Mystery of the missing Fed regulator
It’s one of those touchy subjects that Federal Reserve officials don’t really want to talk about, thank you very much.
For nearly three years now, no one has been tapped to serve as the U.S. central bank’s Vice Chairman for Supervision. According to the landmark 2010 Dodd-Frank bill, which created the position to show that the Fed means business as it cracks down on Wall Street, President Obama was to appoint a Vice Chair to spearhead bank oversight and to regularly answer to Congress as Chairman Ben Bernanke’s right hand man.
For all intents and purposes, Fed Governor Daniel Tarullo does that job and has done it for quite some time. He’s the central bank’s regulation czar, articulating new proposals such as the recent clampdown on foreign bank operations, and he keeps banks on edge every time he takes to the podium. But he has not been named Vice Chair, leaving us to simply assume he won’t be.
A Fed spokesman pointed to what might be Bernanke’s latest public comment on the issue, back in February, 2011, when he told the Senate Banking Committee that the Administration “has not yet nominated anyone, so we’re still nowhere in that respect.” Tarullo, Bernanke added at the time, “is taking the lead on the supervisory and relevant rule-writing issues.” The White House declined to comment.
The new Vice Chair would need congressional approval and could therefore prove a bruising and unnecessary battle for the Administration. As well, Obama might prefer to lump this appointment in with his appointment of a new Fed Chairman as we approach the end of Bernanke’s term in January, 2014.
But as former Fed Chairman Paul Volcker suggested last week, this unfilled position raises grim questions for an institution that failed to head off the financial crisis and, for its troubles, ended up with even more responsibility to oversee banks in the years ahead. The Dodd-Frank act reinforced the Fed’s regulatory authority by providing for the Vice Chairmanship, Volcker told the Economic Club of New York. And then with signature incredulity, Volcker calmly added:
Apparently one Governor has in practice undertaken that substantial role, but for some reason after almost three years the specific position remains unfilled. That lapse unfortunately leaves open the question of whether the Administration and the Federal Reserve really appreciate the significance of maintaining the Fed’s supervisory responsibilities over time.