Senate Banking Committee Chair Brown urges Fed to stop deregulation until Biden picks nominees

• The Senate's top Democrat in charge of banks wants Fed chief Jerome Powell to halt deregulation until President Joe Biden nominates members to the central bank.
• Sen. Sherrod Brown urged Powell to stop regulation rollbacks until Biden nominates a replacement for outgoing Fed Vice Chair for Supervision Randal Quarles.
• Quarles' departure comes a few months before Fed Vice Chairman Richard Clarida's term ends in January and Powell's term as chair expires in February.

The Senate's top Democrat in charge of bank oversight wants Federal Reserve Chairman Jerome Powell to pause any financial deregulation until President Joe Biden nominates new members to the central bank.

Sen. Sherrod Brown, chair of the Senate Banking Committee, urged Powell to stop rolling back industry regulations until the president has a chance to select a replacement for outgoing Fed Vice Chair for Supervision Randal Quarles.

"When Vice Chair Quarles was confirmed to his position, banking lobbyists cheered. Not only did he immediately set out a plan to shift post-crisis rules to benefitting industry interests over protecting working families, he dutifully continued his deregulatory efforts even as the economy was shaken by a global pandemic," Brown wrote in a letter dated Oct. 13.

"A new direction for financial regulation must be determined by whomever the President chooses, and Congress confirms, to critical leadership positions on the Board," the Ohio Democrat added.

Quarles' tenure as the Fed's top bank regulator ends Wednesday and opens yet another high-profile position at the central bank for the White House to fill in the coming months. His position will go unfilled until Biden nominates, and the Senate confirms, a new candidate to oversee the nation's lenders.

"In light of the expiration of the Vice Chair's term, he will no longer chair the committee on supervision and regulation," a Fed spokesperson told CNBC. "That committee will meet as necessary on an unchaired basis. Matters within the committee's responsibility will proceed to the full board only where there is broad consensus among the committee members."

Quarles' separate term as a governor on the Fed's board runs for another 10 years.

Many Democrats see Quarles' departure from the vice chair role as a chance to better police merger applications, capital requirements and other regulatory issues facing banks.

Sen. Elizabeth Warren, a Massachusetts Democrat and fellow Banking Committee member, lambasted Quarles in May for what she and other Democrats considered his dangerous and relaxed approach to financial oversight.

"Instead of protecting the system, you spent your time at the Fed cutting holes in the safety net wherever you could," she said at the time. "Your term as Chair is up in five months. And our financial system will be safer when you are gone."

Quarles was the first person to fill the supervisory role, a position created by the 2010 Dodd-Frank legislation that redesigned financial sector oversight in the aftermath of the Great Recession. The position had gone unfilled until 2017, when former President Donald Trump nominated him to be one of Powell's deputies.

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Quarles' vacancy comes a few months before Fed Vice Chairman Richard Clarida's term ends in January and Powell's term as chair expires in February. Combined with an existing vacancy on the seven-member Fed board, Biden will have several opportunities to shuffle leadership at the nation's central bank.

The White House has not offered comment on when it plans to announce its nominees, though deputy press secretary Karine Jean-Pierre said last week that Biden "does have confidence in Powell at this time."

Powell is still favored by lawmakers on both sides of the political aisle for a second term and would likely face an easy reconfirmation vote in the Senate. He enjoys bipartisan support thanks in large part to the Fed's speedy work to secure the U.S. economy during the Covid-19 crisis and ensure businesses had ready access to liquidity.

Trump nominated Powell to lead the Fed in 2017, years after former President Barack Obama first tapped him to serve on the central bank's board. His renomination is supported by virtually every Republican.

That has not dissuaded some progressive Democrats from pressing Biden to choose a nominee they see as tougher on banks and more focused on issues like climate change and income inequality.

Progressive Reps. Alexandria Ocasio-Cortez, Rashida Tlaib, Ayanna Pressley, Mondaire Jones and Jesus "Chuy" Garcia made their case in late August.

"To move forward with a whole of government approach that eliminates climate risk while making our financial system safer, we need a Chair who is committed to these objectives," the quintet wrote. "We urge President Biden to re-imagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice."

Wall Street widely expects the White House to tap Fed Governor Lael Brainard for a promotion. She is a strong contender to fill Quarles' position if she's not asked serve as a replacement to Powell if Biden decides to replace the Fed chief.

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