At noon on Monday local time in the United States, Trump, who had just triggered a round of turmoil in the global financial markets, got the opportunity he had dreamed of - the position of vice chairman of supervision of the Federal Reserve became vacant.
The Federal Reserve announced in an official statement that Michael Barr, the current Vice Chairman of Supervision, has decided to resign from the position on February 28th, or earlier after his successor is confirmed. After his resignation, Barr will continue to serve as a member of the Federal Reserve Board of Governors.
Reason: Avoid conflict with Trump
Although Barr's resignation letter to Biden was full of polite words, the Federal Reserve's official statement hinted at the reason for his early resignation - to avoid conflict with Trump's economic team.
“The position of Vice Chairman for Supervision was created after the global financial crisis to strengthen the Federal Reserve’s responsibility, transparency, and accountability for oversight and regulation of the financial system,” Barr said. “However, the controversy surrounding the position could become a distraction from fulfilling our mission. In the current environment, I believe it will be more effective for me to continue to serve the American people as governor.”
Let's see how Trump operates
Under the previous plan, Barr's term as vice chairman was originally scheduled to expire in July 2026.
Because Barr's tough regulatory stance is far from Trump's policies, there have been speculations that Trump might try to remove Barr from his position after taking office. At the end of last year, there were also reports that Barr began to contact law firms to explore the possibility of suing the Trump administration.
Barr's resignation does not mean that Trump can just pick anyone to join the Fed. Since Barr is still a Fed governor, and Biden has already filled the seven-member Fed board, if no one leaves next, theoretically Trump can only choose from the five people other than Powell and Barr.
Among the five, current Vice Chairman Philip Jefferson, Lisa Cook and Kugler are all Federal Reserve officials nominated by Biden, while Bowman and Waller are both directors nominated by Trump. Kugler's term will expire the soonest in January 2026, when Trump will be able to nominate his favorite newcomer to the Federal Reserve.
But Trump does not have to choose one of the five.
According to American media analysis, the most likely candidate to be promoted by Trump is Bowman, who has always been critical of Barr's policies. But another option is to offer Bowman a government job, thereby freeing up a Fed board position.
Bank stocks surge
Barr's resignation also boosted Wall Street's big bank stocks. After the news was announced, J.P.Morgan Chase, Goldman Sachs, Citigroup, Morgan Stanley, Bank of America, and Wells Fargo all saw rapid increases to varying degrees.
As the leader in implementing the Basel III Final Plan, Barr once asked the top Wall Street banks to significantly increase their Tier 1 capital by 19%. After encountering strong protests, he reduced the increase to 9%, but it was still unanimously resisted by Wall Street. At the same time, the Federal Deposit Insurance Corporation(FDIC) also voted against the reform.
The Federal Reserve said on Monday it would not make major decisions on rules until a successor vice chairman for supervision was in place.
