President Joe Biden will nominate Michael Barr to be the Federal Reserve’s chief regulator in charge of major banks. Barr, who served as Assistant Secretary of the Treasury for financial institutions under the Obama administration, was seen here at a meeting of the Treasury Department in Washington, DC on November 30, 2010.
Andrew Harrer | Bloomberg | Getty Images
President Joe Biden will nominate Michael Barr, a former Treasury official, to be the Federal Reserve’s chief regulator in charge of major banks.
Barr’s election was expected after CNBC earlier this week confirmed he was the White House front-runner on the post. That would make the lead author of the finance bill perhaps the most powerful U.S. banking regulator: the Fed’s vice president of supervision.
Barr served as Assistant Secretary of the Treasury for Financial Institutions under the Obama administration, where he co-designed the 2010 Dodd-Frank Act. 2008-2009.
Among its many provisions aimed at protecting the economy from future disasters, Dodd-Frank produced both the Consumer Financial Protection Bureau (CFPB) and the Fed’s vice president of supervision.
“He was instrumental in Dodd – Frank’s passage to ensure that a future financial crisis would not create devastating financial difficulties for working families,” Biden said in a statement Friday morning accompanying the White House formal announcement.
“He understands that this job is not a party-political job, but one that plays a crucial role in regulating our nation’s financial institutions to ensure that Americans are treated fairly and to protect the stability of our economy,” Biden added.
The president also stressed that Barr received support from both Democrats and Republicans when he was previously confirmed by the Senate.
It may be an oblique acknowledgment of the difficulties the administration has faced in trying to promote some of its nominees for financial regulatory positions in a 50-50 Senate split.
Sarah Bloom Raskin, Biden’s first choice to be the Fed’s banking supervisor, withdrew her candidacy last month. She removed herself from consideration after West Virginia’s Joe Manchin, the most conservative Democrat in the Senate, said he would not support her nomination because of her views on climate change and energy policy ideas.
Barr himself had last year been considered Biden’s choice to head the Office of the Controller of the Currency. But progressive Democrats, concerned about what they saw as his cozy ties to Wall Street, rejected his candidacy.
The White House later elected Saule Omarova to replace Barr as its nominee to lead the OCC until she was forced to resign in November due to skepticism from moderate Democrats Sens. Mark Warner of Virginia and Jon Tester of Montana.
By pressing Barr again, the White House is betting that Raskin’s withdrawal into the hands of Manchin is enough to persuade progressives – who might have preferred Raskin – to support a more centered election.
These Democrats are likely to want Barr to reveal the details of his past work for financial technology companies like Ripple Labs, a blockchain-based payment company, to ensure he is isolated from corporate interests.
Still, those familiar with the White House mindset say the president’s advisers believe they can convince people like Senator Elizabeth Warren, D-Mass., Who previously welcomed Barr’s work to write Dodd-Frank and establish the CFPB.
Moderate Democrats like Sen. Sherrod Brown of Ohio, chair of the Senate Banking Committee, is considered more reliable support for the veteran of the Obama and Clinton administrations.
Late. Sherrod Brown (D-Ohio), left, speaks with Senator Elizabeth Warren (D-Mass.), During a Senate Banking, Housing and Urban Affairs meeting in Washington, DC.
Andrew Harnik | Washington Post | Getty Images
A Republican aide told CNBC that Barr would likely receive many no votes from their ranks based on his work drafting what many in the GOP consider overly burdensome financial regulations.
If confirmed to the Fed, Barr will be accused of overseeing the country’s largest banks, including JPMorgan Chase, Bank of America and Citigroup. The Vice President of Supervision oversees the safety of the country’s largest lenders by verifying that they meet capital requirements, controlling risks 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 who vote at every central bank meeting.
The Fed started last month what is expected to be a series of rate hikes to help cool unruly inflation. The Department of Labor reported on Tuesday that the prices Americans pay increased by 8.5% in the 12 months ending in March, the warmest pace since 1981.
But imposing higher borrowing costs on the U.S. economy is a difficult task in the best of times.
Economists including Finance Minister and former Fed Chairman Janet Yellen say the Fed must be careful not to retreat too quickly on its easy monetary policies, otherwise US US GDP growth risks in light of ongoing supply chain constraints and Russia-Ukraine war in Europe.
“They have a dual mandate. They will try to maintain strong labor markets while bringing inflation down,” Yellen said of the Fed on Wednesday. “And it’s been done before. It’s not an impossible combination, but it will require skill and also good luck.”
In addition to Barr, the White House has four nominees for the Fed ahead of the Senate – Jerome Powell, Lael Brainard, Lisa Cook and Philip Jefferson.
Barr is the current dean of the University of Michigan’s public policy school, a position he accepted after his work for the Obama administration. During the Clinton administration, he served as Special Assistant to Treasury Secretary Robert Rubin, Assistant Assistant Secretary of the Treasury, and as Special Adviser to President Bill Clinton.