WASHINGTON (AP) — Michael Barr, President Joe Biden’s pick to be the Federal Reserve’s top banking regulator, pledged Thursday to help reduce high inflation and provide “clear rules” to govern financial innovation.
“I would be strongly committed to bringing down inflation to the Federal Reserve’s target” of 2%, Barr said in testimony to the Senate Banking Committee, which is considering his nomination.
Inflation has soared to 8.3%, near a 40-year high, with the cost of items like food, gas and airline tickets having skyrocketed from 12 months earlier. The Fed is facing the difficult and high-risk task of curbing high inflation by sharply increasing interest rates without causing a recession. Widespread doubts about its ability to achieve that goal have helped send the stock market plunging.
Barr, who was a top Treasury Department official during the Obama administration, helped design the 2010 Dodd-Frank financial regulations after the devastating 2008 financial crisis. He is now the dean of the University of Michigan’s Gerald R. Ford School of Public Policy.
If approved by the committee and confirmed by the full Senate, Barr would join the Fed’s Board of Governors as the vice chair for supervision, a position created by the Dodd-Frank legislation. As one of seven members of the board, Barr would also have a permanent vote on interest rate decisions at each of the Fed’s eight policy meetings each year.
There has been only one other vice chair for supervision, Randal Quarles, whose term ended in January. Quarles drove several changes to financial regulation during his term that drew criticism from progressives, including Sen. Elizabeth Warren, a Democrat from Massachusetts. They argued that, among other moves, Quarles took steps that reduced the capital that banks are required to hold to ensure they remain solvent. Still, the banks overall emerged from the COVID pandemic in solid financial shape.
Warren has already endorsed Barr, a Rhodes Scholar who clerked for Justice David Souter on the Supreme Court. He also served during the Clinton administration at the White House, the Treasury Department and the State Department.
Biden chose Barr after his first pick, Sarah Bloom Raskin, ran into a wall of opposition from Senate Republicans and from West Virginia Democratic Sen. Joe Manchin. They argued that she would go too far to weigh the impact of climate change as part of the Fed’s regulatory authority and possibly discourage banks from lending to oil, gas, and coal companies.
This week, Manchin endorsed Barr and said the two had met and discussed “American energy security.”
Barr’s hearing comes after the Senate has approved several other nominees to the board, giving Biden a chance to put a Democratic stamp on the Fed. The Senate last week confirmed Jerome Powell to a second four-year term as Fed chair, and late last month approved Lael Brainard for the No. 2 position of vice chair.
This month, the Senate also confirmed Lisa Cook, an economics professor at Michigan State University, and Philip Jefferson, an economist at Davidson College, to the Fed’s board.