Randal Quarles, formerly the Fed’s vice chair for supervision, will leave the central bank at the end of December.
Randal K. Quarles, a Federal Reserve governor who spent four years overseeing bank supervision, will step down from the Fed in December — opening an additional seat that will allow the Biden administration to reshape the central bank’s leadership.
Mr. Quarles’ role as vice chair for supervision expired in October, but his term as governor was set to last until early 2032. The Trump appointee was widely expected to stay on until his time as head of the Financial Stability Board, a global monitoring and standard-setting body, ended in December. It was an open question whether he would stay after that.
“I intend to resign my position as a governor of the Federal Reserve during or around the last week of December of this year,” Mr. Quarles wrote in a letter to the White House, which the Fed released on Monday.
The announcement that he will step down is likely to be greeted warmly by Democrats, many of whom have been critical of Mr. Quarles’s push to relax some post-crisis financial regulations. Many Democrats have been calling for the administration to nominate a diverse set of leaders to the central bank.
President Biden already has one open spot on the central bank’s seven-person Board of Governors to fill, and will have another when Richard H. Clarida, the Fed’s vice chair, sees his term as governor expire early next year. This will give the administration at least three open spots. Jerome H. Powell’s term as the Fed’s chair is also scheduled to expire early next year, though his term as governor lasts until early 2028. Fed chairs typically leave their unexpired governor seats if they are not reappointed to their leadership roles, though that has not always been the case.
It is not clear when Mr. Biden will announce his central bank nominees, including whether he plans to reappoint Mr. Powell. He said last week that the decision would come “fairly quickly.” Both Mr. Powell and Lael Brainard, a Fed governor who is widely viewed as the other front-runner to lead the institution, were seen leaving the White House last week.
Mr. Powell was initially chosen as a Fed governor by President Barack Obama, but he was elevated to chair by President Donald J. Trump.
While he has been focused on interpreting the Fed’s full-employment goal expansively, something Democrats typically support, he has come under fire for voting for Mr. Quarles’ regulatory decisions, which in many cases made bank oversight less onerous. Ms. Brainard regularly cast dissenting votes against those moves and issued statements warning about relaxing rules that forced banks to behave more cautiously.
Mr. Powell has said that he defers to whoever is in the job of vice chair for supervision, since Congress has confirmed that person to oversee banking matters. Fed governors are nominated by the White House and then confirmed by the Senate.
“The vice chair for supervision is charged with setting the regulatory agenda,” he said in September. “I respect that authority. I respect that that’s the person who will set the regulatory agenda going forward.”
But Mr. Quarles’s departure may help to defang another argument some progressive groups have been making when arguing against keeping Mr. Powell as chair: That with Mr. Quarles still at the Fed, governors who were appointed or elevated by Mr. Trump continued to dominate the board.
The logic was that Mr. Quarles, Governors Christopher Waller and Michelle Bowman, and Mr. Powell could together prevent more aggressive action on bank regulation, climate-related matters and other issues.
Now, the decks will tilt toward Democrats, between the three open positions and the fact that Ms. Brainard, an Obama appointee, is already on the board.
“I will admit that I am surprised,” said Jeff Hauser, director of the watchdog group Revolving Door Project and an opponent of keeping Mr. Powell, said of the news. He later added that “it definitely takes away one of the many arguments” against reappointing Mr. Powell.
The Board of Governors has regulatory powers over big banks, and it sets interest rate policy alongside the Fed’s 12 regional branch presidents, five of whom vote on monetary policy at any given time. Regional bank presidents rotate through their voting seats, although the New York Fed is granted a constant vote. Governors have a constant vote.