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Want to Be a Fed Governor? Roots Matter -- WSJ

23 Sep 2017 6:32 am

Why a nominee from Utah insists he's from Colorado
By Ryan Tracy 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 23, 2017).

Winning nomination to the Federal Reserve Board takes financial acumen, political savvy and a very expansive notion of geography and biography.

Randal Quarles, nominated by President Donald Trump, hopes to join the powerful policy-making body in coming weeks. He is by most indications from Utah and the Fed board has met its quota of members from that part of America. Fortunately for Mr. Quarles, he can argue he's from somewhere else. Colorado, to be precise.

Mr. Quarles's provenance matters because of an obscure provision inserted into the Federal Reserve Act of 1913 by William "Alfalfa Bill" Murray of Oklahoma, a mustachioed, pistol-wielding congressman. Mr. Murray's aim was to dilute Wall Street's influence in an amendment requiring geographic diversity on the governing board: No two members may come from the same region.

Utah falls under the Fed's 12th district, which is the Federal Reserve Bank of San Francisco's domain. It is represented by Fed Chairwoman Janet Yellen, from California.

Mr. Quarles is offering roots in Colorado, where he lived as a child, as a workaround. The state is part of the Kansas City Fed's district.

The act doesn't define what being "from" a place means. And the White House doesn't dispute that Mr. Quarles is from Utah, nor does his spokesman, Brian Rogers. Mr. Quarles declined to comment.

There is plenty of evidence of his Utahnness. His current job is in Salt Lake City. When nominated for a Treasury Department post in 2002, he described himself in Senate testimony as Utah-raised; in the congressional record, he was "Randal Quarles of Utah."

That was then.

Now, "Randal Quarles of Colorado" is how he is described in documents relating to his nomination for Fed vice chairman of bank supervision.

He was born in San Francisco but lived in Colorado from the age of 7 months through second grade, Mr. Rogers says. "After that, Randy returned to Colorado for a material portion of every summer to stay with his grandparents."

Mr. Quarles' parents grew up in Colorado, and he still spends Christmases with family there, he adds.

A White House official says Mr. Quarles's youthful years in Colorado make him eligible for the job. Some Democratic senators have criticized his work representing financial firms, but haven't disputed his Colorado claim. Fed observers expect him to be confirmed later this year.

Back in 1913, Congressman Murray and other rural lawmakers didn't want New York City bankers to dominate the Fed. Instead, the law carved the U.S. into 12 Fed districts that each got its own Federal Reserve bank and shares influence with a Washington-based board of governors.

Mr. Murray -- nicknamed for promoting alfalfa cultivation and known to carry a pistol at times, according to some historical accounts -- successfully amended the bill to add the no-two-members provision. The requirement hasn't been litigated, scholars say, leaving politicians to enforce it.

Lawmakers' skirting it dates at least to President Jimmy Carter's administration. In 1978, prospective Fed Chairman G. William Miller told senators he lived in Rhode Island but, for Fed purposes, would be representing California, where he owned property and had studied law.

Rhode Island wasn't an option because another Fed governor represented its district. The Senate confirmed him.

"It reminds of when you're counting up how many states you have been to -- does it count if you just changed planes?" says Sarah Binder, a senior fellow at the Brookings Institution think tank who recently published a book on the Fed. "Alfalfa Bill would roll in his Oklahoma grave."

State-swapping has worked for people seeking other high offices, including Dick Cheney, who as vice-presidential candidate in July 2000 switched his voter registration and driver's license from Texas to Wyoming, which he had represented in Congress.

Presidential candidate George W. Bush was from Texas, and the Constitution's 12th Amendment says a state's Electoral College delegation can't vote for both presidential and vice-presidential candidates from the electors' home state.

For many Fed watchers, the geographic districts are outdated. Two are based in Missouri -- Kansas City and St. Louis -- chosen in the early 1900s for economic and political reasons, Ms. Binder says. The San Francisco district includes nine states, representing a fifth of Americans.

And Alfalfa Bill's amendment appears to have lost some effect, according to a 2016 article in the Yale Law & Policy Review tracing Fed governors' personal histories. It found that between 1996 and 2015, about 80% of confirmed governors were born on the East Coast, compared with about 30% during the previous eight decades.

The amendment did bite one Fed hopeful, Massachusetts Institute of Technology Professor Peter Diamond, nominated by President Barack Obama in 2010.

Mr. Diamond, a Nobel laureate, withdrew after some Republicans said the board had too many academics. They also said he wasn't eligible because of his longtime residency in Massachusetts, home of Daniel Tarullo, then Fed governor.

One critic of Mr. Diamond's nomination was Mark Calabria, now an adviser to Vice President Mike Pence. Last year, Mr. Calabria suggested Congress clarify that being "from" a Fed district meant living there at least 10 years.

White House spokeswoman Natalie Strom says Mr. Calabria wasn't involved in selecting Mr. Quarles so it wouldn't be appropriate for him to comment.

Mr. Quarles left mixed marks on Las Animas, a town of about 2,000 in southeastern Colorado.

Mr. Quarles "has a very, very strong connection to Colorado, as far as Bent County and his family are concerned," says Diane Baublits, researcher for the county's historical society.

She says she went to high school with Mr. Quarles's parents and confirms he spent first grade at Las Animas's Columbian Elementary School.

Ms. Baublits wonders whether it's time to memorialize Mr. Quarles in a local exhibit, placing him in the company of town natives such as Ken Curtis, who played hillbilly Festus Haggen on the TV series "Gunsmoke."

"Randal might be getting big enough," she says.

Or maybe not. Las Animas Mayor Jim Collins, asked if he knows Mr. Quarles, replies: "I don't think I've ever even heard that name."

Write to Ryan Tracy at ryan.tracy@wsj.com
 

(END) Dow Jones Newswires

September 23, 2017 02:32 ET (06:32 GMT)

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