The air around Randal Quarles is slightly more rarefied. The family residence, dubbed the Wasatch House, is situated high on Salt Lake’s east bench, overlooking the sprawling valley below. His elegant but imposing two-story library is, floor to ceiling, full of books on topics like literature, religion, law, finance and aviation — reflecting his varied interests and Ivy League studies at both Columbia and Yale Law School.
If you were to type “country club conservative” into an artificial intelligence portrait generator, it might spit out an image of Quarles — angular jaw, salt-and-pepper hair and an immaculately pressed suit punctuated by a pocket square. On his coffee table is a glass bowl filled with brightly colored M&Ms — a rare vice for a churchgoer who doesn’t drink or smoke. When we settle in to talk in his library, he sits across from me in a leather, mid-century modern chair.
Quarles lives a well-ordered life, and yet, he’s helped guide the nation’s economic policy during some of the most turbulent times in recent decades. His tenure at the Federal Reserve coincided with the onset of COVID-19, and, more recently, with the rapid rise of inflation. While he self-identifies as libertarian-leaning, he also stands in defense of the Fed and its power to pull on the levers of the economy as the institution tries to fulfill a congressional mandate to use those levers to maintain economic stability and full employment.
Notably, Quarles was one of the rare voices urging rate hikes and raising the alarm about inflation in the fall of 2021, when it first became clear the nation’s fiscal froth wasn’t just about supply chain issues but also overstimulation from government spending. Not everyone listened, but his warnings proved prescient. Now he’s raising concerns about a possible new “constitutional moment” at the Fed, brought on by exceptional powers the nation’s central bank used during the pandemic that could be misused in the future.
If no one listens this time, the consequences, he believes, could be even more significant. I came to Quarles’ home, which he shares with his wife, Hope, and their three children, because he represents an increasingly powerless species in American politics: the fiscal conservative. While many in America are pleased to see this breed of old guard Republicans dwindle, their decline may pose unseen risks to sound governance.
With the rise of a spendthrift right, and a Democratic Party that refuses to be outdone in cutting checks, the nation’s economic situation could become even more precarious absent political voices that sound a bit like Quarles.
As a young Utah-raised lawyer building a career in government in Washington, D.C., the legacy of another son of Utah loomed large in Quarles’ mind — Marriner Eccles. Quarles is married to Hope Eccles, a businesswoman and philanthropist, and the great-niece of Marriner Eccles, the consequential Utah native who helped remake the Federal Reserve into the centralized, powerful institution it is today.
Decades after Eccles served as chairman of the Fed, Quarles would receive his own appointment to serve as a governor on the Fed’s board, a position he left at the end of last year.
Quarles didn’t just admire his wife’s ancestor, he literally sat where he sat — choosing his office in the Marriner S. Eccles Federal Reserve Board Building because he knew it was the very room Eccles had occupied after President Harry Truman threw him out of the chairman’s office over a policy disagreement. Eccles, not known to mince his words, wouldn’t back down when asked by Truman to change interest rates.
In November 2020, Quarles had to lean on his own political independence when, during his congressional testimony in front of the Senate Banking Committee, he shared his opinion with senators that the economy looked stronger than expected and so another large stimulus package — in addition to the already passed $2 trillion Coronavirus Aid, Relief, and Economic Security Act — wasn’t necessary.
The stimulus package was a decision for lawmakers, he maintained, but from his reading of the data the economic numbers for a recovery were looking good. That assessment drew heated rebuttals from Democratic senators, including Sen. Jon Tester, D-Mont., normally considered one of the more moderate Democrats, who accused Quarles of playing political games.
Tester is a “prince of a man,” Quarles tells me, while making it clear he didn’t like the accusation that his assessment of the economy was in any way political. “I hate that kind of thinking,” he continues, “that it’s just because the election is coming up, or that it’s some sort of political thing. I was not trying to be political.”
Congress later approved a $900 million package under Trump, and another $1.2 trillion in aid under President Joe Biden. By fall 2021, it was clear inflation had become a problem, and Quarles wanted the Fed to act, but it wasn’t until March 2022 that the Fed started raising interest rates.
The Fed governing board was concerned about “stepping on the gas and the brakes at the same time,” Quarles says. And since the Fed was slowly tapering off its purchase of treasuries — which it had started doing in March 2020 to keep the economy afloat — there were some on the board who didn’t want to raise rates and taper simultaneously.
It’s clear now, he says, that this was the wrong decision.
But Quarles defends the Fed against accusations of playing politics in this case — insisting that his fellow governors based their decisions on economic factors rather than partisanship. His defense, however, doesn’t come without qualifications. Politicians constantly put political pressure on the Fed. And that pressure is increasing, he says, particularly from progressives in Washington, who want the Fed to expand its reach and compete directly with the private banking industry, in part because of the powers it unlocked during the pandemic.
