Fed candidate Michael Barr pushed to reverse Trump-era banking policies

WASHINGTON — Former Treasury Department official Michael Barr is expected to pursue tighter oversight of the financial system and reverse some Trump-era policies if he wins confirmation as the Federal Reserve’s top banking regulator.

Barr, who worked in the Obama administration, faces the Senate Banking Committee in a confirmation hearing on Thursday, a stumbling block to a four-year term as the Fed’s vice chairman for oversight. . If confirmed by the Senate, he would become America’s most influential financial regulator and have a say in monetary policy.

He would complete President Biden’s list of central bank appointees. Fed Chairman Jerome Powell and three other central bank appointments have been confirmed in recent weeks.

Randal Quarles, who previously held the Fed supervisory role, focused on simplifying financial regulation.


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News from Zach Gibson/Bloomberg

Mr. Barr, a 56-year-old dean of public policy at the University of Michigan, has a dossier that suggests he may seek to restore at least some of the financial rules that have been relaxed by the Fed under the administration. Trump.

Randal Quarles, who previously served as Fed supervisor, focused on simplifying financial regulations enacted after the 2008-09 financial crisis, moves that proponents say clarified or better calibrated the rules of the central bank, but which some Democrats say have significantly lessened the impact of the Wall Street Rule Book.

“We need to undo the damage done by the last four years of policy,” Mr. Barr said in June 2020, referring in part to Trump-era policies that reduced capital and other cash management requirements for major US lenders.

The Biden administration is hoping Mr. Barr will win support from progressive and moderate Democrats.

President Biden’s first nominee for the Fed’s top job, Sarah Bloom Raskin, withdrew from consideration in March after Sen. Joe Manchin (D., W.Va.) said he would not couldn’t support the nomination, citing his views on tackling climate change. Her vote was key to the 50-50 Senate with a unified Republican opposition to Ms. Raskin.

On Tuesday, Mr Manchin said he planned to support Mr. Barr, after meeting him privately last week. It was unclear whether Mr Barr would receive Republican support. Pennsylvania Sen. Pat Toomey, a GOP member on the Senate Banking Committee, said last month he had concerns about Mr. Barr over his involvement in Dodd-Frank’s financial overhaul.

Michael Barr was Assistant Secretary of the Treasury Department for Financial Institutions during the Obama administration.


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Andrew Harrer/Bloomberg News

Last year, Mr Barr was a candidate for the post of Comptroller of the Currency, another top banking job, before skepticism from progressives thwarted that offer. The White House’s eventual pick for the role, Saule Omarova, stepped down after opposition from moderate Democrats, and the position still does not have a confirmed Senate nomination.

Some progressives had raised concerns about Mr. Barr’s previous work for fintech companies Ripple Labs Inc. and LendingClub. Corp.

, arguing that his ties could conflict with his role as regulator. But progressive Sen. Elizabeth Warren (D., Mass.) said she would support Mr. Barr and, in a 2014 book, described him as a hero for helping to create the Consumer Financial Protection Bureau.

While Mr. Barr’s approach may conflict with that taken by Mr. Quarles, Mr. Powell said he would generally defer to whoever succeeds Mr. Quarles. “I respect that this is the person who sets the regulatory agenda going forward,” Powell said in September.

Friends and former colleagues have said that if Mr. Barr tries to change direction at the Fed, they expect him to take a collaborative and pragmatic approach. An academic known for his work on financial inclusion and consumer advocacy, Mr. Barr worked in the Treasury Department during the Clinton and Obama administrations, including as a top lieutenant to then-Treasury Secretary Timothy Geithner. Mr. Barr played an architect role in the 2010 Dodd-Frank financial overhaul.

He co-authored a handbook on financial regulation and wrote a 2012 book, “No Slack,” which argues that low-income people often don’t have access to the kind of financial services that middle-income families do. average take for granted.

Analysts said they expected Mr Barr to pursue relatively modest steps to tighten bank stress tests, rather than wholesale revisions to the annual exercise to test whether big lenders are capable of withstand a severe recession.

Similarly, Mr. Barr is not expected to spend time reviewing measures to facilitate compliance with the Volcker Rule, a Dodd-Frank requirement that prevents banks from trading unless it is on behalf of customers.

“Volcker is a political headache that would get in the way of real work,” said Steven Kelly, associate fellow with the Yale Financial Stability Program.

A first test of Mr Barr’s approach could come from the way he proposes to treat Treasury bills and deposits that banks hold with the central bank under capital requirements known as the ratio. additional leverage. The Fed allowed a temporary pandemic-related reprieve to expire on capital requirements last year, but promised to offer a broader overhaul of the treatment of the ultra-safe asset rule. He hasn’t done it yet.

Top-ranking Democrats such as Senate Banking Committee Chairman Sherrod Brown (D., Ohio) and House Financial Services Committee Chair Maxine Waters (D., Calif.) have said any extension of the relief would be a mistake, weakening the post-crisis regulatory regime. Republicans and Banks generally pushed for an extension.

Write to Andrew Ackerman at [email protected]

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