to who would become the Fed’s new regulatory chief.Speculation over who will get the role is once again ramping up, after the Wall Street Journal on Tuesday reported that the White House was considering Sarah Bloom Raskin, a former Fed governor and former Treasury Department official, for the position.Republican appointee Randal Quarles in October stepped down from that powerful role overseeing the country’s largest lenders, and is due to leave the central bank by year end. Biden said that and other Fed picks would be announced in early December. Analysts and Washington insiders had seen fellow Fed governor Lael Brainard as the leading candidate to replace Quarles because she opposed his agenda to revisit rules created following the 2007-2009 global financial crisis. However, she is stepping into the Fed Vice Chair role that focuses on economic and monetary policy. Progressives are pushing for a candidate who would take a tougher stance on Wall Street, although it is unclear if they will get their way. Here are the leading names in the mix, according to multiple analysts and Washington insiders. SARAH BLOOM RASKIN, FORMER OBAMA OFFICIALA former Fed governor and Treasury official, Raskin is supported by progressives but could also get enough Senate votes to secure the position, said Jaret Seiberg, an analyst at Cowen Washington Research Group.As a Fed governor from 2010 to 2014, Raskin slammed proprietary trading as of “low or no real economic value” and pushed for a strict interpretation of the “Volcker Rule,” a major post-crisis reform curbing such speculative investments. Former President Barack Obama later tapped Raskin to serve as deputy Treasury secretary. She also spent time as the top financial regulator for Maryland before joining the Fed. However, Raskin recently took on a new role at Duke Law, where she has taught since 2017. She will become faculty director of the law school’s Global Financial Markets Center next year. Raskin did not respond to requests for comment.RICHARD CORDRAY, FORMER CFPB HEADA former Ohio attorney general, Cordray served as the first director of the Consumer Financial Protection Bureau (CFPB) from 2012 to 2017. Under his leadership the agency took an aggressive stance going after abusive mortgage and payday lenders, earning praise from progressives and criticism from Republicans who said he was overstepping the agency’s statutory remit.After leaving the agency, Cordray ran unsuccessfully for Ohio governor. He currently runs the Education Department’s student loan program. Cordray did not respond to requests for comment.NELLIE LIANG, TREASURY UNDER-SECRETARYCurrently Treasury under secretary for domestic finance and a former Fed official, Liang was instrumental in building the post-crisis regulatory framework. She spent decades at the Fed as a staffer, ultimately becoming its first director of the Division of Financial Stability following the financial crisis.She left the central bank in 2017 to join the think tank Brookings Institution, where she criticized Republican efforts to trim capital and liquidity requirements for large banks, among other changes. Liang had previously been nominated for a Fed board seat by former President Donald Trump, but she withdrew in 2019 after Republicans blocked her nomination over worries she would be too tough on Wall Street.”We would expect her to tighten big bank oversight, but she also strikes us as pragmatic, which may not work for progressives,” Cowen Washington Research Group’s Seiberg wrote. A spokesperson for Liang declined to comment.RAPHAEL BOSTIC, ATLANTA FED PRESIDENTWith his appointment as President of the Atlanta Fed in 2017, Bostic became the first Black person to hold a regional Fed president role. He has been outspoken on racial diversity and economic inequality issues, both of which are key policy priorities for the Biden administration. An economist by training, Bostic previously held roles at the Fed in Washington, where he won praise for his work on community lending rules, and at the Department of Housing and Urban Development. However, Bostic “represents a bit of an unknown regarding financial regulation,” wrote Brian Gardner, chief Washington policy strategist at Stifel Financial (NYSE:SF) Corp.In an interview on Bloomberg Television on Monday, Bostic said he had “no trips to Washington” on his calendar and that any decision on such an appointment was out of his hands.A spokesperson for Bostic declined to comment. MICHAEL HSU, MEHRSA BARADARANCurrently Acting Comptroller of the Currency, Hsu previously led big bank supervision at the Fed. As acting Comptroller, he has pushed Democratic priorities, including climate change risk and has warned banks against “over-confidence” coming out of the pandemic.While he would be a good fit for Fed supervision, Washington insiders said, the nominee to replace him as permanent Comptroller, Saule Omarova, may not secure enough Senate votes after some moderate Democrats expressed concerns over her academic work. That means the White House may need Hsu to stick around.Baradaran, an academic and expert on financial inclusion, is loved by progressives who pushed her for as Comptroller. But the White House passed her over due to concerns among the industry and moderate lawmakers, some of whom said she did not have sufficient experience in government. A spokeswoman for Hsu declined to comment, and Baradaran did not immediately respond to a request for comment. 