In an unprecedented move, when the economy skidded to a complete halt due to shutdowns, the Fed loaned money directly to states, municipalities and even private businesses, without a congressional appropriation. Quarles didn’t think it was necessarily the wrong thing to do — it was a “targeted, intelligent response” to a crisis — but he now worries about the long-term implications.
“It created a lot of precedential risk, by saying the Fed can, in case of an emergency, lend to anybody,” he tells me. “We can lend to a local dry cleaner, we can lend to Exxon Mobil, we can lend to Flint, Michigan, we can lend to everyone — and we never had. We’ve always said, look, our job is very limited. It’s to provide liquidity to the financial system, both in normal times and particularly in times of stress,” he continues. “And then during COVID we reveal that this powerful institution has the ability to, without any congressional appropriation, lend any amount of money to any person for anything.”
He felt as though the Fed should have at least put up “rhetorical guardrails” to make clear that in the future, if this emergency power is used, it should only be done using congressionally allocated monies. Despite Quarles’ reservations, there was no discussion on limiting the Fed’s powers in the case of a future crisis. Then-Treasury Secretary Steven Mnuchin wanted to just shut down the lending capacity as quickly as possible.
“Mnuchin said, probably correctly, Randy, I don’t want to do that, because if we create such a vehicle it will last forever. We will have created some entity that exists to lend from the government to the economy and I want to close these down by the end of the year,” Quarles recounts.
By the end of 2020, the Fed was no longer using these emergency powers.
But, what’s at risk is the government can easily declare something a crisis — like climate change, or pressure at the border — in order to find a justification use of these powers again.
Another recent issue of concern is there are those in the government who would like to see the Fed create its own digital currency, which would put it in direct competition not just with cryptocurrencies like Bitcoin, but also with the financial services industry as a whole. People could use the Fed’s currency as a type of investment or place to put their savings.
Pressure to create the digital currency comes not only from the left, or from those who would like to see the Fed’s powers increased, but also from the national security establishment on the right, who are concerned about the e-CNY, China’s digital currency. But, Quarles points out, China created its currency in order to monitor the financial transactions of its citizens, something U.S. government officials shouldn’t aspire to do.
His concerns are more than just theoretical.
After Biden was elected president, he nominated a Cornell law professor, Saule Omarova, for a top position at the Treasury. Quarles knew Omarova from his time serving in the Treasury Department under President George W. Bush. While he says she is a “lovely woman,” as an academic Omarova advocated for giving the Fed the power to create savings accounts for every single American, turning it into something that would, once again, be in direct competition with private banks.
Omarova was a favorite of progressive senators on the banking committee like Chairman Sherrod Brown, D-Ohio, and Sen. Elizabeth Warren, D-Mass. She ended up withdrawing herself from consideration when it became clear there weren’t enough votes for her confirmation.
Quarles’ view that the Fed’s power should remain limited may have been why he did not get a warm reception from Warren during one of his routine appearances at congressional hearings. In a committee hearing in May 2021, Warren not so politely told him he was a menace. “Our financial system will be safer when you are gone,” she said. “Instead of protecting the system, you spent your time at the Fed cutting holes in the safety net wherever you could.”
This criticism was also repeated in a New York Times profile of Quarles, in which he was called out for meeting regularly with colleagues from Davis Polk & Wardwell, the influential Wall Street law firm where he once worked. The article insinuated the firm had an interest in working with him to weaken banking rules instituted in the wake of the 2008 recession. But Quarles’ defenders say he was able to strike the right balance of maintaining safeguards while also reducing regulations that were holding the private sector back.
As the most important bank regulator in the country, Quarles handled his responsibilities “with grace,” according to David Beckworth, a senior research fellow at the conservative Mercatus Center. “He was a very thoughtful, careful person when it came to issues regarding monetary policy and financial regulation,” said Beckworth. “He was criticized — but I thought the direction he went in was wise and measured.”
The evidence that the approach Quarles used was effective is that the banks came through the COVID-19 crisis well, said Beckworth. Despite the criticism he’s received, Quarles contends that he worked closely with colleagues of all political stripes while at the Fed. He doesn’t deny the political forces at work, but he insists the policies the Fed implemented were based on careful monetary policy discussions, not on partisanship politics.
Born in San Francisco, Quarles’ family moved to Roy, Utah, when he was a young child. For the most part his family stayed in Roy, and his father worked at Hill Air Force Base. He was the son of — as he described them — “prairie populist Democrats,” and considered himself left of center by Utah’s standards. Quarles moved east to attend Columbia University after a brief stint at Brigham Young University. While earning a degree in philosophy and economics, he found that the gentle progressives of the West had little in common with the angry liberal activists he encountered on Columbia’s Manhattan campus.
