Under new Fed chief, Wall Street can expect victories on regulation

WASHINGTON — In Jerome Powell, banks won’t get a Federal Reserve chairman who is hell-bent on ripping up financial rules. But in some ways, that’s better for Wall Street.

With a resume steeped in industry experience and longstanding relationships with financial executives, Powell is expected to take a measured approach to rolling back regulations adopted after the 2008 economic crisis. He’s seen as a practical, not ideological, watchdog who will be able to get things done.

That gibes with what big banks have long expected from President Donald Trump’s presidency. They want the Fed and other agencies to take the lead in easing post-crisis constraints, particularly because the Republican-controlled Congress has made little headway dismantling the Dodd-Frank Act.

“For Wall Street, Powell is a solid choice,” said Ian Katz, an analyst with Capital Alpha Partners in Washington. “He supports deregulation but not to an extreme. He’s a known quantity and he’s regarded as a thoughtful consensus-seeker. The finance industry views him as safer choice than someone who would want to blow up the place and scrap all the Dodd-Frank rules.”

While Powell’s views on bank oversight are important, they will take a back seat to his duties steering the U.S. economy. He is likely to support the Fed governor responsible for bank oversight, Randal Quarles, an old friend with a similar outlook.

Since joining the Fed board in 2012, Powell has backed a number of new regulations, even as he sometimes questioned their potential effects on lending and other bank activities. A central theme in his speeches has been that the government should “protect these core reforms,” while making adjustments rather than major changes. He reiterated those views after Trump nominated him Thursday.

“Our financial system is without doubt far stronger and more resilient than it was before the crisis,” Powell said. “Our banks have much higher capital and liquidity, are more aware of the risks they run, and are better able to manage those risks.”

In some ways, Wall Street sees Powell as the best of both worlds: he will continue Janet Yellen’s low-interest rate monetary policy, while going further than she would in watering down burdens such as the Volcker Rule and bank stress tests. Big banks have already spent billions of dollars to comply with Dodd-Frank, so they prefer regulators who will tweak regulations instead of killing them.

Goldman Sachs CEO Lloyd Blankfein said he was “not one bit disappointed” in the pick. He said Powell has a “terrific background.”

If confirmed by the Senate, Powell would be able to exert as much influence over rules as he wants, though chairmen often delegate bank oversight. When Ben Bernanke, and then Yellen, led the Fed, they allowed former Federal Reserve Governor Daniel Tarullo to set the agenda.