The Federal Reserve's top banking regulator is set to step down next month, paving the way for President-elect Donald Trump to name a replacement and avert a potential showdown between the two.
Michael Barr's resignation from his position, officially called Vice Chairman for Supervision, takes effect as of February 28, although he will remain as Federal Reserve Governor. His term as Federal Reserve Governor continues until 2026.
There has been speculation that Trump may seek to replace Barr after he takes office on January 20, and this announcement will ease that transition amid speculation that the new president wants someone more bank-friendly to take the job.
Although he did not specifically mention rumors that Trump would try to impeach him, Barr said in a statement that “the risk of a conflict over office could be a distraction from our mission. In the current environment, I have decided that I will do just that.” “I will be more effective in serving the American people in my role as governor.”
“It has been an honor and privilege to serve as the Federal Reserve's Vice Chairman for Supervision, and to work with colleagues to help keep the U.S. financial system stable and strong so it can meet the needs of American families and businesses,” he said.
Bank shares rose after this announcement. the SPDR Standard & Poor's Bank An exchange-traded fund that tracks industry leaders gained more than 1%.
CNBC.com has reached out to Trump's transition team for comment.
In a statement announcing the decision, the Fed indicated that it would not make any major decisions on rules and regulations until a successor is named. The bank is reviewing a set of new rules, dubbed the Basel endgame, which has been widely unpopular in the industry.
Because the Fed is limited to seven board members, Trump will have to appoint someone from the current group to the new position.
This position was created in the wake of the 2008 financial crisis which saw the collapse of several big names on Wall Street. Under Barr's watch, the industry experienced a crisis in early 2023 as Silicon Valley Bank and a few other names collapsed, forcing the Federal Reserve to implement liquidity facilities to prevent problems from spreading.
In recent days, speculation has increased that Trump may seek to force Barr from office. A Reuters report in late December indicated that Barr was consulting with a law firm about his legal options if the president-elect made a move.
