What Vartanian as Fed Vice Chair Would Mean for Bankers

By Heltman, John | American Banker, March 15, 2017 | Go to article overview

What Vartanian as Fed Vice Chair Would Mean for Bankers


Heltman, John, American Banker


Byline: John Heltman

WASHINGTON -- The Trump administration is reportedly widening its search for a nominee to head the Federal Reserve's banking supervisory responsibilities and is considering corporate attorney and Dodd-Frank Act critic Thomas Vartanian for the role.

Vartanian, a former official in the Office of the Comptroller of the Currency in the Reagan administration and partner at Dechert LLP, has hammered the 2010 financial reform law, recently deriding the "regulatory spaghetti" that was created after the 2008 financial crisis.

"It created a regulatory bias against large institutions, an operational obstacle course for community-based institutions, and a regulatory tax on growth. But it failed to provide a vision of how financial services will be permitted to be delivered in this country on a long-term basis," Vartanian wrote in an op-ed in American Banker just after the election. "Financial executives deserve a clear and consistent picture of government policies so that they can steer a course to profitability."

The Wall Street Journal first reported Monday that Vartanian is being considered as the Fed's vice chairman of supervision. Vartanian did not immediately respond to a request for comment.

Vartanian is a familiar figure in the banking industry, and frequently weighs in publicly on issues in the editorial pages of American Banker. As a result, if he receives the nomination, his views will be well known compared with other potential candidates, many of whom do not have as extensive a public record.

In a piece published in December, Vartanian suggested that bank supervision has evolved incrementally from a principles-based framework to a more command-and-control rules-based framework. He said a return to a principles-based regime that retains close supervision would be less onerous for both the banks and the regulators alike.

"Given the near permanence of many laws and regulations, and the tendency to solve every past problem with a new law or regulation, the pendulum has swung too far in the direction of a rules-based system," Vartanian said. "This factor may be contributing to regulatory systems actually being less effective. That is not to say that the system should be entirely principles-based. Principles only work to the extent that entry into the banking business is highly scrutinized, the standards for financial health are closely monitored and breaches of conduct are appropriately enforced and remedied. …

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