(Reuters) -
President Donald Trump's pick to lead bank supervision at the Federal Reserve
benefited from the government bailing out or rescuing two banks during the
2008
financial crisis, but that may not prevent his confirmation by a U.S. Senate
controlled by a business-friendly Republican party, policy analysts told
Reuters in recent days.
Randal
Quarles, a former Wall Street lawyer and U.S. Treasury official who now runs an
investment firm, was part of a team that invested in troubled or failed banks
while he was an executive at private-equity firm Carlyle Group LP (CG.O).
Those investments earned hundreds of millions of dollars for Carlyle, profits
that would not have been possible without government support.
A spokesman
for Quarles did not respond to a request for comment. A spokesman for Carlyle
declined to comment.
Democrats
including Ohio Senator Sherrod Brown have said they intend to scrutinize
Quarles' ties to Wall Street during his confirmation hearing. Senator Elizabeth
Warren described him as "straight off the Wall Street assembly line"
in announcing her opposition in a statement.
But both the
White House and Congress are controlled by Republicans, who have the ability to
approve Trump's nominees with a simple majority after Senate rules were changed
in 2013. Under previous rules, the party in power would have needed at least 60
votes.
Quarles is
viewed by many policy analysts as a business-friendly pick who benefits from
having experience in the federal government and his business ties are unlikely
to be viewed by senior senators his Wall Street ties as a handicap.
"Profiting
in the markets isn't a scarlet letter in this Congress," said Isaac
Boltansky, director of policy research at Compass Point Trading & Research
LLC, in Washington.
Before
launching The Cynosure Group in 2014, Quarles was a partner and managing director
at Carlyle.
While there,
he played a key role in making a $75 million investment in Boston Private
Financial Holdings Inc (BPFH.O),
and was also part of a group that decided to jointly acquire failed lender
BankUnited Inc (BKU.N)
from the Federal Deposit Insurance Corp (FDIC), alongside private equity peers
Blackstone Group LP (BX.N),
Centerbridge Partners LP and WL Ross & Co, as well as banker John Kanas.
Months after
Carlyle's equity infusion, Boston Private received a $150 million bailout from
the Treasury Department, which it later repaid. Those taxpayer funds helped the
firm weather the financial crisis, and allowed Carlyle to sell off its stake
over time for a total of $150 million, effectively doubling its money,
according to a Reuters review of share sales the firm disclosed in regulatory
filings.
The FDIC had
absorbed BankUnited's losses at an estimated cost of $4.9 billion before
selling healthier assets to the private equity consortium for $945 million.
BankUnited later went public, with Carlyle selling shares worth around $428
million in portions through 2014, according to Reuters' analysis of its
disclosures.
The tallies
do not account for dividends or other undisclosed costs. Carlyle would not
provide precise numbers for returns on those investments.
Involvement
with taxpayer bailouts helped sink the earlier nomination of General Electric
Co (GE.N)
executive David Nason for the Federal Reserve supervisory position. Nason
withdrew from vetting after Republicans criticized him for having structured
the bailout program inside the Treasury Department during the Bush
administration.
But Wilbur
Ross, whose WL Ross & Co was part of the consortium that invested in
BankUnited alongside Carlyle, successfully became U.S. Commerce Secretary.
Quarles'
history on Wall Street may be a talking point during his confirmation hearings,
but it is unlikely to bring down his nomination, lobbyists and financial
regulatory lawyers said.
"At the
end of the day, it's really a 'nothingburger,'" said Bob Kurucza, a
partner in Goodwin Procter's financial industry and investment management
practice.
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