President Joe Biden will appoint Michael Barr as the Federal Reserve’s chief regulator in charge of big banks. Barr, who served as Assistant Treasury Secretary for Financial Institutions during the Obama administration, seen here during a Treasury Department meeting in Washington, DC on November 30, 2010.
Andre Harrer | Bloomberg | Getty Images
President Joe Biden will appoint Michael Barr, a former Treasury Department official, as the Federal Reserve’s top regulator in charge of big banks.
Barr’s pick was expected after CNBC confirmed earlier in the week that he was the White House frontrunner for the job. That would make the chief author of financial laws perhaps America’s most powerful banking regulator: the Fed’s Vice President of Oversight.
Barr served as Assistant Secretary of the Treasury for Financial Institutions during the Obama administration, where he helped craft the Dodd-Frank Act of 2010. This act was one of the most significant overhauls of financial regulation in the US. history of the United States and came in the wake of the financial crisis of 2008-2009.
Among its many provisions to protect the economy from future catastrophe, Dodd-Frank produced both the Consumer Financial Protection Bureau (CFPB) and the Fed’s Vice Chairman for Supervision.
“He was instrumental in moving Dodd-Frank through, to ensure that a future financial crisis would not create devastating economic hardship for working families,” Biden said in a Friday morning statement accompanying the official announcement. of the White House.
“He understands that this work is non-partisan, but plays a critical role in regulating our nation’s financial institutions to ensure Americans are treated fairly and to protect the stability of our economy,” Biden added.
The president also pointed to the fact that Barr received support from both Democrats and Republicans when he was previously confirmed by the Senate.
That may be an indirect acknowledgment of the administration’s struggles to advance some of its nominees for financial regulatory positions in a 50-50 divided Senate.
Sarah Bloom Raskin, Biden’s first choice to be the Fed’s banking regulator, withdrew her candidacy last month. She withdrew from consideration after Joe Manchin of West Virginia, the Senate’s most conservative Democrat, said he would not support her nomination because of his views on climate change and ideas of energy policy.
Barr himself had been considered last year as Biden’s choice to lead the Office of the Comptroller of the Currency. But progressive Democrats, concerned about what they saw as his intimate ties to Wall Street, stifled his candidacy.
The White House then chose Saule Omarova to replace Barr as its nominee to lead the OCC until she was forced to step down in November due to skepticism from moderate Sens Democrats. Mark Warner of Virginia and Jon Tester of Montana.
By appealing to Barr again, the White House is betting that Raskin’s removal from Manchin’s hands is enough to persuade progressives — who might have preferred Raskin — to support a more centrist choice.
These Democrats would likely want Barr to disclose details of his past work for fintech companies like Ripple Labs, a blockchain-based payments company, to ensure he is insulated from corporate interests.
Still, those familiar with White House thinking say the president’s advisers think they can convince people like Sen. Elizabeth Warren, D-Mass., who previously applauded Barr’s work, writing Dodd-Frank and by establishing the CFPB.
Moderate Democrats like Senator Sherrod Brown of Ohio, chairman of the Senate Banking Committee, are seen as more reliable support for the veteran of the Obama and Clinton administrations.
Sen. Sherrod Brown (D-Ohio), left, speaks with Sen. Elizabeth Warren (D-Mass.), during a Senate Banking, Housing, and Urban Affairs meeting in Washington, DC.
Andre Harnik | The Washington Post | Getty Images
A Republican aide told CNBC that Barr is likely to receive many downvotes from their ranks because of his work crafting what many GOP members view as overly burdensome financial regulations.
If confirmed for the Fed job, Barr would be responsible for overseeing the nation’s largest banks, including JPMorgan Chase, Bank of America and Citigroup. The Vice President for Supervision oversees the security of the nation’s largest lenders by verifying that they meet capital requirements, controlling risk and subjecting banks to regular stress tests.
Barr would also be an important voice on monetary policy as one of seven members of the Fed’s board of governors, who vote at every central bank meeting.
Last month, the Fed launched what is expected to be a series of interest rate hikes to help calm runaway inflation. The Labor Department reported Tuesday that prices paid by Americans jumped 8.5% in the 12 months ending March, the fastest pace since 1981.
But imposing higher borrowing costs on the US economy is tricky at the best of times.
Economists, including Treasury Secretary and former Fed Chair Janet Yellen, say the Fed will have to be careful not to backtrack on its easy money policies too quickly or risk US GDP growth in the face of continuing constraints on supply chain and the Russo-Ukrainian War in Europe.
“They have a dual mandate. They will try to keep labor markets strong while bringing inflation down,” Yellen said of the Fed on Wednesday. “And it’s been done in the past. It’s not an impossible combination, but it will take skill and also luck.”
Excluding Barr, the White House has four Fed candidates ahead of the Senate — Jerome Powell, Lael Brainard, Lisa Cook and Philip Jefferson.
Barr is the current dean of the University of Michigan’s School of Public Policy, a post he accepted after his work for the Obama administration. During the Clinton administration, he served as Special Assistant to Treasury Secretary Robert Rubin, Deputy Assistant Secretary of the Treasury, and Special Advisor to President Bill Clinton.