The Federal Reserve's top banking regulator will step down next month, clearing the way for the president-elect Donald Trump appoint a successor and avert a potential confrontation between them.
Michael Barr's resignation from his position, formally called vice chairman of oversight, is effective Feb. 28, although he will remain a governor on the Fed's board. His term as Fed governor will last until 2026.
There has been speculation that Trump may seek to replace Barr once he takes office on January 20. The statement will facilitate this transition despite speculation that the new president wants someone more friendly to banks to take the job.
While he did not specifically mention rumors that Trump would try to oust him, Barr said in a statement that “the risk of a position dispute could distract from our mission. “In the current circumstances, I have determined that by serving as governor I would be more effective in serving the American people.”
“It has been an honor and a privilege to serve as Vice Chairman of the Federal Reserve Board for Oversight and to 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 businesses,” he said.
After the announcement of this decision, bank shares rose. The SPDR Bank S&P an exchange-traded fund tracking industry leaders gained more than 1%.
CNBC.com has reached out to Trump's team for comment.
In a statement announcing the decision, the Fed noted that it would not make any significant decisions on rules and regulations until a successor is named. The bank overhauled a set of new rules, called Basel Endgame, that were fundamentally unpopular within 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 brought down many of Wall Street's big names. Under Barr's watch, the industry experienced a crisis in early 2023, during which Silicon Valley Bank and several other companies collapsed, forcing the Fed to implement a liquidity facility to prevent the problems from spreading.
Speculation has increased in recent days that Trump may be trying to force Barr from office. AND Reuters report in late December, he indicated that Barr was consulting with a law firm about his legal options should the president-elect make a move.