WASHINGTON — The Federal Reserve’s leading financial regulator announced on Monday his decision to resign next month, a move likely aimed at evading a clash with the forthcoming Trump administration and GOP senators.
Michael Barr, currently serving as the vice chair for supervision, notified President Joe Biden in a letter of his intention to step down on February 28 or sooner if a replacement is appointed. Nonetheless, he will continue to serve as a member of the Fed’s board of governors, a position he holds until 2032.
Barr was responsible for proposing stringent new regulations for the largest banks in the U.S., which would have mandated these institutions to significantly boost their financial cushions. His proposals faced strong pushback from major financial companies, including JPMorgan Chase, and were heavily scrutinized by Republican senators.
During the prior presidential campaign, there were reports suggesting that former President Donald Trump may attempt to oust or demote Barr. However, Fed Chair Jerome Powell stated in a November press conference that a president lacks the legal power to carry out such actions.
Senator Tim Scott, expected to chair the Senate Banking Committee — the entity overseeing the Fed — described Barr’s proposed regulations as “disastrous” on Monday. He has expressed concerns that such measures would hinder bank lending capabilities and adversely affect the economy.
“Michael Barr has failed to meet the responsibilities of his position,” Scott commented in a statement. “I stand ready to collaborate with President Trump to ensure we have responsible financial regulators at the helm.”
By resigning from his vice chair role while retaining his governor position, Barr has restricted the Trump administration’s choices for his replacement. The Federal Reserve’s board of governors is currently full, with the next available position not occurring until Governor Adriana Kugler’s term concludes on January 31, 2026.
Consequently, President-elect Trump can either appoint an incumbent governor to the regulatory position or wait until next year to fill the board vacancy with a new regulator. Governor Michelle Bowman, a Republican appointee, has advocated for less stringent regulations and could be a potential candidate for the role.
Barr explained that he believes stepping down from the vice chair role would minimize the risk of distractions from the Fed’s mission, stating, “In the current environment, I’ve determined that I would be more effective in serving the American people from my role as governor.”
Since taking office in June 2022, Barr has been involved in the fallout from a series of bank failures in the spring of 2023, starting with Silicon Valley Bank, noted as the third-largest collapse in U.S. banking history. He prepared a report attributing these failures to relaxed bank regulations, the Fed’s staff actions, and decisions made by the banks’ management teams.
Following these events, Barr recommended tightening regulations, specifically targeting banks with over $100 billion in assets by demanding they hold additional capital reserves. In contrast, previous Trump administration appointees had relaxed regulations for banks with less than $250 billion in assets.
These proposed regulations faced significant backlash from the banking industry, leading Powell to announce in March that adjustments would be made. The Federal Reserve indicated on Monday that it “does not intend to take up any major rulemakings until a successor for the vice chair of supervision is confirmed.”
