President Joe Biden announced, on April 15, 2022, his intent to to nominate Michael Barr as the Federal Reserve Board's (FRB) next vice chair for supervision, a key banking regulatory post. Biden's first pick, Sarah Bloom Raskin, withdrew her nomination in the face of opposition from a majority of senators, including all 50 Republicans plus Democrat Joe Manchin of West Virginia.
Biden's statement indicates that he finds fighting inflation to be a major policy imperative right now, and that the Federal Reserve has a "critical role" in this effort. Biden hailed Barr for a "career protecting consumers," especially his "critical role" in creating the Consumer Financial Protection Bureau (CFPB), the position for which he is being nominated now (i.e., FRB vice chair for supervision), and in securing the passage of the Dodd-Frank Act.
- President Biden intends to nominate Michael Barr to be the Fed's vice chair for supervision.
- He replaces Sarah Bloom Raskin, who withdrew in the face of certain defeat before the full Senate. Barr is seen as a more centrist choice.
- Currently a law professor, he previously served in the Obama and Clinton administrations.
- Barr is credited with playing key roles in crafting Dodd-Frank and the Consumer Financial Protection Bureau (CFPB).
Why Raskin's Nomination Foundered
Raskin's nomination foundered on Republican concerns that, if confirmed, she would use her seat on the FRB to advance her views on climate change through regulatory overreach. In an opinion piece written in September 2021, Raskin stated that "U.S. financial regulators have yet to show that they are thinking about creative solutions [to climate change]." She indicated, "Many of these risks can still be mitigated, but only if regulators in the United States can break some bad habits."
Who Is Michael Barr?
Michael S. Barr is currently a law professor at the University of Michigan Law School and the founder and faculty director of the University of Michigan's Center on Finance, Law & Policy. He has taught financial regulation and international finance. He also has co-founded the International Transactions Clinic and the Detroit Neighborhood Entrepreneurs Project at that institution.
Barr served in the Obama administration as the U.S. Department of the Treasury's assistant secretary for financial institutions, and the White House press release calls him "a key architect" of the Dodd-Frank Act. He also served on the National Economic Council (NEC). In the Clinton administration, Barr served as Treasury Secretary Robert E. Rubin’s special assistant, as deputy assistant secretary of the Treasury, as special adviser to President Clinton, and as a special adviser and counselor on the policy planning staff at the U.S. Department of State.
Outlook for Barr's Nomination
Barr had been mentioned in 2021 as a possible pick by Biden to be Comptroller of the Currency, but he faced opposition from the left wing of the Democratic Party over concerns that he was too close to Wall Street. Still, the White House is hoping that Democratic Senator Elizabeth Warren of Massachusetts will emerge as a key supporter, given her past praise of Barr's work on creating Dodd-Frank and the CFPB.
However, while he is seen as a much more centrist choice than Raskin, a Republican Congressional aide told CNBC that Barr is likely to receive many nay votes from Senate Republicans based on his work crafting what many of them view as excessive financial regulations.