WASHINGTON, USA — Michael Barr, the Federal Reserve’s top banking regulator, announced on Thursday, that he will step down from his role early, citing concerns over potential political disputes as the country prepares for a new administration under President-elect Donald Trump.
Mr Barr, who had championed stricter oversight following a series of high-profile bank failures in 2023, will vacate his position as vice chair for supervision, though he will remain on the Fed’s board in a reduced capacity.
His term was originally set to expire in 2026.
“The risk of a dispute over the [vice president for supervision] position could be a distraction from our mission,” Mr Barr said in a statement on Thursday, January 9, 2025, avoiding any direct reference to Mr Trump.
“In the current environment, I’ve determined that I would be more effective in serving the American people from my role as [Fed board] governor.”
The decision paves the way for Mr Trump to appoint a replacement from within the Fed’s existing board, as the supervisory role was established after the 2008 financial crisis to improve oversight of the banking system.
A Wave of Pre-emptive Resignations
Mr Barr’s announcement follows similar moves by other key Washington officials ahead of the new administration.
Gary Gensler, chair of the Securities and Exchange Commission, recently said he would step down this month, despite his term also extending until 2026.
Last month, FBI Director Chris Wray declared his intention to leave office two years before the end of his tenure, amid speculation he would be replaced.
The departures underscore the heightened tension surrounding leadership transitions, particularly in roles that President-elect Trump has previously criticised.
Banking Rules in Focus
Throughout his tenure, Mr Barr faced pushback from Republican lawmakers over his push for stricter banking regulations, particularly in the wake of last year’s bank collapses.
His departure sidesteps what could have become a protracted legal battle over the president’s authority to reassign specific positions within the Fed.
Although Fed governors are protected from removal by the president except “for cause,” the same clarity does not extend to particular board roles such as the vice chair for supervision.
Trump’s transition team had reportedly been exploring legal options to challenge Mr Barr’s continuation in the role.
In response to the resignation, the Fed stated that Mr Barr would leave on 28 February or when a successor is confirmed. The central bank also indicated that it would halt plans for new banking regulations until the supervisory position is filled.
Market Reaction
Shares in major U.S. banks rose following the announcement, reflecting optimism among financial institutions wary of additional regulatory scrutiny.
Mr Barr’s exit marks another key shift in Washington’s regulatory framework as President-elect Trump prepares to assume office later this month.
Whether these changes signal a broader rollback of financial oversight remains to be seen.