Federal Reserve Board Vice Chair for Supervision Michael S. Barr speaks during a hearing with the Senate Banking Committee on Capitol Hill, on May 18, 2023. Anna Moneymaker/Getty Images
Michael Barr, the Federal Reserve’s vice chair for supervision, confirmed he will step down on Feb. 28 to avoid a distraction over the central bank’s banking regulatory mission.
Barr announced on Jan. 6 that he would resign before his term expires in July 2026. The central bank’s chief regulator plans to remain on the Federal Reserve Board of Governors until January 2032.
His position was established shortly following the global financial crisis to foster a financial system of accountability and transparency.
“The risk of a dispute over the position could be a distraction from our mission, ” Barr said in a letter to President Joe Biden. “In the current environment, I’ve determined that I would be more effective in serving the American people from my role as governor.”
Barr told lawmakers in November that he would serve his entire term.
“As Chair Powell said, we serve fixed terms of office, and I intend to serve my fixed term of office,” Barr said at a House Financial Services Committee hearing.
“From his supervisory failures during the Spring 2023 bank failures to the disastrous Basel III Endgame proposal—Michael Barr has failed to meet the responsibilities of his position,” said Sen. Tim Scott (R-S.C.), a member of the Senate Banking Committee, in a statement.
Rep. French Hill (R-Ark.) plans to work with Trump to find a successor who can craft and institute balanced regulatory policy.
“I was pleased to learn that Michael Barr is stepping down from his role as the Federal Reserve’s top bank regulator,” Hill, who chairs the House Financial Services Committee, said on social media platform X. “It’s my preference that his nominee is committed to tailoring bank regulatory policies and implementing a balanced approach to prudential supervision.”
Regulation Shift
Since being appointed by President Joe Biden in July 2022, Barr has pursued an aggressive regulatory agenda, implementing a range of stringent rules on the financial sector.
He has been a staunch advocate for the Basel III Endgame proposal, a risk-based update to the U.S. regulatory capital framework intended to cushion the banking sector against future crises. The initiative has endured significant industry complaints and political pushback from both sides of the aisle.
The Fed official announced a “re-proposal” of Basel III in September to soften the provisions. This seismic change largely excluded banks with assets between $100 billion and $250 billion from stronger capital requirements. Instead, to highlight banks’ various risk profiles, they will be required to account for unrealized capital gains and losses on their securities.
“This process has led us to conclude that broad and material changes to the proposals are warranted,” Barr said at a Brookings Institution event on Sept. 10, 2024. “There are benefits and costs to increasing capital requirements. The changes we intend to make will bring these two important objectives into better balance, in light of the feedback we have received.”
In addition to Basel III, Barr has championed mandating large banks to tap the discount window, a source of emergency liquidity for troubled institutions during financial crises.
“Incorporating the discount window into a readiness requirement would also reemphasize that supervisors and examiners view use of the discount window as appropriate under both normal and stressed market conditions,” Barr said on Sept. 26, 2024, at the 10th annual U.S. Treasury Market Conference.
Federal Reserve Governor Michelle Bowman attends an event in Washington, on Oct. 4, 2019. Eric Baradat/AFP/Getty Images
While he suggested modifications, Barr remains an advocate for holding annual stress tests for the largest banks in the country.
“While our stress test is an important measure of the strength and resilience of the banking system, we must recognize that it does have limitations, as does any exercise,” Barr said at a Boston Fed event in October 2023.
Incoming administration officials have not listed any individuals for this position.
Nominated by Trump in April 2018 to fill a 14-year term on the Fed’s Board of Governors, Fed Gov. Michelle Bowman has regularly espoused a pro-market view to regulations.
Over the last year, Bowman has purported her concerns with Basel III. In a July 2024 speech in London, Bowman identified various consequences of imposing these capital reforms, such as impacting market liquidity and prompting banks to raise prices or discontinue products and services.
“While I am acutely aware of our need to consider these costs and price effects, I am also aware that regulators sitting in Washington, D.C. are not well-equipped to query and understand these real-world consequences of reform,” she said at the International Swaps and Derivatives Association (ISDA) event. “My hope is that we take them into account when moving forward to implement the Basel III endgame standards.”
The Epoch Times reached out to the Trump transition team for comment.
Andrew Moran
Author
Andrew Moran has been writing about business, economics, and finance for more than a decade. He is the author of "The War on Cash."
