Fed candidate Michael Barr calls inflation ‘far too high’

WASHINGTON (AP) — Michael Barr, chosen by President Joe Biden to be the Federal Reserve’s chief banking regulator, pledged Thursday to help reduce high inflation and provide “clear rules” to govern the financial innovation.

“I would be strongly committed to bringing inflation back to the Federal Reserve’s target” of 2%, Barr said in testimony before the Senate Banking Committee, which is considering his nomination.

Inflation soared to 8.3%, near a 40-year high, as the cost of items like food, gasoline and plane tickets soared from 12 months earlier. The Fed faces the difficult and high-risk task of reining in high inflation by raising interest rates sharply without causing a recession. Widespread doubts about his ability to achieve this goal helped plunge the stock market.

Barr, who was a senior Treasury Department official in the Obama administration, helped craft the 2010 Dodd-Frank financial regulations after the devastating 2008 financial crisis. He is now dean of the Gerald R. Ford School of Public Policy from the University of Michigan.

If approved by the committee and confirmed by the full Senate, Barr will join the Fed Board of Governors as vice chairman for oversight, a position created by the Dodd-Frank legislation. As one of seven board members, Barr would also have a standing vote on interest rate decisions at each of the Fed’s eight policy meetings each year.

There was only one other vice president for oversight, Randal Quarles, whose term ended in January. Quarles led several financial regulatory changes during his tenure that drew criticism from progressives, including Sen. Elizabeth Warren, a Massachusetts Democrat. They argued that, among other measures, Quarles took steps that reduced the capital banks are required to hold to ensure they remain solvent. Still, banks overall have emerged from the COVID pandemic in strong financial shape.

Warren has previously endorsed Barr, a Rhodes Scholar who worked for Justice David Souter on the Supreme Court. He also served during the Clinton administration in the White House, the Treasury Department, and the State Department.

Biden chose Barr after his first choice, Sarah Bloom Raskin, ran into a wall of opposition from Senate Republicans and Democratic West Virginia Sen. Joe Manchin. They argued that she would go too far to weigh the impact of climate change under 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 met and discussed “American energy security.”

Barr’s hearing comes after the Senate endorsed several other board nominees, giving Biden a chance to put a Democratic stamp on the Fed. Last week, the Senate confirmed Jerome Powell for a second four-year term as Fed Chairman and late last month endorsed Lael Brainard as Vice Chairman No. 2.

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 board.

Comments are closed.