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Worse Than a Crime
The closing of Bank Director’s Acquire or Be Acquired Conference in Phoenix Tuesday took a decidedly political bent, with a former Federal Reserve official under the first term of President Donald Trump sharing a sharp critique of the president.
The criminal investigation of Fed Chairman Jerome Powell “is obviously beyond the pale,” said Randal Quarles, who served as vice chair for supervision from 2017 to 2021. That was during the last session of Bank Director’s annual conference, which drew about 2,100 attendees this year.
Trump has repeatedly criticized Powell because he believes the Fed hasn’t lowered interest rates fast enough. Powell announced Jan. 11 that he was under criminal investigation for his testimony before Congress about cost overruns for renovations at the Federal Reserve offices in Washington, D.C.
Powell said the move was “unprecedented” and a pretext to pressure the Fed to reduce rates. The president has said he didn’t know anything about the criminal investigation, according to news reports.
Quarles said he voted for Trump and agreed with him on some policy matters. He also noted that he thought Trump’s Fed chair nominee, Kevin Warsh, would do an excellent job. But he emphasized that it was important for people in both parties to see that criminal investigations in such matters are not just useless but counterproductive. He borrowed a quotation referencing Napoleon’s unjust execution of a duke in the 19th century, “This was worse than a crime. It was a blunder.”
While critiquing the criminal subpoena, Quarles defended the president’s right to make his views known on interest rates — emphasizing that it’s only in recent history where presidents backed off public pronouncements about interest rates. Quarles referenced advice former U.S. Treasury Secretary Robert Rubin gave then-President Bill Clinton cautioning him that pressuring the Fed on monetary policy would backfire politically.
Quarles pointed out that decisions are made not by the Fed chair or the president, but by the Board of Governors of the Federal Reserve System and the Federal Open Market Committee, with input from Fed governors across the country.
“But what is important is that no one person, not the president, not anyone in Congress, the chairman of the Fed, the president of New York Fed, can direct the short-term decisions, particularly with respect to monetary policy, that are coming out of the system,” he said.
• Naomi Snyder, editor-in-chief for Bank Director
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