What a difference an administration makes. Under former Vice-Chair for Financial Supervision Daniel Tarullo, the Federal Reserve operated with a clear cut vision of financial regulation that viewed leverage as highly suspect, Basel III as a baseline to go over, and Shadow Banking as the enemy. We’re exaggerating but not by much. Under Vice-Chair Randal Quarles, the approach is already much different. Tarullo spoke forcefully and emphasized a dampening of risk. Quarles is highlighting the unknowns but leans towards more relaxed, or “calibrated”, regulation.
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