Federal Reserve Vice Chair for Supervision Michael Barr plans to step down from his position to avoid potential legal conflicts with the Trump administration, allowing for a more industry-friendly successor. His departure comes 18 months early and paves the way for President Trump to nominate either Michelle Bowman or Christopher Waller, both current Fed governors, to replace him. Bowman has criticized Barr’s proposals for banks to hold more capital and is seen as a frontrunner for a more lenient regulatory approach that could benefit U.S. banks.
Following Barr’s announcement, bank stocks surged, reflecting optimism about reduced regulations and the possibility of easier merger approvals. Analysts expect that the regulatory landscape may soften, particularly concerning the Basel III Endgame, which originally proposed raising capital requirements for large banks significantly. A gentler final version of this proposal is anticipated under Bowman’s potential leadership.
Barr remains a Fed governor, preserving the balance of power with a 4-3 advantage for Democratic appointees, while also limiting options for his replacement. His resignation from the vice chair role has been framed as a strategic move to maintain governance stability at the Federal Reserve.
