Bank regulation is likely to be more moderate if Michael Barr, U.S. President Joe Biden's nominee for the Federal Reserve's top regulatory role, is confirmed.
Biden announced his intention to nominate Barr to be vice chair for supervision in a statement April 15.
Barr, a former U.S. Treasury Department official during the Obama administration, is seen as a more moderate selection than Biden's previous nominee, Sarah Bloom Raskin, who failed to garner the support of any Senate Republicans and one critical Democrat, dooming her candidacy. She withdrew her nomination last month.
Senate approval has been a challenge for the White House while it is evenly split between Republicans and Democrats, and senators might be more likely to approve Barr.
"[Barr's] worldview on regulation very much aligns with the Democratic party but maybe not to the same extent as the progressive wing of the Democratic party," Edward Mills, managing director and Washington policy analyst at Raymond James & Associates Inc., said in an interview. "It's a question of how aggressive would he be willing to be."
As assistant Treasury secretary for financial institutions during the Obama administration, Barr helped craft the 2010 Dodd-Frank Act that overhauled financial regulation following the 2008-09 financial crisis.
Raskin's outspoken support of Fed efforts to combat climate change was a significant reason she failed to earn any Republican votes, or that of Sen. Joe Manchin, D-W.Va. He hails from a state that produces the second most amount of coal in the U.S., according to the U.S. Energy Information Administration.
Barr has spoken less than Raskin on climate-related issues, giving him a better chance of getting confirmed, according to Isaac Boltansky, director of policy research at BTIG LLC.
"I think he starts in a comparatively better position than Raskin given the energy issue," Boltansky wrote in an email. Building out climate change scenario analysis is among the expected priorities for the role, Boltansky said.
Those priorities have not changed and include strengthening stress tests and updating Community Reinvestment Act regulations, Boltansky added.
"What has changed is that the White House is looking for a nominee who can get confirmed in an evenly divided Senate," Boltansky said.
The chance that Barr would be confirmed is about 60%, Ian Katz, managing director at Capital Alpha Partners, wrote in a note.
Although progressives previously opposed Barr as a candidate for the Office of the Comptroller of the Currency, citing advisory work for fintech companies, they "might have to give up their purity hopes and accept someone who has dipped his toes into the waters of financial firms," Katz wrote.
In the meantime, the Fed is operating without its top bank regulator and could do so for some time, hamstringing its ability to address key items on its regulatory agenda.