[Congressional Record Volume 163, Number 159 (Wednesday, October 4, 2017)]
[Senate]
[Pages S6307-S6308]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                      Nomination of Randal Quarles

  Mr. BROWN. Mr. President, today we are considering the nomination of 
Randal Quarles to be a member of the Federal Reserve Board of 
Governors.
  Since 1984, Mr. Quarles has revolved between the public and private 
sectors. He was most recently the director of the Carlyle Group from 
2007 to 2013, and then founded Cynosure Group, an investment management 
company.
  I appreciate Mr. Quarles' willingness to serve the public once again, 
but I don't think he is the person we want in this important role at 
the Federal Reserve.
  The financial crisis devastated communities in my State and across 
the country--devastated in terms of lost jobs, foreclosed homes, and 
evaporated savings. We have made a lot of progress in the 7 years since 
we passed Wall Street reform. The Vice Chair of Supervision at the 
Federal Reserve, a position created in Dodd-Frank, is supposed to look 
out for our financial system and make sure that our financial system is 
sound.
  Mr. Quarles served as Treasury's Under Secretary for Domestic Finance 
in the years leading up to the 2008 financial crisis. It was his job to 
coordinate oversight of the financial industry. Many of his statements, 
however, leading up to the crisis were far too credulous. He seemed to 
believe whatever the banks were telling him. They were far too 
credulous when it came to industry claims that we simply need not 
worry; the economy is in good shape and we don't have to worry about a 
credit bubble.
  In the early 2000s, while at the Treasury Department, Mr. Quarles 
espoused the following view of the role of regulators in financial 
markets. It is a long quote, and I will quote him directly:

       Markets are always ahead of the regulators, and frankly 
     that's how it should be. It's analogous to the advice that my 
     father

[[Page S6308]]

     provided me that ``if you don't miss at least two or three 
     planes a year, you're spending too much time in airports.'' 
     If the regulators aren't a little behind the market in a few 
     areas at any given time, they would be stifling innovation 
     and evolution. The regulators' task is to promote investor 
     protection, while ensuring that prudential and supervisory 
     activities do not stifle efficiency gains. For effective 
     regulation, the regulators must work with the markets.

  I am not sure where to start on picking that apart. More importantly, 
it is showing that someone who says that shouldn't be in charge of 
financial regulation at the Federal Reserve.
  He said at his Senate nomination hearing: ``That is probably the most 
unfortunate use of language that I ever made, and I do not stand behind 
that statement.'' That is what he said when presented with these words 
at his confirmation hearing. He made other similarly unfortunate 
statements in the years leading up to the financial crisis.
  In 2006, as Under Secretary for Domestic Finance, he discussed the 
prospects for an impending financial crisis. This was before things 
looked really, really bad. He said:

       How would our current financial system stand up to this 
     sort of canonical crisis? On the whole, I would say that the 
     U.S. economy is well positioned to weather such a 
     retrenchment in risk-taking.

  This was about a year and a half before the economy began to implode. 
He was in a high position in the Treasury Department, and he had access 
to all of the information he might possibly want, and he said that the 
``economy is well positioned to weather such a retrenchment.''
  In the same speech, on the potential harm posed by increases in 
mortgage payments for families with exotic mortgages he said:

       While that is certainly a large number, it represents only 
     a small hit to aggregate personal income. Moreover, market 
     reports indicate that borrowers using such non-traditional 
     mortgages tend to be upper income individuals that can manage 
     a sizable increase in their mortgage payment.

  He concluded by saying, again, in 2006:

       Fundamentally, the economy is strong, the financial sector 
     is healthy, and our future looks bright. We will surely face 
     challenges in the future, but we can take comfort in the 
     knowledge that our economy and financial system have 
     proven remarkably resilient to all manner of adverse 
     shocks in the past.

  That was a lot of comfort to the millions of Americans afflicted by 
the financial crisis.
  My wife and I live in Cleveland, in ZIP Code 44105. The year after 
Mr. Quarles made that statement and the economy started to really tank, 
my ZIP Code had more foreclosures than any other ZIP Code in the United 
States. I know what that does to a neighborhood.
  I am not confident Mr. Quarles took to heart the costly lessons of 
the financial crisis. He seems far too ready to relax the rules for 
Wall Street and those who protect consumers. He is another example that 
this administration, which said it wants to drain the swamp, instead 
looks like a retreat for Goldman Sachs executives. The number of people 
on Wall Street who have influence on our government is just far and 
away worse than we have ever seen it.
  Putting Mr. Quarles--who should know better but apparently doesn't, 
from his statements--at the Federal Reserve, in charge of financial 
regulation, is just the wrong thing. In 2015, when asked about Dodd-
Frank, he said:

       The macro issue is that the government should not be a 
     player in the financial sector. It should be a referee. And 
     the practice, and the policy, and the legislation that 
     resulted from the financial crisis tended to make the 
     government a player. They put it on the field as opposed to 
     simply reffing the game.

  How could he think that, when he was part of the government when it 
didn't do its job and didn't do the job that regulators are supposed to 
do? In response to questions for the record at his nomination hearing, 
he stated: ``My approach to policy making, and particularly to 
regulation, has been that the discretion of policy makers, and 
particularly of regulators, should be as constrained as possible.''
  He is really saying: Let Wall Street do what it wants to do; let Wall 
Street run the financial sector of our economy, and government 
regulators should sort of step aside.
  As vice chair for supervision and as a Member of the Federal Reserve 
Board of Governors, Mr. Quarles will be making decisions about risk-
based capital, leverage and liquidity requirements, resolution plans, 
concentration limits, risk committees, stress tests, and other 
important safeguards put into place after the crisis for the Nation's 
largest banks. The crisis showed we need strong financial watchdogs, 
not, as he said, ``constrained'' ones. If confirmed, I am not sure who 
Mr. Quarles will be working for, taxpayers and working families or Wall 
Street.
  Let me close by reminding my colleagues that, last Congress, the 
Banking Committee refused to consider President Obama's nominees to the 
Federal Reserve Board. Mr. Quarles is the first nominee President Trump 
has chosen. There are currently three other vacancies. The term for 
Chair of the Federal Reserve expires early next year. Because of that, 
President Trump will likely fill at least five of the seven Federal 
Reserve Board seats, which are 14-year terms.
  Again, if the first one is someone who is so close to Wall Street, 
what does that tell you about who is in the White House? What does it 
tell you about the advisers in the White House? What does it tell you 
about that executive retreat for Goldman Sachs I talked about in the 
White House?
  If all the nominees to the Federal Reserve are like Mr. Quarles, 
average Americans may once again pay the price. We can't return to a 
time when financial watchdogs are asleep on the job.
  There seems to be a collective amnesia in this body, in the White 
House, and in the Banking Committee about what people in our country 
went through in 2008, 2009, 2010, 2011, and 2012, which was, in large 
part, because of the influence of Wall Street in our government. We 
can't let that happen. That is why I urge my colleagues to oppose the 
nomination of Mr. Quarles to the Federal Reserve.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BLUNT. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Cotton). Without objection, it is so 
ordered.