Sen. Elizabeth Warren on Tuesday told Federal Reserve Vice Chairman for Supervision Randal Quarles that she was recommending President Biden replace him when his term ends later this year.
“Your term as chair is up in five months, and our financial system will be safer when you are gone,” she told Quarles during a testy exchange at a Senate Banking Committee hearing on the Federal Reserve’s regulation of the financial system.
“I urge President Biden to fill your role with someone who will actually keep our financial system safe,” she said.
Warren, who’s built a reputation as a tough questioner in public hearings, accused Quarles of lightening the Fed’s supervision of Credit Suisse, just months before the bank suffered billions in losses due to its exposure to a hedge fund called Archegos.
Archegos collapsed in spectacular fashion in late March, leading to losses in major banks that were exposed to its assets, none more so than Credit Suisse.
Warren pointed to the Federal Reserve’s decision last year to stop additional supervision of the Large Institution Supervision Coordinating Committee (LISCC), which is supposed to oversee systemically important banks.
Quarles countered that the Fed’s decision to remove the bank from LISCC supervision was based on its size and reduced footprint in the United States, and noted that most of its losses occurred abroad.
“I didn’t say to weaken supervision, ma’am, I said it was more appropriate to supervise them with other foreign banks of the same size footprint in the United States, which is what we do,” he said.
“The losses that you’re referring to did not occur in the United States, and we would not have been able to pick them up in LISCC or otherwise,” he added.
Warren shot back that foreign losses could also impact the U.S. financial system, and that the event was a forewarning of potentially bigger problems down the line.
“Look, we dodged a bullet with the Archegos collapse this time, but what slipped through the net by regulators to contain these losses when things go wrong was relatively small to what could have slipped through,” she said.
Warren’s advocacy has shifted nomination decisions in the past.
In the summer of 2013, as then-President Obama was considering appointing Larry Summers to the post of Federal Reserve chairman, Warren made her opposition to the nomination clear, publicly throwing her weight behind Janet Yellen instead.
Summers eventually withdrew his name from consideration, citing the potential for an “acrimonious” confirmation process.
Yellen went on to become the first woman to lead the Federal Reserve.