Since the start of the Biden transition, progressives have been laser-focused on personnel, arguing that it doesn’t matter who ends up in the room when big decisions are made. This axis has been validated; key personnel in areas such as antitrust, trade, labor rights, economic policy and financial regulation have reversed many laissez-faire policies of the past and revitalized the public sector. Compared to the Obama administration, where a A Citigroup executive helped pick the economics teamthis has been a sea change, with progressives not only placed in high-level positions, but dispersed throughout government, gaining experience for the future.
But in a 50-50 Senate, confirmations of such positions are still in jeopardy. If a candidate cannot attract Republican support, all Democrats must support him if he is to take office, giving enormous leverage to the Manchins and Sinemas of the world. Meanwhile, candidates who are friendly with big business may get a few Republican votes, reducing the influence of progressives to block.
This structural problem has recently come to light. Business Democrats were able to withdraw the Progressive-endorsed nominations of Saule Omarova as Comptroller of the Currency and Sarah Bloom Raskin as Vice Chairman for Federal Reserve Oversight, at the request of the bank interest and, in the case of Raskin, fossil fuel companies.
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These positions are still open. Michael Hsu, a former Fed official, is the acting comptroller and can stay there indefinitely. And according to several reports, the administration is considering Michael Barr for the position of Supervisory Vice President. Barr is a veteran of the Clinton and Obama years who is now Sanford Weill’s dean of public policy at the University of Michigan. (Weill was the former CEO of Citigroup, whose merger with Travelers Insurance triggered the end of Glass-Steagall and the beginning of the era of mega-banks.)
Barr has been hanging around the periphery of the Biden administration for some time, first suggested for a top job at the Treasury Department and then for the OCC, a high profile fight he ultimately lost in the middle of a gradual decline. Barr was even rumor for a place of the Fed in 2014; he then also withdrew after an outcry.
The progressive justification for opposing Barr has not changed, but the circumstances have. Despite his ties to the Rubin/Geithner era and his questionable commitment to strong banking supervision, the current momentum could allow Barr to walk away unscathed.
Many critics see this as a mistake. “Anyone who opposes Barr for the OCC should be quadruple against him for the vice president of oversight job,” said a financial reformer who spoke on condition of anonymity because of his work on the nomination. “It is the most important financial regulator, not only in the United States but in the world.”
AS ASSISTANT SECRETARY TO THE TREASURY for financial institutions in the Obama years, Barr was Tim Geithner’s key right-hand man and congressional liaison on the Dodd-Frank reforms. Sheila Bair has written extensively in his memoirs of that time on how Barr defended the financial industry against aggressive regulation at every turn, seeking to eliminate strict regulations on derivatives, weaken the Volcker rule which attempted to prevent banks from engaging in risky transactions with customers’ money and to preserve the possibility of future bailouts. He sadly gave the quote to New York review that the bill could have broken up the big banks if the Treasury had agreed to it, but they decided against it.
Barr was also the lead designer of HAMP, the failed foreclosure mitigation program that allowed banks to trap borrowers in predatory schemes. steer somehow somehow excused for failure to stop the tide of lockdown in a 2020 book, saying the White House should have “acted more forcefully from the start”. He also has leads the investigation in fraudulent evictions with false documents, promising that things would change within a year. (They did not do it.)
The Vice President is responsible for reviewing the largest banks, determining appropriate capital ratios, and managing proprietary trading and other financial innovations. The Vice President also represents the United States in cross-border negotiations on international banking standards. “Placing Barr in charge of regulation at the Fed, the institution that bails out banks in the first place, would torpedo any notion Democrats have learned from this misjudgment,” writes Jeff Hauser of the Revolving Door Project in a press release.
Observers have also expressed concern over Barr’s ties to the fintech and cryptocurrency industries. He has done consultancy work for Lending Club and Ripple; the old fired its CEO after forging loans to make them suitable for a buyer, while the buyer is in the middle of a reverse fight with the SEC after the agency labeled one of its coins an unregistered title. Previously, Barr served on the board of the Alliance for Innovative Regulation, a fintech and crypto front group whose ideas mostly boil down to throw out a bunch of so-called burdens on innovators.
Crypto companies were thrilled when Barr was rumored for the OCC job. Since then, the Biden administration has issued a Executive Decree on the “responsible development of digital assets” which some considered to be favorable to the industry. (Bitcoin price jumped up on the news.) With reports from crypto firms write your own rules in the United States, companies like Binance make deliberate efforts to evade federal scrutiny and hundreds of public officials walking through the revolving door of crypto, now is an inopportune time to bring in another person with industry ties. At the Fed, efforts are underway to create a central bank digital currency, and the vice president in charge of oversight would play a major role in this regard.
BARR’S CV SHOULD BE, as in the past, a failure for a critical mass of Senate Democrats. Senator Sherrod Brown (D-OH) publicly sided with UC Irvine professor Mehrsa Baradaran on Barr for the OCC slot. (Neither ultimately got the nomination.) But despite Barr’s roots in the old guard, everyone agrees he was tough on the Dodd-Frank consumer protection debate. He fought hard for the CFPB, earning him praise from Sen. Elizabeth Warren (D-MA), who would normally lead these fights. The two appeared together as recently as February.
Brown, who went to the mat for Omarova and Raskin and came back empty, also has a longstanding interest in consumer protection. Although most of this work is in the hands of the CFPB and not the Fed, the vice president will play a role in updating the Community Reinvestment Act. Politics wrote that Brown “should be supportive” of a Barr nomination, something written oddly vague enough to make it sound like it came from Brown, though that could easily have been the White House’s interpretation.
The senator with the biggest beef with Barr is unquestionably Sen. Jeff Merkley (D-OR), who drafted the Volcker Rule that Barr weakened. Staff members involved in that fight accused Barr of not telling them the truth. But most of those staffers aren’t in Congress, Merkley no longer sits on the banking committee, and he hasn’t had much say on those issues for the past few years. Merkley’s office did not respond to a request for comment.
According to sources with knowledge of the deliberations, little work has been done to find a more aggressive alternative to Barr.
Barr himself has clearly made overtures to Republicans. The Politico article revealing his position as the top contender included a month-long interview with Barr, in which he said the Fed’s job “shouldn’t be a partisan role” and that the former vice chairman of oversight, Randal Quarles, has made “substantial” choices on deregulation. Barr was quick to add that he disagreed with “a number of policies” pursued by Quarles, but the language Barr used upset some. “With what policies did he agree [Quarles]?” asked a reformer.
Yet despite this awareness, it’s hard to see exactly how Barr, or any Biden nominee, would earn Republican votes. Republicans expect the Senate to turn in their favor in November, and they could just hold on and get a full veto over the nomination. That could return the current pre-midterm election dynamic to giving a single Democratic senator the chance to block Barr. And the appetite to fight for a more progressive candidate is relatively muted.
Of course, there are those who want a fight. “Barr cannot be trusted to make enemies of old banks or new fintech when necessary for the safety and soundness of the financial system,” Hauser said. “We need a vice president of oversight who watches over people and the economy, not his own career.”
One thing is certain, and that is that the Senate will not wait for the nomination of the Vice President for Oversight to advance the four other Fed candidates already in front of them. That means there is time for opposition to potentially emerge, perhaps from Merkley, or Sen. Bernie Sanders (I-VT), or someone else.
The fight between Democrats who favor Wall Street and those who support Main Street has been raging for years. Barr is a complicated figure in this battle, but with clear ties to the pro-bank posture of the old guard. Progressives want to maintain the gains they made on staff during the Biden years. Whether they will decide to face someone like Barr rather than protect their flank remains to be seen.