Michael Barr, Vice Chairman of the Federal Reserve (Fed) who has led U.S. financial regulatory policy, announced his intention to resign on the 6th (local time) ahead of the inauguration of President-elect Donald Trump. However, he will retain his position as a Fed board member until his term expires in January 2032.
Barr, responsible for financial supervision, stated on the same day, "The risk of controversy surrounding the position of Vice Chairman for Supervision could hinder the Fed's goals." He plans to resign from the Vice Chairman for Supervision position effective February 28. The term for the Fed Vice Chairman is four years, and he was appointed in July 2022 by President Joe Biden, a Democrat.
This decision drew attention as it was made public ahead of President-elect Trump's inauguration on the 20th. Barr previously served as Deputy Treasury Secretary under the Obama administration, and since he was appointed by Biden, a political rival of Trump, there were widespread expectations that the incoming administration might attempt to remove him immediately. The Fed Vice Chairman for Supervision holds a particularly influential position in the U.S. banking system. Given Trump’s platform of deregulation and pro-cryptocurrency policies, it is highly likely that he would want to replace Barr, who has strengthened regulations, with a loyalist. The New York Times (NYT), citing multiple sources, reported that Trump administration officials wanted to dismiss Barr.
However, Barr confirmed his intention to maintain his board membership, stating, "I judged that it would be more effective to serve as a Fed board member under the current circumstances." Although confident of winning any legal battle over the Vice Chairman position, he was concerned that such a process would have negative repercussions for the Fed. The term for a Fed board member is 14 years, and Barr’s term runs until January 2032. The Wall Street Journal (WSJ) analyzed, "To avoid a potential legal battle with Trump, Barr voluntarily stepped down from the Vice Chairman position but remains on the board to prevent the Trump administration from expanding control over Fed monetary policy."
Accordingly, President-elect Trump will have to select a new Vice Chairman for Supervision from the current board members. The Fed Board consists of seven members, including the Chair, four of whom were appointed by the Biden administration. Major foreign media outlets reported that Christopher Waller and Michelle Bowman, both appointed during Trump’s first term, could be candidates for the new Vice Chairman for Supervision, with Bowman, who has advocated for deregulation, being a particularly strong contender. The Fed announced that it will not make any significant decisions regarding bank regulation until the new Vice Chairman takes office.
The Republican Party, to which President Trump belongs, welcomed Barr’s resignation. Senator Tim Scott, chairman of the Senate Banking Committee, said Barr "failed to fulfill the responsibilities of his position" and expressed readiness to "work with Trump to ensure responsible financial regulatory agencies are in charge." French Hill, chairman of the House Financial Services Committee, also said he was "pleased."
On the other hand, concerns have been raised that this decision could fuel debates over the Fed’s independence following the start of the Trump administration. Dennis Kelleher, CEO of the nonprofit Better Markets, called it a "shocking decision" and said it would "undermine the Fed’s role in overseeing the safety and soundness of the financial system." He also described Barr’s resignation as an "unfounded surrender to deregulation zealots." Ian Katz, managing director at Capital Alpha, told the NYT he was "surprised" and had expected Barr to resist Republican ouster efforts and defend the Fed’s independence.
Regarding this, the WSJ, citing sources, clarified that Barr’s resignation does not signal the resignation of current Fed Chair Jerome Powell. Powell’s term as Chair runs until May 2026.
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