Michael Barr, a former Treasury Department official, will be nominated by President Joe Biden to be the Federal Reserve’s top bank regulator.
Barr’s selection was predicted after CNBC reported earlier this week that he was the White House’s top candidate for the job. It would make the primary financial law author, the Fed vice chair of supervision, the most powerful bank regulator in the United States.
During the Obama administration, Barr worked as an assistant Treasury secretary for financial institutions, where he helped draught the Dodd-Frank Act of 2010. That law, which came after the financial crisis of 2008-2009, was one of the most comprehensive overhauls of financial regulation in US history.
Dodd-Frank created the Consumer Financial Protection Bureau (CFPB) and the Fed’s vice chair for supervision, among many other regulations aimed at protecting the economy from repeat disasters.
“He was instrumental in the passage of Dodd-Frank, to ensure a future financial crisis would not create devastating economic hardship for working families,” Biden said in a statement released alongside the formal White House announcement on Friday morning.
“He understands that this job is not a partisan one, but one that plays a critical role in regulating our nation’s financial institutions to ensure Americans are treated fairly and to protect the stability of our economy,” Biden continued.
The president also highlighted that when Barr was previously confirmed by the Senate, he got bipartisan support from both Democrats and Republicans.
That could be an oblique acknowledgement of the administration’s difficulty in getting some of its nominations for finance regulatory roles through the Senate, which is split 50-50.
Last month, Sarah Bloom Raskin, Biden’s original choice for the Federal Reserve’s bank supervisor, withdrew her candidacy. She dropped out after West Virginia’s Joe Manchin, the Senate’s most conservative Democrat, indicated he wouldn’t support her candidacy because of her views on climate change and energy policy.
Last year, Barr was considered by Biden as a candidate to lead the Office of the Comptroller of the Currency. But his candidacy was snuffed out by radical Democrats, who were concerned about his intimate links to Wall Street.
After criticism from moderate Democrats Sens. Mark Warner of Virginia and Jon Tester of Montana, the White House nominated Saule Omarova to replace Barr as its choice to oversee the OCC until she was forced to resign in November.
The White House is betting that Raskin’s resignation at Manchin’s hands will persuade progressives — who might have preferred Raskin — to support a more centrist candidate.
Democrats are likely to demand that Barr reveal details of his previous work for financial technology companies such as Ripple Labs, a blockchain-based payments firm, in order to ensure that he is free of corporate interests.
Those familiar with the White House’s thinking say the president’s advisers hope they can persuade senators like Elizabeth Warren, D-Massachusetts, who previously praised Barr’s work on Dodd-Frank and the creation of the Consumer Financial Protection Bureau.
Moderate Democrats, such as Ohio Senator Sherrod Brown, the head of the Senate Banking Committee, are seen as more solid allies for the Obama and Clinton administration veterans.
Based on his work establishing what many in the GOP consider unduly burdensome banking rules, a Republican aide told CNBC that Barr would certainly earn many no votes from his party’s ranks.
Barr would be in charge of overseeing the nation’s top banks, including JPMorgan Chase, Bank of America, and Citigroup, if confirmed for the Fed post. The vice chair for supervision is in charge of ensuring that the country’s largest lenders are secure by ensuring that they satisfy capital requirements, assessing risks, and putting banks through regular stress tests.
As one of seven members of the Fed’s board of governors who vote at every central bank meeting, Barr would be a powerful voice on monetary policy.
Last month, the Federal Reserve began the first of what is expected to be a series of interest rate hikes aimed at taming wild inflation. The Labor Department announced on Tuesday that prices in the United States increased by 8.5 percent in the year ended in March, the fastest rate since 1981.
However, even in the best of times, forcing increased borrowing costs on the US economy is a difficult undertaking.
Economists, including Treasury Secretary and former Fed Chair Janet Yellen, say the Fed must be careful not to reverse its easy-money policies too quickly, or the United States’ GDP growth will be jeopardised in the face of ongoing supply-chain constraints and the European conflict between Russia and Ukraine.
“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 has been done in the past. It’s not an impossible combination, but it will require skill and also good luck.”
Barr apart, the White House has four Fed candidates before the Senate: Jerome Powell, Lael Brainard, Lisa Cook, and Philip Jefferson.
Barr is currently the dean of the University of Michigan’s public policy school, a position he took after serving in the Obama administration. He worked as a special assistant to Treasury Secretary Robert Rubin, deputy assistant secretary of the Treasury, and special advisor to President Bill Clinton during the Clinton administration.