Hoping to avoid a legal battle with the incoming Trump administration, Michael Barr, the Federal Reserve's vice chair for supervision, will relinquish his role as the central bank's chief regulator by the end of next month.
The resignation amounts to a swift reversal for Barr, who as recently as a few weeks ago,
In his letter of resignation, which was submitted to President Joe Biden on Monday morning, Barr said he was concerned that a legal battle would be too disruptive to the Fed. Yet, he will not relinquish his seat on the Fed Board of Governors.
"The risk of a dispute over the position could be a distraction from our mission," Barr wrote. "In the current environment, I've determined that I would be more effective in serving the American people from my role as governor."
The announcement comes two weeks before President-elect Donald Trump is set to be sworn into office.
Since Trump's victory in the November general election, questions have swirled about whether he would attempt to remove Barr from office, with lawyers and scholars split on whether the president would have the legal authority to do so. Some in Trump's orbit
Both
"It's not about me. It's about what is right for serving the American public," Barr said. "And I feel very strongly — as does Chair Powell, as does the institution — that the independence of the Federal Reserve is critical for that."
In stepping down voluntarily, Barr and the Fed avoid the matter being tested in court.
Once Barr vacates the vice chair position, Trump will be able to nominate a replacement. This will likely entail elevating a current board member — with Gov. Michelle Bowman, a frequent voice of dissent to Barr's regulatory proposals, being the most natural candidate — or waiting for a governor seat to open up. The next scheduled vacancy will arise on Jan. 31, 2026, when Gov. Adriana Kugler's term expires.
In relinquishing his title of vice chair, Barr will no longer be able to set the Fed's regulatory agenda, but he will still have a say on regulatory policy via his vote on the board. Likewise, he will maintain his seat on the Federal Open Market Committee, the central bank's monetary policy arm.
Barr's term on the Board of Governors expires in early 2032, though few governors stay for the entirety of their term. The median term of office for a Federal Reserve Governor is just over five years, according to
In his resignation letter, Barr described his time in the position of vice chair for supervision as "an honor and a privilege."
Barr's decision to step down was celebrated by Republicans in Congress, admonished by consumer advocacy groups and met with mixed responses by academics and analysts.
Brian Gardner, chief Washington policy strategist for the investment firm Stifel, called the "unexpected" announcement "a positive for banks." In an analyst note, he said the move not only avoids a messy legal showdown, but will also likely result in "some behind-the-scenes relief immediately."
Gardner added that he expects the change of personnel to create a more favorable merger and acquisition approval process and an end to the Basel III endgame proposal championed by Barr and other Biden-era regulatory chiefs. He added that it will also expedite the implementation of Trump's banking policies.
"Mr. Barr's term as vice chairman was scheduled to run into 2026, so while the election of Mr. Trump was a positive for bank stocks, we cautioned that changes at the Fed would be slower than at other agencies," Gardner wrote. "Today's announcement generally puts the Fed on the same schedule as other bank regulatory agencies. While much of the Trump trade appears to be already priced into bank stocks, we think the probability of an accelerated timetable is still a positive for the sector."
The incoming chairs of the Senate Banking Committee and House Financial Services Committee both celebrated the resignation. Sen. Tim Scott, R-S.C., who is set to lead the upper chamber's financial oversight committee, said Barr's departure was warranted in light of banking stresses and stalled reform pushes that occurred on his watch.
"The Federal Reserve Vice Chair for Supervision is mandated by law to oversee the safety and soundness of our banking system. 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," Scott said. "I stand ready to work with President Trump to ensure we have responsible financial regulators at the helm."
Rep. French Hill, R-Ark., said he was "pleased" by the news of Barr's self-demotion.
"I look forward to working with President Trump's choice for Fed Vice Chair for Supervision," Hill wrote on the social platform X. "It's my preference that his nominee is committed to tailoring bank regulatory policies and implementing a balanced approach to prudential supervision."
Others were frustrated by the decision. Dennis Kelleher, head of the advocacy group Better Markets, said Monday would go down as a "dark day in the history of the Fed," arguing in a lengthy written statement that Barr's decision would effectively hand control of the central bank's oversight functions to "deregulation zealots."
Like others, Kelleher also pointed to the Fed Board's commitment not to take on major rulemakings until a new vice chair for supervision has been named, as a sign that the institution was acquiescing to the political whims of the incoming administration.
"Facilitating that — while destroying the independence of the vice chair position and gutting a key post-2008 crash reform — is an abdication of responsibility proved by the Fed's simultaneous statement that it 'does not intend to take up any major rulemakings until a vice chair for supervision successor is confirmed,'" Kelleher wrote. "The entire mission and mandate of the vice chair for supervision will now likely be a dead letter as a deregulator will undoubtedly be installed in that position."
Similarly, Jeff Hauser, executive director of the Revolving Door Project — a watchdog group focused on presidential appointees — lambasted Barr for, in his view, stepping aside to allow the Trump administration to implement its bank policy preferences.
"Michael Barr could have forced the Trump administration to jump over legal hurdles to slow, and potentially thwart, the Wall Street-approved plan to prematurely oust him as the Federal Reserve's vice chair for supervision," Hauser said in a prepared statement. "Instead, Barr is resigning without a fight, accelerating the timeline on which Trump can give big banks free rein to rip off working families. Barr's decision exemplifies anticipatory acquiescence — something that other public officials must avoid if they do not wish to expedite Trump's looting of America."
Others view Barr's decision more favorably. Peter Conti-Brown, a leading Fed scholar and professor at the University of Pennsylvania's Wharton School, called Barr's decision to relinquish his vice chairmanship but remain on the board "an incredibly courageous act."
"This means that his voice and leadership as a Fed governor will stay in place, but the prerogative of re-shifting federal banking policy — the most important aspect of which is naming the banking regulators — goes to the person just elected president of the United States," Conti-Bown wrote on his
Conti-Brown also noted that with no vacancies on the board, the administration will be incentivized to elevate an existing governor to the position of vice chair for supervision. He pointed to Bowman and fellow Trump appointee Gov. Christopher Waller as the two most logical choices.
"For those more interested in the Fed's institutional credibility and efficacy and less interested in the partisan politics of it all, the biggest point is that both would be exceptional," he wrote. "Each is eminently qualified to serve as vice chair for supervision."
