Randal Quarles Set to Be Named to Bank-Supervision Post at Fed

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The Federal Reserve building in Washington September 1, 2015. REUTERS/Kevin Lamarque (Copyright Reuters 2017)

A former top Treasury Department official in the George W. Bush administration is expected to be President Donald Trump's pick for a top financial regulatory post at the Federal Reserve, a senior official familiar with the matter said Sunday. 

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Randal Quarles, who now runs the Cynosure Group, a Salt Lake City-based investment firm he co-founded, is expected to be selected as the Fed's vice chairman for bank supervision. The position requires Senate confirmation. 

Mr. Quarles couldn't immediately be reached for comment. A White House spokeswoman declined to comment. 

The position was created by the 2010 Dodd-Frank financial law to oversee the largest U.S. banks. Former President Barack Obama never nominated anyone to the job. Former Fed Governor Daniel Tarullo, who stepped down in April, served as the de facto vice chairman for supervision. The position is one of three vacancies on the Fed board. 

Filling the position will give the Trump administration a significant opportunity to shape its financial regulation agenda. 

Mr. Quarles said in a 2015 interview with Bloomberg TV that repealing the Dodd-Frank law altogether is "politically very difficult," but that significant changes to the law were worth considering. In some respects, he said, the regulatory overhaul was "not ambitious enough," while in other ways "it was overly ambitious." 

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Mr. Quarles is seen as less ideological than other candidates the Trump administration had considered for the job. That suggests the White House could take a more considered approach to overhauling the regulatory architecture put in place by the Obama administration and Mr. Tarullo. 

In the same interview, Mr. Quarles said he supported efforts to create more predictable monetary policy by having the Fed follow a simple rule, or formula, to set interest rates that uses measures of inflation and economic slack. At the time, he said the Fed's approach to monetary policy was increasing uncertainty in the markets. "An important element of Republican thinking about monetary policy currently is that it ought to be more rules based," he said in the 2015 interview. 

Officials in the Trump administration have said filling the vice chairman's job is a priority and broadened their search for the job in recent weeks. A leading contender for the position, GE Capital executive David Nason, took himself out of the running last month. 

Mr. Quarles served at Treasury from 2001 to 2006, including as undersecretary for domestic finance in his final two years at the department. He was a partner of the Carlyle Group, one of the world's largest private equity firms. He also served at the Treasury in the administration of George H.W. Bush. 

At least at the outset, Mr. Trump's nominee probably won't be able to exercise significant influence over the largest U.S. financial firms in the same fashion as Mr. Tarullo. Major regulatory decisions will have to be approved by Fed Chairwoman Janet Yellen, a defender of the Fed's new regulatory regime. She has said she intends to serve out her term through February 2018, and Mr. Trump hasn't ruled out reappointing her.