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WASHINGTON (Reuters) – As the race for the Federal Reserve’s next top regulatory official heats up, one thing is certain: whoever gets the job will have a jam-packed agenda tackling the gamut from capital rules and fair lending to digital assets and climate change.The latest development in the search for the Fed’s vice chair of supervision came on Tuesday when the Wall Street Journal reported the White House was considering Sarah Bloom Raskin, a former Fed governor and former Treasury Department official, for the role.Other names floated include: Atlanta Fed President Raphael Bostic; acting Comptroller of the Currency Michael Hsu; U.S. Treasury under-secretary Nellie Liang; Mehrsa Baradaran, a law professor who had previously been floated for the Comptroller role; and Richard Cordray, who led the Consumer Financial Protection Bureau.The Fed’s supervision chief Randal Quarles stepped down from that role in October and will leave the central bank at the end of the year. While the White House last month said it was renominating Jerome Powell as Fed chair, it punted on who would take up the powerful supervision role overseeing Wall Street’s biggest lenders. Analysts and Washington insiders had long said the top contender for the role was fellow Fed governor Lael Brainard, but she will be stepping up to the Fed’s other vice chair role focused on economic and monetary policy.Each of the contenders would have their own take on the role and, in turn, would have to win the backing of the Fed chair and board, both of which are also in the balance, to push through major changes. But any Democratic pick for the supervision post, whether centrist or progressive, will be expected to chart a new course and tackle a number of looming and in some cases thorny issues, say analysts. These include:DE-REGULATION REDUX?Over the past four years, Quarles led a review of regulations introduced following the 2007-2009 global financial crisis, arguing they were too blunt and onerous. Democrats accused Quarles of saving Wall Street billions of dollars while increasing systemic risks. Among the most contentious changes were revisions to the “Volcker Rule” curbing speculative bank investments; scrapping a requirement for big banks to hold capital against certain swap trades; and stripping the Fed of its power to fail banks on their annual “stress tests” based on subjective concerns. The new supervision chief will have to decide whether they want to revisit these changes, a potentially time-consuming and fraught exercise. CLIMATE CHANGE RISKSClimate change, a top policy priority for Democrats, is expected to rapidly rise on the Fed agenda under new leadership. So far, the Fed has asked lenders to explain how they are mitigating climate change-related risks to their balance sheets, with the industry expecting to progress to a formal climate change scenario analysis in 2023, Reuters has reported.Those projects are expected to accelerate. The big question will be whether Quarles’ successor pushes for restrictions or stiffer capital requirements on banks with significant exposures to polluting industries or other climate-specific risks. The Fed may also sign off on climate risk lending guidance for big lenders which Acting Comptroller Hsu has said banking regulators are working on.FINTECH FRAMEWORKQuarles’ successor will also have to tackle a regulatory blueprint for “fintech” companies that are quickly chipping away at the traditional financial sector. The Fed is exploring how banks intersect with fintechs, particularly with smaller lenders that may outsource more services and infrastructure. Fintechs are also lobbying the Fed for access to its payments system. While other banking regulators have worked for years to bring fintechs under their regulatory umbrella, the Fed has resisted, fearing doing so could create systemic risks. But as the sector continues to balloon, the Fed is expected to act.“You hear a lot about the promise of fintech, but they should also be looking very closely at the risks,” said Tim Clark, a former Fed official who now works with the advocacy group Better Markets.On a related front, the Fed is currently studying the implications of a central bank digital currency. With studies from the Fed Board and Federal Reserve Bank of Boston expected soon, the central bank is trying to weigh the risks and advantages of such a product, which could expand its reach and help speed money transfers.STRESS TESTS Banks’ annual “stress test” health checks are likely to be top of the list of Quarles’ changes that Democrats will want to be reviewed. Quarles tried to make the tests more transparent and predictable for banks, including scrapping a “qualitative” objection that allowed the Fed to flunk lenders on subjective grounds. Democrats say under Quarles the tests became too easy. Jaret Seiberg, an analyst with Cowen Washington Research Group, wrote in September that stress test changes would likely come in 2023, and could include directing banks to reserve eight quarters of expected dividends, instead of the current four, and potentially reviving the qualitative objection. SUPPLEMENTARY LEVERAGE RATIOAnother issue on the table is the supplementary leverage ratio, a rule created after the decade-ago crisis requiring banks to hold capital against assets regardless of their risk. The Fed had to temporarily ease that rule in the midst of the pandemic as a glut of bank deposits and Treasury bonds drove up capital requirements on what are viewed as safe assets. Despite intense bank lobbying, the Fed let that relief expire in March but promised to review the overall rule. The Fed has yet to publish a proposal, leaving the job up to Quarles’ successor. COMMUNITY REINVESTMENT ACTThe central bank will also play a key role in a long-awaited overhaul of the Community Reinvestment Act rules which promote lending in lower-income communities. The Fed, which shares responsibility for writing the rules with other bank regulators, hopes the rules can be updated to reflect the growth in online banking, while still ensuring lenders make meaningful contributions to the poorer areas they serve.Efforts to update the rules under the Trump administration faltered after regulators could not agree on a path forward. More