Michael Barr’s term as the Federal Reserve’s vice chair for supervision technically runs until July 2026. But history suggests a shift may come sooner now that Donald Trump is returning to the White House.
Barr, formerly a Treasury official in the Obama administration, is currently one of the most important financial regulators in the U.S. He has pressed to reverse many of the banking policies put in place during Trump’s first term as president and remaining in office would create a conflict between the central bank and the elected branches of the U.S. government.
Even before the 2020 election, Barr was on record as criticizing the Trump administration’s banking reforms.
“We need to undo the damage caused by the last four years of policy,” Barr said in June 2020.
In the past, Fed officials in his role have stepped down when a president from the opposite party took office. Randy Quarles, appointed by Trump to the vice chair role, stepped down as a Fed governor about 10 months after Biden took office. Although his term as vice chair for supervision had already expired, his term as Fed governor had years to run. In the first Trump administration, Dan Tarullo stepped aside early from his role as the Fed’s chief bank regulator and resigned as Fed governor, although he had already served eight years in the role and was never formally confirmed as vice chair.
While some Trump supporters think of the Quarles and Tarullo departures as setting an informal precedent for the vice chair to move aside to make room for the new administration’s regulatory priorities, some of Barr’s allies privately argue that he should stay on. They say the position of Vice Chair for Supervision is new enough—it was created by the 2010 Dodd-Frank banking reforms—that there really isn’t a precedent and that Quarles remained in the position for months after Biden’s election.
This time around, however, Barr’s direct criticism of Trump and the conflict of his positions with that of the administration could make remaining in the position untenable. It could lead to outright disputes on bank regulation between the elected government of Trump and the central bank, something central bankers typically seek to avoid.
Should Barr decide to follow this informal precedent, the new administration could swiftly steer financial regulatory policy to embrace its goals of energy abundance and domestic technology manufacturing. This could include reversing attempts to pressure banks and financial institutions away from financing fossil fuel projects, such as fracking and pipelines.
While some of Trump’s advisors have informally explored the idea of replacing Barr before his term expires, that would be legally fraught and could wind up in a lengthy court battle. It would be far preferable for Barr to step aside to make room for the new administration’s electoral mandate, a person familiar with discussions in the Trump camp said.
Removing Barr as supervisor would not interfere with the Fed’s independence on monetary policy. Barr’s term as Fed governor is slated to last until 2032 and he could, in theory, remain governor while giving up the vice chair role, although that would be unprecedented.
Fed Governor Michelle Bowman is widely seen as a top contender to succeed Barr, although Trump advisors caution that any decision on that would be premature prior to Barr’s resignation.
Meanwhile, former President Donald Trump has already made it clear he doesn’t intend to remove Jerome Powell as Fed chair prior to the expiration of his term May 2026. But there’s no question that Trump intends to appoint a new head for the central bank once Powell leaves the role. Some of Trump’s allies have suggested that Powell should also step aside, given the history of Trump’s criticism of Powell and the Fed’s decision to cut rates by 50 basis points just weeks ahead of the election.