Nomination of Randal Quarles
Floor Speech
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Mr. BROWN. Mr. President, it has been a good year to be a Wall Street banker. Barely a day goes by that doesn't bring news of another consumer protection rollback, another unraveling of taxpayer protections, or another handout to Wall Street. The man at the center of many of these decisions is right now, on this floor, up for nomination to a 14-year term as Governor on the Board of the Federal Reserve.
When Randy Quarles' nomination to serve as Vice Chair of Supervision at the Fed--the first person ever to serve in that position--when it came before the Senate last year, I urged my colleagues to vote no. Quarles' record worried many of us that he wasn't interested in doing actual supervision. I said he seemed far too ready to swallow financial industry talking points, once again, and relax the rules for Wall Street.
Since then, his record at the Federal Reserve his confirmed the worst fears so many of us held. In just 10 months under Mr. Quarles' leadership, the Fed has taken steps to systematically unravel Wall Street reform.
Let's look at what happened. Start with the stress test. The Fed allowed the seven largest banks to redirect $96 billion that should have been used to pay workers, to reduce fees for consumers, and to protect taxpayers from bailouts. Instead, they plowed that money into share buybacks and dividends that do what? Of course, they reward wealthy executives and the biggest investors. Two banks, Goldman Sachs and Morgan Stanley, had capital below the required amounts. Those banks failed the test, but they got passing grades anyway because they are Wall Street. The Fed reportedly called them up and let them haggle over the test results. Imagine this happening in school--when you were at school growing up in Oklahoma or I in Ohio--to allow them to proceed after haggling over the test results. They allowed them to proceed with buybacks and dividends that would drain the required capital.
Under Quarles' leadership, the Fed wants to make funneling money back into stock buybacks even easier. The Fed's pending proposal on Big Bank capital will allow the eight largest banks in this country--banks each worth hundreds of billions of dollars--to redirect up to $121 billion into share buybacks and dividends. This is money that could be used to protect taxpayers from bailouts.
Remember, share buybacks and dividends juice stock prices. They do little to increase long-term growth or to reward the workers who make a company's success possible. Going forward, the Fed also wants to make stress tests even easier. Apparently, haggling with the megabanks over the scores wasn't lenient enough.
Quarles has proposed letting bankers comment on the tests before they are administered. That is like letting the students write the exams, and the Fed is considering dropping the qualitative portion of the stress test altogether. That is the part of the test that examines banks' risk management processes, data systems, and the fitness of its board of directors.
I understand these board of directors are all paid--I believe in every single case of the eight largest banks--at least $200,000 a year. The Fed plans changes for the Volcker rule, the rule that stops big banks from taking big risks with Americans' money. That rule requires the banks make investments in the real economy, not casino-style trades using families' checking and savings accounts.
Lest you think only American banks are getting a handout, soon foreign banks will be getting in on the action. This spring, Mr. Quarles said the Fed wants to loosen the rules on foreign megabanks. We are talking about Deutsche Bank, Santander, UBS, Credit Suisse, and Barclays. You have read about those banks. In most cases, those banks have broken our laws. These foreign banks have broken our laws time and again. Yet we are going to loosen the rules on these foreign megabanks.
The question I have with all these weakening of protections for American taxpayers and American consumers is, What problem exactly is the Fed, under Mr. Quarles' watch, trying to solve? Banks increased their profits by 13 percent last year. That is before you account for the windfall in the tax cut. When you add in the tax benefits, it was a 28-percent increase in their profits. The banking sector bought back $77 billion worth of stock last year. The CEOs of the six largest banks got an average raise of 22 percent. So what exactly is Mr. Quarles trying to fix? What is not going all the banks' way day after day? The CEO of Wells Fargo got a 36-percent raise, even as scandal after scandal mounted at the bank under his watch.
I don't think these megabanks are really the people who need Mr. Quarles' help. Maybe you ought to look elsewhere. Maybe look at the tellers. The average teller in this country makes $12.50 an hour. Wages for ordinary Americans simply aren't moving up.
Mr. Quarles was in a very similar position a decade ago in the Bush administration. The financial sector was booming, but average Americans were sitting around their kitchen tables, feeling less and less secure, wondering what they were going to do next.
During this time when Mr. Quarles served in the Bush administration, the Treasury Department's foreclosure filings in Ohio doubled--from around 40,000 at the beginning of 2002 to 80,000 by the end of 2006. Mr. Quarles just brushed off concerns about the growing troubles in the mortgage market. Famously, he said in those days, in 2006, that the future looked bright. His actions today suggest he ain't learned a lot since. His amnesia and the collective amnesia of this body are just a little too familiar in this town. We can't afford any more nominees who fail American workers, who fail American homeowners, or who fail American taxpayers.
It always comes back to, whose side are you on? Are you going to fight for the little guy, whether she punches a time clock or whether he works in a diner, or are you going to fight for the 1 percent? Are we here to serve American workers in the middle class, or are we here to serve Wall Street? Randal Quarles has made it clear whose side he is on. I urge my colleagues to reject his nomination.
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