President Joe Biden’s expected nomination of a former Obama Treasury Department official to regulate national banks is triggering fierce opposition from progressive activists, who say the president’s choice is too closely tied to the finance industry.
Biden’s planned selection of Michael Barr to lead the Office of the Comptroller of the Currency also marks a break from Sen. Sherrod Brown (D-Ohio), who is in line to chair the Senate Banking Committee, which will vet the nomination. Brown has been advocating for a competing candidate, law professor Mehrsa Baradaran, an expert on the racial wealth gap who has called for the delivery of banking services through the U.S. Postal Service.
Watchdog groups and racial justice organizations on Thursday spoke out against Barr’s selection, which had yet to be announced but became public through press reports. Activists said they planned to take their case to liberal allies in Congress, including Brown and Sen. Elizabeth Warren (D-Mass.), who also serves on the Banking Committee. The groups are pushing for Baradaran to get the job.
"If this is a trial balloon, then hopefully it fails," said Vasudha Desikan, political director for the Action Center on Race and the Economy. "He’s a terrible choice."
The pushback marked the biggest rift yet among Democrats over appointees to federal agencies tasked with regulating banking and markets. Until now, progressives had largely been successful in their campaign to put their preferred industry watchdogs in key posts, including the director of the Consumer Financial Protection Bureau and the Securities and Exchange Commission.
Barr, dean of the University of Michigan’s public policy school, is a veteran of the Clinton and Obama Treasury Departments and has long been seen as a contender for a top post in the Biden administration. But in recent weeks he faced competition from Baradaran for the job of running the Office of the Comptroller of the Currency. Brown and other influential players from the party’s left wing quietly promoted her appointment, which would shake up an agency long criticized for being too cozy with the banking industry.
Baradaran, who teaches at the University of California at Irvine Law School, wrote the book “The Color of Money: Black Banks and the Racial Wealth Gap" about obstacles impeding Black-owned financial institutions and Black Americans as they try to build wealth.
Brown, who has vowed to make racial equity a key focus of his Banking Committee agenda, believes that Baradaran is "the right fit for this moment," one staffer familiar with the situation said.
"She is the future of economic policy, and her expertise is well-suited to make Biden’s vision of an equitable economy happen," the source said.
Barr’s long record in Democratic policy circles — as well as his post-government work — has given critics fodder to fight his nomination. Progressives who want the party to pursue structural economic reforms to fight inequality and climate change are skeptical that recruiting from the party’s old guard of economic policy officials will deliver big changes.
Barr was a key figure in the drafting of sweeping Dodd-Frank financial safeguards that Congress passed after the 2008 Wall Street meltdown as well as the implementation of a post-crisis program designed to help struggling homeowners avoid foreclosure.
Those episodes have potential political pitfalls for him.
The housing program, the Home Affordable Modification Program, fell short of providing the economic relief that officials first promised. And during the writing of Dodd-Frank, former officials involved in the talks say Barr, who was a key Hill liaison for then-Treasury Secretary Tim Geithner, resisted the drafting of certain regulations that would have been even tougher on big banks.
"Barr was a tough negotiator against members of Congress from both parties," said Tyler Gellasch, a former aide to then-Sen. Carl Levin (D-Mich.), who fought for stricter limits on trading by big banks. "On the one hand, he aggressively pushed back against progressives and protected the banks from stronger reforms, but on the other hand, he fought fiercely for the [consumer bureau’s] creation."
Barr didn’t respond to a request for comment. In a Bloomberg TV interview he did in July, he said he recognizes the inequity in the banking system.
"Our financial system is not really safe enough or fair enough yet, and there are more risks to come," he said. "We still need to work on a financial system that works better for households and businesses, and we’re not there yet.”
The public criticism he has received prompted heavy hitters from the Obama administration to speak up in his defense. Former CFPB Director Richard Cordray told POLITICO Thursday night that he was a “big fan of Michael and very supportive.”
“He knows the issues backward and forward,” Cordray said. “He is a progressive champion. A lot of people wanted to put brakes on the CFPB. He’s always been a fan.”
Aaron Klein, a Brookings senior fellow who served with Barr at Treasury during that period, defended Barr’s work on the Dodd-Frank financial reform law, arguing that "striking the balance was important" to securing votes to pass the bill.
"Dodd-Frank passed without a vote to spare," Klein said. "The legislative skill necessary to craft and secure enactment of that bill was daunting. People look back on it like it’s a foregone conclusion there would be a law. But there were very real moments when there was a risk of nothing going through."
Former FDIC Chair Sheila Bair, who documented clashes with Barr in her book about the fallout of the crisis, told POLITICO that "I have not always agreed with Michael, but I respect his formidable intellect and his life-long commitment to making our financial system work for low-income families."
"Combined with [SEC chair nominee Gary] Gensler and [CFPB director nominee Rohit] Chopra, this will be a very strong team of financial regulators," Bair said.
After the Obama administration, Barr re-entered academia and continued to advocate for stricter financial regulation as the Trump administration sought to scale back what Democrats had enacted. He also developed ties with upstart financial technology firms, joining the advisory boards of cryptocurrency company Ripple Labs and Lending Club. The SEC is suing Ripple for violating investor protection laws through the sale of the XRP digital asset. Lending Club is becoming a bank after receiving the OCC’s approval to buy another lender.
If picked to lead the OCC, Barr would have immense influence over the direction of financial regulation, including the so-called fintech companies that he advised in recent years. The OCC regulates national banks such as JPMorgan Chase and Bank of America and is increasingly focused on writing rules that would allow fintech firms to more easily operate across the country with a single set of regulations, rather than state-by-state requirements.
"Few if any academics have worked as closely with fintech in the last decade than Barr, and there are broad progressive fears that fintech is just a new way for bankers and Big Tech and others to evade regulation and make billions profiteering off the rest of us," said Jeff Hauser, executive director of the Revolving Door Project. "Fintech will win big if Barr gets OCC, and we’ll likely not understand the full dimensions of the downside of fintech’s ascendance for another 5-10 years."
Much of the conflict over Barr’s potential nomination arises from the fact that Baradaran won’t be getting the job, dashing hopes of supporters who argued that, as an outsider with strong, documented views on inequality, she had the potential to deliver a major shakeup of the agency.
"It wasn’t just the OCC," said Desikan, with the Action Center on Race and the Economy. "But it was Mehrsa herself as an individual."
Victoria Guida contributed to this report.