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The choice of Barr was expected after CNBC earlier in the week confirmed that he was the White House’s frontrunner for the post. It would make the leading financial laws author perhaps the most powerful U.S. bank regulator: the Fed vice chair of supervision.
Barr served as assistant Treasury secretary for financial institutions during the Obama administration, where he helped design the 2010 Dodd-Frank Act. That law was one of the most expansive overhauls of financial regulation in U.S. history and came on the heels of the 2008-2009 financial crisis.
Among its many provisions aimed at protecting the economy from future calamity, Dodd-Frank produced both the Consumer Financial Protection Bureau (CFPB) and the Fed’s vice chair for supervision.
“He was instrumental in the passage of Dodd-Frank, to ensure a future financial crisis would not create devastating economic hardship for working families,” Biden said in a statement Friday morning accompanying the formal White House announcement.
“He understands that this job is not a partisan one, but one that plays a critical role in regulating our nation’s financial institutions to ensure Americans are treated fairly and to protect the stability of our economy,” Biden added.
The president also underscored the fact that Barr received support from both Democrats and Republicans when he was previously confirmed by the Senate.
That may be an oblique acknowledgement of the difficulties the administration has faced in trying to advance some of its nominees for financial regulatory posts in a Senate split 50-50.
Sarah Bloom Raskin, Biden’s first pick to be the Fed’s bank regulator, withdrew her candidacy last month. She removed herself from consideration after West Virginia’s Joe Manchin, the most conservative Democrat in the Senate, said he would not support her nomination due to her views on climate change and energy policy ideas.
Barr himself had last year been considered as Biden’s pick to run the Office of the Comptroller of the Currency. But progressive Democrats, concerned by what they viewed as his cozy ties to Wall Street, snuffed out his candidacy.
The White House later chose Saule Omarova to replace Barr as its nominee to lead the OCC until she was forced to withdraw in November as a result of skepticism from moderate Democrats Sens. Mark Warner of Virginia and Jon Tester of Montana.
In tapping Barr again, the White House is betting that Raskin’s withdrawal at the hands of Manchin is enough to persuade progressives — who might have preferred Raskin — to back a more-centrist choice.
Those Democrats would likely want Barr to divulge the details of his prior work for financial technology companies like Ripple Labs, a blockchain-based payments firm, to guarantee he is insulated from corporate interests.
Still, those familiar with the White House’s thinking say the president’s advisors believe they can convince the likes of Sen. Elizabeth Warren, D-Mass., who previously applauded Barr’s work in writing Dodd-Frank and establishing the CFPB.
Later Friday, Warren resolved that guesswork with an endorsement of the president’s choice.
“The Fed’s Vice Chair for Supervision is a powerfully important financial regulator, responsible for holding the biggest banks accountable and preventing the next financial crisis,” Warren wrote in a post to Twitter.
“During the Obama administration, Michael Barr was a key force in the creation of the Consumer Financial Protection Bureau, and I intend to support President Biden’s nominee for this important role at the Fed,” she added.
Moderate Democrats like Sen. Sherrod Brown of Ohio, the chairman of the Senate Banking Committee, are considered more reliable support for the veteran of the Obama and Clinton administrations.
Sen. Sherrod Brown (D-Ohio), left, speaks with Sen. Elizabeth Warren (D-Mass.), during a Senate Banking, Housing and Urban Affairs in Washington, DC.
Andrew Harnik | The Washington Post | Getty Images
A Republican aide told CNBC that Barr would likely receive many nay votes from their ranks based on his work crafting what many in the GOP consider overly burdensome financial regulations.
If confirmed for the Fed post, Barr would be charged with overseeing the nation’s largest banks, including JPMorgan Chase, Bank of America and Citigroup. The vice chair for supervision oversees the safety of the country’s biggest lenders by checking that they are meeting capital requirements, checking risks and subjecting banks to regular stress tests.
Barr would also be an important voice on monetary policy as one of seven members of the Fed’s board of governors, who vote at every central bank meeting.
The Fed last month kicked off what’s expected to be a series of interest rate hikes to help cool unruly inflation. The Labor Department reported on Tuesday that the prices Americans pay jumped by 8.5% in the 12 months ending in March, the hottest pace since 1981.
But imposing higher borrowing costs on the U.S. economy is a tricky task in the best of times.
Economists, including Treasury Secretary and former Fed Chair Janet Yellen, say the Fed will have to be careful not to pull back on its easy-money policies too quickly, or else risk U.S. GDP growth in the face of ongoing supply-chain constraints and the Russia-Ukraine war in Europe.
“They have a dual mandate. They will try to maintain strong labor markets while bringing inflation down,” Yellen said of the Fed on Wednesday. “And it has been done in the past. It’s not an impossible combination, but it will require skill and also good luck.”
Excluding Barr, the White House has four nominees to the Fed in front of the Senate — Jerome Powell, Lael Brainard, Lisa Cook and Philip Jefferson.
Barr is the current dean of the University of Michigan’s public policy school, a post he accepted following his work for the Obama administration. During the Clinton administration, he served as special assistant to Treasury Secretary Robert Rubin, deputy assistant secretary of the Treasury and as special advisor to President Bill Clinton.
Read More: Biden to nominate Michael Barr as Fed bank regulator