By Pete Schroeder
WASHINGTON (Reuters) -Michael Barr, the Federal Reserve’s top regulatory official, said on Monday he plans to step down from that post on Feb. 28, avoiding a potentially messy legal fight with President-elect Donald Trump over his future at the U.S. central bank.
Barr said in a statement he was stepping down from his role as the central bank’s vice chair of supervision over a year before his term expires, but planned to keep his seat on the Fed’s Board of Governors.
The central bank said in the statement it would take up no major rulemaking until a successor to the regulatory role is confirmed. Barr’s exit clears the way for Trump, who will be sworn in on Jan. 20, to appoint all new bank regulators for the U.S. government and begin work on a more industry-friendly agenda. Barr’s term was not set to expire until July 2026, and he had previously told Congress he intended to remain in the position.
While not naming Trump, Barr said in a statement the “risk of a dispute” over his job could be a “distraction” from the Fed’s mission. Reuters had previously reported that Barr, a Democrat, had sought legal advice from an outside law firm to explore his options should Trump try to remove him.
Barr’s decision to remain as a Fed governor, however, limits Trump’s options for naming a successor. There are no open seats on the Fed’s seven-member board, meaning he would either need to select a new regulatory chief from the existing ranks, or move one of those officials to a separate post elsewhere in government to free up a spot.
Fed Governor Michelle Bowman, who has been regularly critical of Barr’s efforts to impose tougher rules on the banking sector, is widely seen by lobbyists and analysts as a candidate to replace him.
Tapped by President Joe Biden, Barr pursued an aggressive agenda in an effort to impose a range of stricter rules on the nation’s biggest banks. Those efforts were met with intense opposition from the banking industry, which has intensely lobbied against his efforts and filed multiple lawsuits against rulemaking under the Biden administration.
There were reports in recent months that Trump’s advisers were looking for ways to increase the incoming White House’s sway over the Fed, alarming officials and investors who argue that the central bank’s independence is necessary for it to be able to properly set monetary policy.
A spokesperson for Trump’s transition did not immediately respond to a request for comment.
Fed Chair Jerome Powell, who was appointed to his role as central bank chief by Trump only to be subsequently criticized for his decisions on interest rates, was seen as a target of the incoming president. But Powell said after the Nov. 5 presidential election that Trump would not have the authority to remove him. Trump subsequently said he does not intend to remove Powell.
The law establishing the Fed says the president is only allowed to fire Fed governors for cause, but it is silent on whether Trump would have the power to demote Barr from his role as vice chair for supervision. Powell has previously said demoting Fed officials is not permitted under the law.
(Reporting by Pete Schroeder and Ann Saphir; Editing by Paul Simao)
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