Long before President Obama won the November election, there was widespread belief that one of his top economic advisers, Lawrence Summers, now the director of the White House's National Economic Council, was gunning to succeed Ben Bernanke as the Federal Reserve Board's chairman when his term expires in January.So last week, when the administration proposed a regulatory reform plan — largely written by Summers — that called for increasing the Fed's power, it did not take observers long to connect the dots and start asking questions.
"The Fed was the clear winner in this," Sen. Bob Corker told Treasury Secretary Tim Geithner during a Senate Banking Committee hearing.
"With our interaction with you guys, there is obviously going to be some arm-twisting and consultations taking place," the Tennessee Republican said. "Would it make sense for the government to, in writing, tell all of us that no one involved in creating this at the White House or Cabinet will be appointed as Fed chairman?"
Geithner responded, "I don't think that would be appropriate."
In an interview later, Corker said the administration needs to make its intentions clear.
"It would be good for people involved in the House and Senate to know that the arm-twister who is trying to consolidate so much power in the Fed's office is also seeking that job," he said.
"This administration has gone to some trouble to make sure that people who are involved in government relations don't end up working on those same issues within their Cabinet or at the White House. Yet it appears to me that on one of the most important pieces of legislation that we'll take up during this Congress, we may have a situation where the very person who is trying to concentrate these powers in a central office — the chairman of the Fed — may be a strong candidate for that job at the White House."
When asked if he was referring to Summers, Corker said: "We are talking about anybody, but he has certainly been mentioned as someone. … If it's not true, certainly the president could clear it up very quickly with a letter to that effect. "
No Secrets Here
The Fed has not taken a formal stance on the president's regulatory reform plan, but that did not stop Ed Yingling, the president of the American Bankers Association, from outing the central bank's views.In an appearance on CNBC last week, Yingling said the Fed opposed the idea of ceding its consumer protection function to a new agency — a central tenet of the proposal.
He was asked how he knew that, given the Fed's silence. "We checked with the government relations department of the Fed, and they said they're opposing it," he said. "I think it makes a lot of sense. … It all has to be one well-thought-out package, and all of a sudden part of it is going to be pulled out."
A top Fed official seemed to confirm that point the next day.
"There is really no separating … consumer protection from the quality" of loans, Tom Hoenig, the president and chief executive of the Federal Reserve Bank of Kansas City, told the cable channel. "Layering another oversight body on that could be tricky, as you try and do safety and soundness in one organization and consumer protection" in another.
From Fed to Deloitte
Deborah Bailey has stepped down as the Fed's deputy director of banking supervision and regulation to become a director of Deloitte & Touche LLP's governance, regulatory and risk strategies practice.She will focus on advising companies on risk management and compliance, along with obtaining banking or bank holding company charters.
Bailey's first day at Deloitte & Touche was last week. She spent 24 years at the Office of the Comptroller of the Currency before joining the Fed in 1997. She became deputy director of supervision and regulation in 2006.
Douglas' New Firm
John Douglas, a former Federal Deposit Insurance Corp. general counsel, switched firms Friday.He moved to Davis Polk & Wardwell after spending two years at Paul, Hastings, Janofsky & Walker LLP.
Douglas was the FDIC's top lawyer from 1987 through 1989. His clients have included Citigroup Inc., parties affected by the Washington Mutual failure, and the boards of BankUnited Financial Corp. and IndyMac Bancorp.
He practiced at Alston & Bird LLP before joining Paul Hastings.