The United States Federal Reserve’s top financial regulator, Michael Barr, said he would resign next month to avoid a potential confrontation with President-elect Donald Trump and Republicans in the Senate.
In a letter to President Joe Biden, Fed governor Barr said he would step down as vice chair for supervision on 28 February or earlier if a successor was confirmed. He will however remain on the board of governors with his term lasting until 2032.
In a statement, Barr said while it has been an honour to serve the American people, he believes it is in the best interest of the country for him to stand down.
“The risk of a dispute over the position could be a distraction from our mission,” he said.
“In the current environment, I've determined that I would be more effective in serving the American people from my role as governor."
Barr was known for overseeing the proposal of tough new laws for the largest U.S. banks which required them to significantly increase their financial revenues. This sparked criticism from Senate Republicans and fierce opposition from the largest financial firms.
During last year’s presidential campaign, reports were published where Trump said he would try and fire or demote Barr if elected, however, Fed Chair Jerome Powell said the president does not have the legal authority to do so at a press conference in November.
Senator Tim Scott, who is in line to chair the Senate Banking Committee which oversees the Fed, said Barr’s proposed financial laws were “disastrous”.
“Michael Barr has failed to meet the responsibilities of his position,” he said.
“I stand ready to work with President Trump to ensure we have responsible financial regulators at the helm.”
Due to Barr stepping down as vice chair but not governor, the Trump administration’s options to replace him have been limited. As there are no current openings on the Fed Board of governors until 31 January 2026, Trump can only appoint another current governor to the position.
A potential replacement is Republican governor Michelle Bowman who has publicly supported less stringent financial regulations.
Barr follows in the footsteps of the head of the Securities and Exchange Commission, Gary Gensler, and FBI director, Chris Wray, who also preemptively resigned ahead of Trump entering the White House later this month.