The Extraordinary Influence of Daniel Tarullo
I’m a bit late on this—my wife and I just welcomed a new baby last week, so even this little blog post is a minor miracle—but Wall Street Journal reporters Emily Glazer and Ryan Tracy have a fascinating profile of Federal Reserve Board Governor Daniel Tarullo, whom they rightly call in the article’s headline “The Most Powerful Man in Banking.” (Disclosure: I was a source for the reporters and am cited in the article.)
Shortly after the article went live, Binyamin Appelbaum, a journalist for the New York Times, tweeted that he thought the profile was good, but that it was “silly to describe [Tarullo] as most powerful man in banking. He’s just the referee.”
Give Appelbaum the benefit of the doubt here—his was a hot take on Twitter, so he may have had something more in mind than this analogy (Appelbaum is after all a first-rate reporter who regularly covers the Fed and financial regulation). But there’s nothing to the idea that Tarullo is just a referee any more than Chief Justice John Roberts is merely an umpire calling balls and strikes. Indeed, in many ways Tarullo is redefining the rules of the game to a greater extent than a Supreme Court justice. As the de facto—though, to my and others’ dismay , not the de jure—Vice Chair for Bank Supervision, Tarullo has exercised unrivaled influence on shaping the Fed’s implementation of Dodd-Frank’s many industry-redefining rules, whether we’re talking about swaps, capital regulation, ring-fencing, even insurance regulation —Tarullo has had a hand in it all.
Banking, arguably even more than other regulated industries, exists not separate from its regulators, but through them. What counts as the “business of banking” is itself not a purely market-defined phenomenon, but a regulatory one. If there is a single important aspect of national and international banking that touches the Fed’s bailiwick that hasn’t been changed, by Tarullo, I can’t name it. He isn’t the referee—he’s the sports commissioner who is rewriting the rules of the game that the referees enforce and the players must obey.
I write about Tarullo in my book, in the chapter on the influence of the non-Chair governors, and argue that Tarullo is “the most influential non-Chair Governor in the Fed’s history.” Much of this success comes through factors outside Tarullo’s control, but the shape of the financial system in 2016 bears a significant imprint of Tarullo’s ideas. There are many powerful women and men in banking, but none more than he.