Fed Governor Quarles to step down, opening seat for Biden pick

Federal Reserve Governor Randal Quarles will resign from the central bank at the end of December, he announced Monday, clearing the way for an eventual nominee from President Biden.

Quarles, who had served as the Fed’s vice chair of supervision from 2017 through October, told Biden in a Monday letter that he would step down from the bank “during or around the last week of December.”

Quarles, a Republican, was appointed by former President Trump to join the Fed in 2017. He was confirmed that year to a four-year term as the Fed board’s regulatory chief and again in 2018 to a 14-year term as one of the Fed board’s seven governors.

While his term as the Fed’s regulatory chief ended last month, Quarles could have stayed at the Fed as a governor through 2032. The president can only fire members of the Fed board “for cause,” which courts have generally held to mean severe misconduct or incompetence.

Quarles’s resignation gives Biden a smoother path to reshaping the Fed, with several other key positions either open or soon to be vacant as well.

Biden is expected to announce whether he will renominate Fed Chair Jerome Powell as soon as this week. Powell’s four-year term as Fed chief ends in February and Biden is expected to either nominate him for another stint or announce a more liberal replacement, which would likely be Fed Governor Lael Brainard.

The president may also announce his choices to replace Fed Vice Chair Richard Clarida, whose term as the Fed’s No. 2 lapses in January, and to fill a vacant Fed governorship left by Trump.

Brainard, the only Democrat on the Fed board, is considered a front-runner for one of the Fed board’s two vice chairmanships if Biden decides to renominate Powell.

Powell would likely face some opposition from progressive Democrats such as Sen. Elizabeth Warren (Mass.), who has called on Biden to replace the Fed chair for several actions to loosen and streamline banking regulations. While some Republicans may also oppose Powell for his handling of inflation, Powell is expected to receive the 51 votes necessary for another term if renominated. 

Fed-watchers say that if Biden decides to renominate Powell, they expect the president to elevate Brainard and appoint other staunch liberals to the bank. It is unclear if Clarida intends to stay at the Fed after his term as vice chair expires, but he could do so until the end of next year.

The Fed’s board of governors controls Fed bank regulation and supervision, oversees the operations of the 12 reserve banks and automatically serves on the bank’s broader monetary policy committee. The board can include up to seven governors, three of whom are nominated as the board’s chair, vice chair and vice chair of supervision.

Each Fed board member and chair is nominated by the president and must be confirmed by the Senate. While a Fed governor’s term lasts 14 years, many members of the Fed board are nominated to the remainders of terms left by previous members who resigned. 

The current members of the Fed board are Powell, Clarida, Quarles, Brainard, Michelle Bowman and Christopher Waller. All but Brainard are Republicans who were nominated to their current positions by Trump.