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The Fed may go easier on banks in 2025. Michael Barr, the Fed vice chair of supervision who promoted legislation that would require big banks to hold more capital in reserve, has announced he will resign his post by February 28 of this year. President-elect Trump will name one of two Republican Fed governors as his successor.
Barr was confirmed to his position by the Senate, and his term originally was to have ended in July 2026. He chose to step down earlier than that, he told the New York Times, to avoid a lengthy legal battle with the Trump administration over whether a president has the power to fire an officer of an independent federal agency.
“If it came to litigation on the merits, I would win,” Barr said. But he didn’t want to “spend the next couple of years fighting” about the issue in court. “And what I decided was that no, it’s not good for the Fed,” he said. “It would be a serious distraction from our ability to serve our mission.”
If Trump did fire Barr, and if courts upheld that decision, Trump might attempt to remove Fed chair Jerome Powell next, the New York Times posited.
Barr’s decision surprised some observers, who noted that the Fed has historically been politically independent. As late as last November, just a couple of weeks after the election, Barr told lawmakers that he planned to serve his full term.
Barr will stay on as a Fed governor, and the central bank has paused “major rulemakings” until the next vice chair is named, it said in a press release.
Is it endgame for Endgame? Barr was the architect of proposed regulations known as Basel III Endgame, which would have mandated that banks with more than $100 billion in assets hold around 19% more capital in reserve. Driven, in part, by the 2008 financial crisis and 2023 regional bank collapses, the regulations were intended to protect banks against losses. Barr first proposed the regs in July 2023, and then in a weakened form, mandating a 9% capital increase, in September 2024.
Now, Basel III Endgame’s fate is even more uncertain. Fed Governor Michelle Bowman, who MSNBC calls the “front-runner” for Barr’s seat, voted against the regs.