After Progressive Pick Forced Out, Biden Taps Crypto-Linked Michael Barr for Top Bank Regulator Job
"Barr can't be trusted to make enemies of the old banks or the new fintechs when necessary for the safety and soundness of the financial system," said one progressive critic.
A month after climate campaigners condemned Sen. Joe Manchin for refusing to support the nomination of Sarah Bloom Raskin to a top Federal Reserve post, government watchdogs are warning that the president's choice of a replacement nominee, Michael Barr, has close ties to industries that could be responsible for "the next financial crisis."
"When it comes to the cryptocurrency and fintech industries, which some believe could be responsible for the next crash, concerns about the revolving door have too often been waved away."
President Joe Biden on Friday announced he would nominate Barr to serve as the vice chair of supervision on the Federal Reserve Board of Governors, a position in which he would regulate big banks as well as other financial innovations.
Barr is currently a law professor at the University of Michigan and previously worked in the Treasury Department, where he helped to pass the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.
While Barr was instrumental in creating the Consumer Financial Protection Bureau (CFPB), appeared in February with progressive Sen. Elizabeth Warren (D-Mass.) for a discussion about economic inequality, and has secured the support of Senate Banking Committee chairman Sen. Sherrod Brown (D-Ohio), the Revolving Door Project warned that much of Barr's past and current work has not prepared him to protect the American public from reckless activities of financial firms.
Writing for the organization on Thursday, Eleanor Eagan and Timi Iwayemi noted that Barr is currently an advisor at NYCA Partners, which invests in "fintech"--mobile applications and other technologies that automate financial transactions--and a member of the advisory council for the Alliance for Innovative Regulation, a think tank which has received funding from fintech and cryptocurrency firms "and has advocated extreme regulatory reform measures."
\u201cNEW: Biden should close the revolving door *before* captured regulators lay the groundwork for a financial crisis. \n \nNominating Michael Barr, who's closely associated w/ crypto & fintech, for Fed Vice Chair of Supervision would be a very bad start\n \nhttps://t.co/mLuF2sUENV\u201d— Revolving Door Project (@Revolving Door Project) 1649959608
In the years preceding the 2008 financial meltdown, wrote Eagan and Iwayemi, "regulators who came from the country's largest banks and planned to promptly return to them removed regulatory restraints and turned a blind eye to the predictably dangerous effects (see, e.g. Robert Rubin and Alan Greenspan)."
"And yet, as familiar as that story has become, many appear not to have learned its lessons," they added. "When it comes to the cryptocurrency and fintech industries, which some believe could be responsible for the next crash, concerns about the revolving door have too often been waved away."
Last year, Jon Cunliffe, the Bank of England's deputy governor for financial stability, warned that digital assets "have no intrinsic value and are vulnerable to major price corrections," and pose a concern to financial stability.
The rate of growth in the cryptoasset market, Cunliffe said, is comparable to the $1.2 trillion subprime mortgage market in 2008.
"When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice," he said.
As David Dayen wrote at The American Prospect Thursday, in addition to his ties to cryptocurrency, Barr served as an advisor for peer-to-peer lending firm the Lending Club, which was called "predatory" by the Cleveland Fed in 2017, and was a key architect of the Home Affordable Modification Program (HAMP), "the failed foreclosure mitigation program that allowed banks to trap borrowers in predatory schemes."
Dayen also noted that former FDIC Chair Sheila Bair wrote in her memoir about Barr's push to eliminate strong regulations for derivatives and weaken the Volcker Rule, which attempted to stop banks from using customers' money to engage in risky trading.
"While Barr was a true ally in the fight for creating the Consumer Financial Protection Bureau," said Jeff Hauser, executive director of the Revolving Door Project, "when it came to shifting the economic structure of Wall Street itself, he was a proud supporter of the 'Too Big to Fail' bailout-heavy status quo. Putting Barr in charge of regulation at the Fed, the institution which bails out banks in the first place, would torpedo any notion that Democrats have learned from that error in judgment."
Barr's nomination contrasts with that of Raskin earlier this year. Raskin, who withdrew her nomination after it became clear Manchin (D-W.Va.) would join Republicans in opposing her, drew right-wing ire for her call for regulators to hold banks accountable for their contributions to the climate crisis.
Last year, the Revolving Door Project had urged Biden to nominate Raskin to the vice chair of supervision role to "minimize [former President Donald] Trump's deregulatory Federal Reserve legacy."
By contrast, "Barr can't be trusted to make enemies of the old banks or the new fintechs when necessary for the safety and soundness of the financial system," Hauser said this week. "We need a VC-S who looks out for the people and the economy, not for his own career."