It was at a protest held at Columbia’s landmark sundial monument — which hasn’t functioned as a sundial since 1946 — where Quarles started his transition from a left-leaning college student to the “pragmatic libertarian” he describes himself as today. The protest that day was billed as a pro-worker rally in support of the service staff at the university who were on strike.
“I’m in support of labor,” he thought. “I should go.”
Quarles was disturbed by what he heard that day, especially when the lead protester said, “The administration is saying that this negotiation has to be a matter of give and take, but when are they going to understand that we are here to take, take, take!”
“And then,” Quarles recounts, “this sea of people around the sundial began chanting, take, take, take! And that kind of began my thinking that there may be some more avenues to explore.”
In Latter-day Saint circles, Quarles became something of a legend during his time at Columbia for penning a tongue-in-cheek missive describing his woes as a volunteer ward clerk in Manhattan handling an overwhelming number of mixed up membership records that should have gone to a congregation in the Bronx.
“The Bronx Ward used to be part of our ward. But it isn’t anymore. Please believe me,” he wrote. “If you could see my face, you would see that it is an honest face, one that could not lie. It is also, though, a tired face. I have seen much in my day, and most of it has been membership records from the Bronx.”
The humorous letter continued: “It’s the third or fourth time I’ve written. What more do you want? What more can we give? I’m a young man. I should be out tonight, on the town. I should be at a Broadway play tonight with a beautiful girl on my arm, the shriek of the city in my ears, and the double beat of summer love in my heart.”
The letter worked and the problem was fixed.
After Columbia, and a two-year mission for The Church of Jesus Christ of Latter-day Saints in Quebec City, where he served under mission president Wayne Owens, a former Utah Democratic congressman, Quarles attended Yale Law School. He was there for the birth of the Federalist Society, which grew out of a 1982 conference held in New Haven, Connecticut, with students from Yale and the University of Chicago. He went to work at the Wall Street law firm, Davis Polk in both New York and later in London.
One source told me that as a young lawyer in London, Quarles was so busy that he kept his important papers in the oven in his apartment, which he never had time to use.
Even as he was charting his course to success through Ivy League schools and elite legal circles, Quarles maintained close ties to Utah. With his six weeks of vacation, and an amateur pilot’s license, he traveled to southern Utah every year to volunteer as the co-pilot for the Navajo Air Ambulance. But then, after traveling regularly for six hours from New York City to an associate’s house in the Hamptons, he realized it would take him about the same amount of time to fly home to Utah on the weekend. So, that’s what he started to do.
It was during one of his trips back that he met Hope Eccles. After a long-distance relationship, they got engaged, even though they had never seen each other on a Tuesday, he likes to quip. After settling down in Manhattan, they then had to relocate to Washington, D.C., when Quarles was asked to serve in George H.W. Bush’s Treasury Department. His position involved developing a response to the still-lingering savings and loan crisis.
There, Quarles met Jerome “Jay” Powell, the current Fed chairman. In a strange twist of fate, Quarles had to go to Capitol Hill to vouch for Powell’s conservative bona fides during his confirmation hearings for the Fed chairmanship, even though many years earlier, when they worked in the Bush 41 White House, Powell had tried but failed to get Quarles to declare himself a Republican.
“Even then, I was an independent, I wasn’t a Republican,” Quarles says. “After a year, they wanted to promote me, but the political folks at the White House said, ‘You can’t put someone in that position who is not a Republican.’ They said, ‘Please, just become a Republican.’ And I said, ‘I already have a religion.’ So eventually the White House just gave up and promoted me.”
A few years later, Quarles did in fact become a Republican, because of his desire to get more involved in Utah politics and policy.
Quarles returned to the private sector during the Clinton administration, but after George W. Bush took office, he was asked once again to serve in the Treasury Department. In the aftermath of 9/11, Quarles spent much of his time working in positions involving international finance, including as U.S. executive director for the International Monetary Fund.
During the Bush 43 years, Quarles traveled to Afghanistan, where he stood looking out over the foothills surrounding Kabul with John Taylor, then an undersecretary in the Treasury Department, and the Afghani finance minister.
“It was a little eerie how much that place where we were, looking out over Kabul, looked like standing in the foothills here and looking out over Salt Lake City,” he recalls “(Taylor) told the story of how the Mormons had come into Utah and made the desert blossom like a rose, and he said to the finance minister, your war-torn country can also have an economic renaissance here as there was in Utah after the Mormons arrived if you pursue the right economic policies.”
After Quarles tells me this story, he pauses, and then adds, “They didn’t follow that advice to the letter.”
He left the Bush administration at the end of 2006, well clear of the 2008 Great Recession.
