Now Trump has 3 Fed board seats to fill
WASHINGTON – Federal Reserve board member Daniel Tarullo, a key official guiding bank regulation efforts, will resign this spring, the Fed said Friday.
Tarullo’s decision will clear the way for President Donald Trump to select a candidate for the bank supervision position. Trump is likely to choose someone more in line with his desires to roll back the regulations put in place by the Dodd-Frank Act, which overhauled bank supervision in the wake of the 2008 financial crisis.
Tarullo said in a short resignation letter to Trump that he planned to step down “on or around April 5, 2017.” He did not provide a reason for his decision.
The Fed board currently has two vacancies because Congress refused to confirm two nominees of former President Barack Obama. Tarullo’s departure will mean Mr. Trump will have the chance to fill three Fed vacancies in his first months in office.
The Dodd-Frank Act created a position of vice chairman for bank supervision. But the Obama administration never filled the post, reflecting in part the sharp disagreements between Democrats and Republicans in Congress over how the financial system should be regulated. Instead, Tarullo has effectively served as the Fed’s point person on bank regulation since 2009.
Trump last week launched his long-promised attack on the Dodd-Frank Act, ordering an administration review of the financial oversight law after meeting with business executives at the White House and pledging further action to free banks from restrictions.
Trump had been expected to fill the vice chairman for supervision position, which would likely have complicated Tarullo’s role. His term as a Fed board member does not expire until Jan. 31, 2022.
Said Barclays Research in a note: “Tarullo’s resignation only further cements our view that significant change is coming to the Federal Reserve Board of Governors over the next 18 months.”
However, Cowen & Co. cautioned that the new board opening doesn’t necessarily mean the Fed will go lighter on the country’s biggest banks. “We would note that conservative and populist forces remain strong within Team Trump, which is why it is far from assured that the President will nominate individuals for these regulatory posts who are clearly positive for the mega banks,” the firm said in a commentary.
It added: “Some conservatives seek a higher leverage capital requirement for the biggest banks as a way to encourage them to shrink. In other words, there is risk that the replacement could be tougher on the biggest banks than Tarullo rather than easier.”
Reacting to Turullo’s announcement, Fed Chair Janet Yellen released a statement saying, “Dan led the Fed’s work to craft a new framework for ensuring the safety and soundness of our financial system following the financial crisis and made invaluable contributions across the entire range of the Fed’s responsibilities.”
Mr. Trump was also highly critical of Yellen during the presidential campaign, accusing her of keeping interest rates low to benefit Democrats. It’s expected he’ll decide to appoint someone else as chairman of the Fed when Yellen’s four-year term ends in February 2018. Yellen has said she has no intention of leaving before her term as chairman ends.
Tarullo, 64, had been a law professor at Georgetown University Law Center before joining the Fed board in 2009.
