Revolving door project | RELEASE: Michael Barr’s Fintech partnership may cloud judgment of SVB autopsy

FOR IMMEDIATE RELEASE
Contact: Timi Iwayemi, [email protected]

Michael Barr’s Fintech partnership may cloud judgment of SVB autopsy

In response to recent bank failures, corresponding bailouts and potential upcoming regulatory actions, Research director for the revolving door project Timi Iwayemi issued the following statement about the Federal Reserve’s Deputy Chairman for Supervision, Michael Barr:

“Federal Reserve Deputy Chairman for Supervision Michael Barr has been tasked with leading a review of the agency’s supervisory failures that led to the crisis. This follows an admission by Barr in a speech at the Peterson Institute for International Economics last week that the Fed tends to[s] to have a very light-touch approach to smaller institutions.’ This designation likely covers a significant number of banking institutions, given the rollback of Dodd-Frank protections in 2018 that reduced regulatory authority. While repealing Trump’s deregulatory banking law is critical, it’s also important to ask why Barr and Fed Chair Jerome Powell ignored troubling signs at these failed institutions until the crash. The central bank has been eager to raise interest rates unnecessarily and discipline labor; banking analysts had publicly identified the declining value of bank assets for months; Why, then, did the Federal Reserve not match its tightening zeal with serious oversight of bank balance sheets?”

“We have noted several times that Barr’s extensive connections to the fintech and crypto industries should preclude him from an oversight role at the Fed, which could significantly change the trajectory of these industries. In fact, the SVB bailout secured the continuity of Circle’s stablecoin USDC, which had initially lost its link amid turmoil over the $3.3 billion in deposits the crypto company parked at the bank.It is also likely that Barr’s former colleagues at NYCA Partners, which funds a significant number of crypto and fintech firms, benefited from this government’s rear stop.

“As of now, Barr is tasked with investigating oversight failures that occurred under his watch, with a bank that specifically targeted the crypto and fintech industries that Barr was so active in right before he returned to government. Barr is a walking conflict of interest. His central role in the investigation is damning.”

“As much as we welcome a review of internal deliberations in the build-up to the crisis, we are skeptical of the Fed’s ability to undergo a credible internal investigation into the apex bank’s conduct during the ethics scandals of 2021. To ensure public trust, Barr and Powell must commit to publish investigative reports on these failed banks as well as the Fed’s supervisors’ opinion of the banks’ aggressive risk-taking activity in the period leading up to their collapse. Even better, Fed officials could step aside to allow an independent inspector general to conduct an investigation into regulatory failings. Additionally, this is an opportunity for Congress to use its oversight powers as well – the failure of the nation’s 16th largest bank requires an exhaustive review that will include hearings and a standing commission with subpoena authority.”

“SVB’s collapse is the biggest bank failure in the US since the Great Financial Crisis; the public deserves a fair and detailed answer to reassure them of the ongoing safety and soundness of the financial system. The investigation cannot be helped by a man, Michael Barr, who is likely to be implicated in the findings of a thorough investigation into this failure.”

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PHOTO CREDIT: “Michael Barr” by Center for American Progress is licensed under CC BY-ND 2.0.