The Federal Reserve’s top banking regulator will resign next month, paving the way for newly elected President Donald Trump to appoint a replacement and avert a potential confrontation between the two.
Michael Barr’s resignation from the position, formally called vice chairman for oversight, will take effect Feb. 28, although he will remain as governor on the Fed board. His term as Fed governor lasts until 2026.
There was speculation that Trump would try to replace Barr after he takes office on January 20. The announcement will ease that transition amid speculation that the new president wants someone more bank-friendly to take on the role.
While he did not specifically mention rumors that Trump would try to impeach him, Barr said in a statement that “the risk of a position dispute could be a distraction from our mission. In the current environment, I have determined that my role as governor would allow me to be more effective in serving the American people.”
“It has been an honor and privilege to serve as Vice Chairman for Supervision of the Federal Reserve Board and work with colleagues to help maintain the stability and strength of the U.S. financial system so it can meet the needs of American families and companies. ” he said.
Bank stocks rose after the announcement. The SPDR S&P Bank the exchange-traded fund that tracks the sector’s leaders gained more than 1%.
CNBC.com has reached out to the Trump transition team for comment.
In a press release announcing the decision, the Fed noted that it will not make any major decisions on rules and regulations until a successor is named. The bank has revised a set of new rules, called the Basel endgame, that have been generally unpopular in the industry.
Because the Fed is limited to seven board members, Trump will have to appoint someone from the current group to the new position.
The position was created after the 2008 financial crisis, which saw several big names on Wall Street implode. Under Barr’s watch, the industry experienced a crisis in early 2023, with Silicon Valley Bank and a few other names going bankrupt, forcing the Fed to implement a liquidity facility to prevent the problems from spreading.
Speculation had increased in recent days that Trump would try to force Barr out of office. A Reuters reports this indicated in late December that Barr was consulting with a law firm about his legal options if the president-elect were to make a move.