WASHINGTON — The Federal Reserve’s top financial regulator said Monday he would resign next month, avoiding a potential confrontation with the new Trump administration and Senate Republicans.
Fed Governor Michael Barr said in a letter to President Joe Biden that he would step down as vice chairman for oversight on February 28, or sooner if a successor is confirmed. Still, Barr said he would remain on the Fed’s board of governors. His term as governor lasts until 2032.
Barr oversaw the proposal of strict new rules for the largest US banks, which would have required them to significantly increase their financial reserves. The proposal drew fierce opposition from the largest financial companies, including JPMorgan Chase, and sharp criticism from Senate Republicans.
During last year’s presidential campaign, reports emerged that former President Donald Trump would try to fire or demote Barr. But at a news conference in November, Fed Chairman Jerome Powell said a president does not have the legal authority to do both.
Senator Tim Scott, who is set to become chairman of the Senate Banking Committee, which oversees the Fed, on Monday called Barr’s proposed financial regulations “disastrous.” He has previously said they would restrict bank lending and weaken the economy.
“Michael Barr has failed to meet the responsibilities of his office,” Scott said in a statement. “I stand ready to work with President Trump to ensure we have responsible financial regulators at the helm.”
By resigning as vice president, but not as governor, Barr has limited the Trump administration’s ability to replace him. All seven seats on the Fed’s Board of Governors are filled, and there won’t be an opening until Governor Adriana Kugler’s term ends on January 31, 2026.
As a result, President-elect Trump can only appoint another current governor to the top regulatory position for now, or wait until next year to fill the board vacancy with a new regulator. Gov. Michelle Bowman, a Republican appointee, has publicly supported less stringent financial regulations and is a potential replacement.
“The risk of a position dispute could be a distraction from our mission,” Barr said in a Fed statement. “In the current environment, I have decided that my role as governor would allow me to be more effective in serving the American people.”
Barr took office in June 2022 and later became embroiled in the spring 2023 wave of bank failures that began with Silicon Valley Bank, the third-largest failure in U.S. history. Barr oversaw the drawing up a report who blamed watered-down banking regulations, the Fed’s own executives and the banks’ managers for the failures.
Barr then proposed tightening banking rules, especially for banks with $100 billion or more in assets, by requiring them to keep more capital in reserve. Previously, Trump appointees at the Fed had relaxed rules for banks with less than $250 billion in assets.
Still, these rules were met with fierce opposition from the banking industry, prompting Powell to do so announced last March that they would be revised.
The Fed said Monday that it “does not intend to issue major regulations until a successor supervisor is confirmed.”