Michael Barr's vision and integrity

I think Michael Barr just performed an incredibly courageous act and commend him for it

Blockbuster news in the banking world as Michael Barr, the Vice Chair for Supervision at the Federal Reserve, announced that he will resign his leadership position but retain his Governorship. This means that his voice and leadership as a Fed Governor will stay in place, but the prerogative of reshifting federal banking policy—the most important aspect of which is naming the banking regulators—goes to the person just elected President of the United States.

There will be many partisans who will view this resignation with alarm. There is an argument that Barr should have fought tooth and nail to retain his leadership, to push for the Democrats’ vision of bank regulation and supervision, and that Democrats should stop negotiating themselves and learn to use power.

I am completely unpersuaded by those views. Michael Barr just performed an incredibly courageous act by his resignation of the Vice Chair, especially as he retained his role as a Governor.

By doing so, he also limited President Trump’s political options in succeeding him. By statute, the Vice Chair for Supervision must also be a Fed Governor. Generally, though hardly always, a new Fed Chair or Vice Chair will be nominated simultaneously with a separate appointment to be a Governor. This luxury is available because, historically, the Board has almost always been punching at less than full freight: every president until the end of the first Trump Administration tolerated ever-rising vacancies on the Board (fun fact: my first ever op-ed in 2014 was on precisely this subject.)

But that’s not the case today. There are no vacancies at the Fed. That means that President Trump he only Republicans currently serving on the Board of Governors (besides Jay Powell himself) are Christopher Waller and Michelle Bowman. I don’t know Waller’s politics as well, but I know Bowman is a solid choice for a Republican president and imagine Waller is too.

For those more interested in the Fed’s institutional credibility and efficacy and less interested in the partisan politics of it all, the biggest point is that both would be exceptional. Each is eminently qualified to serve as Vice Chair for Supervision.

I imagine that Barr’s decision is bitter-sweet. Sweet because it is good for America, good for the Fed, and frankly probably good for him (though I may be projecting). As I said in a profile by Kyle Campbell, I thought that Barr was in “one of the most untenable positions” in Washington, given how little power he had independent of the Board and how overwhelming the political pressure would be to do anything like produce a meaningful prospective agenda. I may be projecting here, but in Barr’s shoes and given that context, I would regard the resignation as an overwhelming relief.

But that resignation surely brings some bitterness as he looks back on what he has accomplished over the past 2.5 years. From that perspective, there must be frustration for Barr and his supporters. Given that I count myself among the latter group, I do view that record with a sense of what might have been.

In a post in this blog a few weeks ago, I outlined what I regarded as the “complicated options” facing the Barr. He chose the best one. The genius of his decision is that his legacy at the Fed is only just beginning.

The best thing he has done so far is what he did today. For that courageous act, I commend him.