The Federal Reserve’s top banking regulator Michael Barr will step down from his position in February, saying that "the risk of a dispute over the position could be a distraction from our mission."
Fed watchers expected President-elect Donald Trump to demote Barr, who was a Joe Biden appointee and a Treasury official during the Barack Obama era, although it was not clear that Trump would have had the legal power to make such a move once he took office.
Barr himself said in November he wouldn’t leave as the Fed's vice chair of supervision before his term was up even if Trump tried to fire him, saying "I intend to serve my fixed term of office." Barr's term as vice chair for supervision was scheduled to end in July 2026.
Barr backed off from that potential fight Monday, in a surprise move. However, he said that he would remain on the Fed board of governors, a separate term that doesn't end until 2032.
"I’ve determined that I would be more effective in serving the American people from my role as governor," he said.
Barr’s decision to resign by Feb. 28 doesn't mean his boss, Fed chair Jerome Powell, will necessarily do the same.
Since Trump's election win, Powell has repeatedly reinforced his intention to serve out his term as chair through May 2026, telling reporters he didn’t intend to go anywhere even if Trump tried to fire or demote him.
"Not permitted under the law," the central bank chair said in November when reporters asked about it.
Barr's departure comes as the people in Trump’s orbit are floating some dramatic ideas that would remake the way US banks are regulated, from deleting the CFPB to abolishing the FDIC.
There are lots of questions about whether any of the ideas, some of which would require acts of Congress, will come to pass.
Barr has clashed with the US banking industry over a new set of controversial capital rules proposed by top bank regulators that would require lenders to set aside greater buffers for future losses.
The requirements are based on an international set of capital requirements known as Basel III imposed in the decade following the 2008 financial crisis.
Banks have been fighting this US proposal for the last year in an aggressive public campaign and even dropped hints about suing regulators if they don’t get their way.
They won a big victory in September when Barr and other regulators said they would water down those requirements. Some in the industry expect regulators to scrap the proposal once Trump is in office.
"If there was any doubt," the Basel proposal "is dead," Stifel chief Washington policy strategist Brian Gardner said in a note.