(Yahoo! Finance) - The Federal Reserve’s top banking regulator said Wednesday he wouldn’t leave before his term was up even if President-elect Donald Trump tried to fire him, echoing remarks made by Fed Chair Jerome Powell earlier this month.
"As Chair Powell said, we serve fixed terms of office and I intend to serve my fixed term of office," Michael Barr, the Fed’s vice chair for supervision, told lawmakers on Wednesday when asked what he would do if the president-elect wanted to remove him.
Barr's term as vice chair for supervision ends in July 2026, and Powell's term as chair ends in May 2026.
Powell has twice this month reinforced his intention to serve out his term as chair, telling reporters he also didn’t intend to go anywhere even if President-elect Trump tried to fire or demote him.
"Not permitted under the law," the central bank chair said when reporters asked about it.
The comments from Powell and Barr come amid massive uncertainty for the central bank following Trump's election victory.
During his first term, then-President Trump attacked Powell with regularity (even though it was Trump who had elevated him to his current role) and openly pushed for the actions he wanted, even once suggesting negative interest rates.
The Washington Post has reported that bank executives and former Fed officials expect Trump to demote Barr, who was a Joe Biden appointee and a Treasury official during the Barack Obama era. It is not clear that Trump would have the legal power to make such a move, the Post reported.
It’s an unsettled legal question, though, that would hinge on interpretations of Section 10 of the Federal Reserve Act.
The law states that each member of the board shall hold office for 14 years "unless sooner removed for cause by the President."
The question that has been debated for years is what exactly constitutes "for cause."
The language in the law is plainly more restrictive for Fed officials when compared with the arrangements for cabinet officials and other members of a presidential administration, who are often described as working "at the pleasure" of the president.
Legal experts have tended to say that a simple policy disagreement wouldn't rise to the level of cause, but it's a standard that hasn't been tested with a judge.
Barr has during his term clashed with the US banking industry over a new set of controversial capital rules proposed by Barr and other top bank regulators that would require lenders to set aside greater buffers for future losses.
The requirements are based on an international set of capital requirements known as Basel III imposed in the decade following the 2008 financial crisis.
Banks have been fighting this US proposal for the last year in an aggressive public campaign and even dropped hints about suing regulators if they don’t get their way.
They won a big victory in September when Barr and other regulators said they would water down those requirements. Some in the industry expect regulators to scrap the proposal if Trump wins.
Barr told lawmakers Wednesday, "I expect to work with my new colleagues at the OCC and the FDIC in the coming year" on those capital rules and other measures.
David Hollerith - Senior Reporter