“I like to say, ‘Everything was fine when I left,’” he jokes, throwing up his hands. “I don’t know what they did once I turned my back. It’s the same thing I say about inflation. Other folks like to joke that my leaving the government is a leading indicator for an economic catastrophe about to happen.”
When Donald Trump was elected president in 2016, Quarles assumed he would not be asked to serve in the latest Republican administration. He had serious disagreements with the policies Trump campaigned on, especially when it came to trade.
“I am what was once considered a standard libertarian-type, small-government, free trade, pragmatic-libertarian Republican,” he says, using all of the hyphens he could think of to describe his political leanings. “I thought that probably foreclosed my serving in a Trump administration, because many of the things that he was quite clear about were things that I’d also been quite clear about, particularly free trade. The economic nationalist agenda was not really mine.”
But then, when he was asked to serve at the Fed in a recently created position that would oversee untangling some of the regulations introduced into the financial sector through the Dodd-Frank Act, which was meant to forestall another 2008-type recession but instead ended up hamstringing small and midsize banks and slowed the pace of economic growth, he was quick to agree.
“I thought, ‘Well, the Fed is quite separate from the executive,’” he says. “This job is a technocratic one, and it was kind of made for me. I was kind of born to do it.”
His official title, besides governor, was vice chairman for supervision and chairman of the Financial Stability Board. He served at the Fed from October 2017 through October 2021, a time of unprecedented financial turbulence nationally because of the pandemic.
He met with Trump before the nomination became official, and again to discuss Trump’s nomination of a Fed chair, and both times he was struck by the unexpected normalcy of the meetings.
“I met with (Trump) twice, once in the context of this job and once when he was trying to make the decision about the chairman, and the two chairman candidates were Jay (Powell) and John Taylor, whose deputy I had been for four years in the Bush 43 administration, and so it just turned out that I was the person in the administration who knew both of them better than anyone else, so he wanted to talk to me about them,” he says. “And, in both of those conversations he was absolutely down the middle of the fairway of all the other presidents that I’ve talked with over the course of my career.”
I wanted clarification, so I ask Quarles what he meant.
“Lots of folks seemed to believe that as a human being who occupied the office of the presidency, (Trump) broke all kinds of norms, and was just utterly unqualified to be president,” he responds. “All I can say is, in those interactions that I had with him, it was a totally normal conversation with a president about these sorts of issues. Which is to say, no president I’ve interacted with has really understood what the Fed or financial regulation is about. They know it’s very important. They don’t understand it all, the way they understand a lot of other things, but they’re generally savvy enough to get the general implications and to have a very useful discussion about the objectives and what one might do and what one might not do when thinking about who ought to be the chairman of the Fed.”
“Trump,” he continues, “like just about every president, would have no idea about what the chairman of the Fed actually does, but his discussion of the two possibilities was just what you would have wanted from a president making that decision. Yes, there was bluster, yes there was a lot of laying it on thick and about how much he needed my advice. But again, not outside the margin of error from anyone you would expect to be president.”
Quarles credits Trump’s election with his reconsideration of some of the ways he’d learned to look at the world, and particularly how he sees people who struggled to find good-paying jobs in the wake of globalization. Perhaps, in a way, it led Quarles to return part of the way back to his prairie populist roots.
He explains, “I used to think, ‘I’ve changed jobs a lot in my life. Just pull up your socks and get a new job!’ That’s what you do. And I was shocked that the dissatisfaction with that basic message was so widespread that it caused a bunch of Democrats who would not vote for Mitt Romney to vote for Donald Trump. You had a lot of folks who said, ‘My choice is either Donald Trump or Bernie Sanders.’ That really shocked me, and made me think, you know, if you’re a 55-year-old man who has made furniture in Hickory, North Carolina, for your career … your economic position is never going to recover. Your kids will be better off, the country will be better off, as a result of those economic policies, but you won’t be. And that has softened me somewhat.”
Quarles is back in Salt Lake City now, working as chairman of the Cynosure Group, a private equity firm he co-founded with family and friends, which is named after the ship that brought his wife’s ancestor David Eccles from Scotland to America in 1863. After commuting back and forth from Washington, D.C., to Salt Lake for years, Quarles has now settled in at home.
Although since leaving his post at the Fed, he has traveled the speaker’s circuit, including a local engagement with the Orrin Hatch Foundation, he has given several podcast interviews, and has spoken to journalists, including me. Clearly, he still has opinions on what the Fed should and should not do, and how the financial system should or should not be regulated.
While Quarles remains engaged, in the spirit of Marriner Eccles he also plans to maintain his independence. When Quarles spoke to the man who replaced him as vice chair, Michael Barr, he advised him, “the real point of this job is to tell your own side ‘no.’”
