Biden to nominate Michael Barr as Fed bank regulator

Biden to nominate Michael Barr as Fed bank regulator

President Joe Biden will appoint Michael Barr as the Federal Reserve’s chief regulator of big banks. Barr, who served as Assistant Treasury Secretary for Financial Institutions during the Obama administration, here at a Treasury Department meeting in Washington, DC on November 30, 2010.

Andreas Harrer | Bloomberg | Getty Images

President Joe Biden will appoint Michael Barr, a former Treasury Department official, to be the Federal Reserve’s chief regulator of big banks.

Barr’s election was expected after CNBC confirmed earlier in the week that he is the White House lead candidate for the post. It would make the leading author of financial legislation perhaps the most powerful US banking regulator: the Fed’s deputy supervisor.

Barr served as Assistant Treasury Secretary for Financial Institutions during the Obama administration, where he helped draft the 2010 Dodd-Frank Act. This law was one of the largest financial regulatory overhauls in US history and followed the financial crisis of 2008-2009.

Among his many regulations designed to protect the economy from future disasters, Dodd-Frank created both the Consumer Financial Protection Bureau (CFPB) and the Fed’s vice chairman for oversight.

“He was instrumental in passing Dodd-Frank to ensure that any future financial crisis would not bring devastating economic hardship for working families,” Biden said in a statement Friday morning accompanying the formal White House announcement.

“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 added .

The president also underscored the fact that Barr had the support of both Democrats and Republicans when he was previously confirmed by the Senate.

This may be an indirect acknowledgment of the difficulties the administration faced trying to advance some of its candidates for financial oversight posts in a 50-50 Senate situation.

Sarah Bloom Raskin, Biden’s first choice as the Fed’s banking regulator, withdrew her candidacy last month. She withdrew from the scrutiny after Joe Manchin of West Virginia, the most conservative Senate Democrat, said he would not support her nomination because of her views on climate change and energy policy ideas.

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Barr himself had been seen as Biden’s choice to head the Office of the Comptroller of the Currency last year. But progressive Democrats, concerned about what they saw as his close ties to Wall Street, quashed his candidacy.

The White House later selected Saule Omarova to replace Barr as the nominee for leadership of the OCC until November, when she was forced to withdraw due to skepticism from moderate Democrats Mark Warner of Virginia and Jon Tester of Montana.

By tapping Barr again, the White House is betting that Raskin’s withdrawal through Manchin is enough to persuade progressives – who might have preferred Raskin – to support a more centrist election.

Those Democrats would likely want Barr to reveal the details of his past work for financial technology companies like Ripple Labs, a blockchain-based payments company, to ensure he is insulated from corporate interests.

Still, those familiar with the White House mindset say the president’s advisers believe they can persuade senators like Elizabeth Warren, D-Mass., who previously credited Barr’s work in writing Dodd-Frank and founding the CFPB applauded.

Later Friday, Warren resolved that guesswork with a confirmation of the president’s election.

“The Fed’s Vice Chairman for Oversight is a vitally important financial regulator with the responsibility to hold the largest banks to account and prevent the next financial crisis,” Warren wrote in a post on Twitter.

“During the Obama administration, Michael Barr was a key force in the creation of the Consumer Financial Protection Bureau, and I intend to support President Biden’s nominee for this important role at the Fed,” she added.

Moderate Democrats, such as Ohio Senator Sherrod Brown, who chairs the Senate Banking Committee, are seen as a more reliable pillar of support for veterans of the Obama and Clinton administrations.

Sen. Sherrod Brown (D-Ohio), left, speaks with Sen. Elizabeth Warren (D-Mass.), during a Senate session on Banking, Housing and Urban Affairs in Washington, DC.

Andreas Harnik | The Washington Post | Getty Images

A Republican adviser told CNBC that Barr would likely receive many no votes from their ranks based on his work, which many in the GOP would draft as overly onerous financial regulations.

If Barr is confirmed for the Fed post, he would be tasked with overseeing the country’s largest banks, including JPMorgan Chase, Bank of America and Citigroup. The Vice-Chairman for Oversight oversees the safety of the country’s largest lenders, checking whether they meet capital requirements, assessing risks and subjecting banks to regular stress tests.

Barr would also be a major voice in monetary policy as one of seven members of the Fed’s Board of Governors who vote at every central bank meeting.

The Fed began a series of rate hikes last month, which are expected to be a series of rate hikes to cool stubborn inflation. The Labor Department reported Tuesday that the prices Americans pay rose 8.5% in the 12 months to March, the fastest pace since 1981.

But imposing higher borrowing costs on the US economy is a tricky task at the best of times.

Economists, including Treasury Secretary and former Fed Chair Janet Yellen, say the Fed must be careful not to backtrack on its easy money policy too quickly or risk US GDP growth amid ongoing supply chain constraints and the Russia-Ukraine war in Europe.

“You have a double mandate. They will try to maintain strong job markets while bringing inflation down,” Yellen said of the Fed on Wednesday. “And that has been done in the past. It’s not an impossible combination, but it does require skill and a lot of luck too.”

With the exception of Barr, the White House has four nominees for the Fed before 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 post he accepted after working for the Obama administration. During the Clinton administration, he served as Special Assistant to Treasury Secretary Robert Rubin, Deputy Assistant Treasury Secretary, and Special Advisor to President Bill Clinton.