Friday, February 10, 2017

A resignation within the Fed gives a new advantage to Trump to deregulate the finance – The World

Named by Barack Obama to oversee the large us banks, Daniel Tarullo, has announced his departure.

View of the u.s. federal Reserve (Fed) in Washington, d.c., September 17, 2015.

Daniel Tarullo, one of the principal architects of the strengthening of financial regulation in the United States, announced on Friday, February 10, his resignation from the board of governors of the federal Reserve (Fed). Even if he did not give a reason for his departure, which should take place on 5 April, the decision of Mr. Tarullo comes a few days after the signing by Donald Trump of a decree aimed at easing the regulatory framework of finance.

Mr. Tarullo, 64, had been appointed by Barack Obama in January 2009 to oversee the major banks of the united states to avoid a new financial crisis. The role of this former professor of law at Georgetown university has been to establish stricter rules requiring the institutions of Wall Street to make more secure their capital structures by strengthening their own funds.

based on the Dodd-Frank act passed in 2010, he helped to set up tests of strength, to gauge the ability of large banks to face a new financial crisis. In order to avoid that us taxpayers are not again put at contribution to bailing out the banking system in the event of collapse.

Opinion divided on its balance sheet

The opinion on the assessment of its action are shared. Some consider that it has effectively rendered the u.s. banking system the most solid in the binding to take less risk. On Friday, Janet Yellen, the Fed president, has paid tribute to his action, calling his contribution of’” priceless “. But, on the other, to the left, criticize him for not having been far enough in not daring to put not question the principle of the “too-big-too-fail” (banks being too big to let them fail). In contrast, the banking lobby accuses him of having cut off the wings of large establishments to force regulation, while giving undue influence to the us government in the banking business.

These criticisms have been widely taken up by Gary Cohn, the director of the national economic Council at the White House. the ” We have the best banks of the world and the best-capitalized and we should use our competitive advantage. On the other hand, we also have the banks, the most regulated in the world, “ said the former number two at Goldman Sachs a few days ago in an interview with the Wall Street Journal,, adding that the new administration wanted to ” unlock “ this system that has been ” crowd capital.” In response, Mr. Tarullo and Ms. Yellen reaffirmed that the Dodd-Frank act should not be watered down because it has helped to reduce the risks within the financial system.


In any case, the departure of Mr. Tarullo is an opportunity for Mr. Trump to change the political sensitivities within the Fed. Because, in addition to its role on the regulation, Mr. Tarullo is also a voting member of the monetary policy committee of the central bank. However, after his resignation, no less than three seats are now vacant.

late last year, Mr. Obama had proposed to nominate Allan Landon, a former officer of the Bank of Hawaii, and Kathryn Dominguez, a professor at the University of Michigan, but the Senate, republican majority, had opposed it. Furthermore, the vice-chairman of the Fed, Stanley Fischer, has to leave his post in June 2018, while Mr. Trump has hinted that he will not renew the mandate of Ms. Yellen, who, too, has a maturity date in 2018.

The dismantling of financial regulation promises to be definitely more difficult than what Mr. Trump. Indeed, it is necessary that Congress take up the amendments, the voting, and then the regulators will interpret the new rules, before making them applicable. A process that could take several years. In contrast, in the shorter term, Mr. Trump has the opportunity to nominate candidates more in line with his vision of both the monetary policy and regulation. To replace Mr. Tarullo, we talk about David Nason, currently CEO of a financial subsidiary of the conglomerate General Electric and a former manager at the secretariat of Finance.


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