After Daniel Tarullo’s resignation, there could be big structural changes in the Fed

In a statement released by the Federal Reserve, Daniel Tarullo, a Fed board member is set to resign in April this year. His resignation raises the number of vacancies on the Fed board to three.

Interestingly, all seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate.

Effective on or around April 5, 2017, Tarullo’s resignation could mean a vacancy in the Federal Reserve. Daniel Tarullo has been on the board since 2009 and is leaving office well ahead of his term which ends in 2022.

He had spent last seven years overseeing the most comprehensive financial regulatory effort since the Great Depression — The Dodd-Frank Wall Street Reform and Consumer Protection Act.

Key reforms introduced by Dodd-Frank included new liquidity requirements, reforms aimed at creating more transparency for derivatives and stress tests on banks. Broad goals included preventing large banks from failing during an economic and financial crisis and consumer protection.

The president has called the law a “disaster” and has recently said there soon he would do a “big number” on it. Last year in December, according to Reuters, Daniel Tarullo had said that banking regulators should defend the tough rules.

Addressing a meeting of financial market researchers in Washington last year, he referred to the 2008 housing bubble and said, “It is critical that we not forget our still quite recent history.”

According to the Fed chief, Janet Yellen, “Dan led the Fed’s work to craft a new framework for ensuring the safety and soundness of our financial system following the financial crisis and made invaluable contributions across the entire range of the Fed’s responsibilities.”

The Federal Reserve board traditionally has 7 governors, each appointed for a 14-year term. After a full 14-year term, a Board member is not reappointed and if a board member leaves the Board before his or her term expires, the person nominated and confirmed to serve the remainder of the term may later be appointed to a full 14-year term. The members of the Board of Governors are nominated by the President of the United States and confirmed by the U.S. Senate.

Two of its five board members are scheduled to end their terms next year: Janet Yellen and Vice Chairman Stanley Fischer.

In the past, two vacancies had already weakened the Fed’s structure. Filling these vacancies require the Senate’s approval, and during Obama’s presidency, the Senate had reportedly declined a hearing on his nomination of two new governors.

After Daniel Tarullo, there will be three vacant positions and who fills it remains very crucial for the future of the Fed.

Tarullo was a voting member of the central bank’s policymaking panel and his resignation also leaves a key vacancy in Federal Open Market Committee (FOMC). Because all the Board of Governors members also constitutes the FOMC, this also means that three of the 12 positions on the FOMC remain unoccupied.

The FOMC decides on the future course of monetary policies after a deep analysis of the current economic situation.

The Federal Reserve is an independent body within the government that is ultimately accountable to Congress and the American people. With Republicans controlling the Senate, the Fed may have more Trump appointees in the years to come.