The Federal Reserve's vice chair for supervision, Michael Barr, announced his resignation effective February 28th, citing a desire to avoid potential conflicts with the incoming Trump administration and Senate Republicans. Barr, who will continue to serve as a governor on the Fed's board until 2032, had overseen the proposal of stringent new regulations for the largest U.S. banks, aimed at increasing their financial reserves.
The proposed rules faced strong opposition from major financial institutions like JPMorgan Chase and were criticized by Senate Republicans, including Sen. Tim Scott, who called them 'disastrous' and detrimental to lending and the economy.
Former President Donald Trump had reportedly considered removing Barr from his position, but Fed Chair Jerome Powell clarified that such actions were beyond the president's legal authority. Barr's decision to step down as vice chair limits the Trump administration's options for his replacement, as all seven seats on the Fed's board are currently filled.
President-elect Trump can only appoint another current governor to the regulatory position or wait until a vacancy arises in 2026. Governor Michelle Bowman, known for her support of less stringent financial regulations, is a potential replacement for Barr.
In response to the controversy surrounding the proposed regulations and potential disputes over his position, Barr stated that he believed he could better serve the American people as a governor. The Fed announced that it would hold off on major rulemakings until a successor to Barr as vice chair for supervision is confirmed.
Barr's tenure was marked by the fallout from bank failures in 2023, with Silicon Valley Bank's collapse being a significant event. He led efforts to tighten bank rules, particularly for larger institutions, by requiring them to hold more capital in reserve. However, the rules faced industry pushback, leading Powell to announce revisions last March.
