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The Fed's Last Troublemaker

"When Daniel Tarullo arrived at the Federal Reserve Board in January 2009, the economy was still in a free fall. The country had shed 3.6 million jobs in the past year, with cuts at major companies like Home Depot, Microsoft, and Boeing. Across the U.S., home prices had dropped precipitously. And, two days after Tarullo assumed his post as one of seven Federal Reserve governors—some of the most powerful economic officials in the world—the stock market plunged and recorded one of its worst drops on record for the month of January.

"To those at the Fed, the mission was critical, fundamental, and starkly clear. It was nothing less than the rescue of the American economy itself. Tarullo was, at first blush, not the obvious choice to be drafted for such a task. At 60, with his white hair and bushy eyebrows and his habit of turning conversations into lectures, he appeared less of an economist than a professor—which is what, in fact, he was.

"Tarullo arrived at the Fed with a mandate from President Obama: to shore up the banking system to prevent another major, global financial crisis. Unlike previous bank regulators and supervisors, he went further, pushed harder, and accumulated massive power, all while alienating some inside the cloistered, genteel Federal Reserve and those outside in the banking industry as well with his combustible style.

"His clout was evident almost from the start, when Chairman Ben Bernanke essentially divided up the central bank's long To Do list after the financial crisis and gave Tarullo great leeway to formulate the Fed's regulatory reaction. Still, while it was a massive set of responsibilities, Bernanke reserved the most important, most immediate—and sexier—job for himself: wrestling with the country's monetary policy."

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