Susan Walsh/AP Photo
Former Assistant Treasury Secretary for Financial Institutions Michael S. Barr, center, is seen here in November 2010 before a meeting at the Treasury Department in Washington.
Late Wednesday, reports surfaced that President Biden plans to appoint Michael Barr, currently a public-policy professor at the University of Michigan, to head up the Office of the Comptroller of the Currency. While OCC is not one of the flashiest desks in government, it is an important and powerful independent bureau within the Treasury Department that regulates and oversees all nationally chartered banks.
Barr’s name is familiar, but that is not a good thing. Keeping the former Tim Geithner–era Treasury Department official from confirmation to a Federal Reserve Board of Governors position became a heated and ultimately successful campaign for progressives in 2014. Barr was a key figure in the crafting of the Dodd-Frank financial reform, and a willing destroyer of more progressive ideas for it, on behalf of the Obama administration. His rumored appointment is particularly dispiriting for progressives who hoped that Mehrsa Baradaran, a law professor and expert on the racial wealth gap, would win the OCC appointment.
Jubilant at Barr’s elevation, however, are the fintech and cryptocurrency sectors. “Fintech” refers to the quickly burgeoning world of borrowing and financial services apps that often look and act as predatory as payday lenders but have much snappier graphic design. “Crypto” is shorthand for the smattering of unregulated digital currencies currently being pumped and dumped and used for money laundering, among other things. Fintech luminaries, publications, and cryptocurrency mavens across the board are cheering the possible appointment of the person who should, in theory, be tasked with regulating them.
James Rule, CEO of Astrolight Media Group, a cryptocurrency publication, tweeted fist bump and champagne emojis in response to Barr’s appointment. Cointelegraph tweeted excitedly that Barr “could become one of the most powerful U.S. banking regulators according to insiders.” Needless to say, they are hyped. We know that because they made a meme about it.
That excitement is not undeserved. Barr is deeply ensconced in the capricious and scandal-plagued corners of fintech. According to his own CV, he served on the board of LendingClub, a fintech company known best for “forging legal loan documents to facilitate the sale of its loans to the investment bank, Jeffries,” according to the Revolving Door Project. LendingClub was sued by the Federal Trade Commission for misleading people about hidden fees. Barr also serves on the Bill and Melinda Gates Foundation FinTech Advisory Council, and is an adviser to both NYCA Partners, a fintech venture capital firm that backs or has backed no fewer than 64 fintech groups, and the Alliance for Innovative Regulation, a group striving to scrap and rewrite financial regulation, allowing for more intrusive corporate surveillance of financial activity and weaker consumer protections and public-transparency standards. Barr even joined the advisory board of infamous fintech firm Ripple, the self-proclaimed “Amazon of payments,” in 2015, and left at a recent date unknown.
His connection to Ripple, celebrated in particular by the crypto world, is perhaps the biggest red flag. Ripple has been notoriously scandal-plagued. It was sued by the SEC for allegedly selling its cryptocurrency XRP without registering it as a security. Its executives, CEO Brad Garlinghouse and co-founder Chris Larsen, went on to raise billions of dollars in sales of the unapproved security, according to the SEC complaint. Some observers on the fintech side suggested that Barr’s appointment could help snuff out those charges. “While Barr will make the financial industry more crypto-friendly, the question awaiting is that will it also impact the ongoing lawsuit?” wondered crypto publication Morning Tick.
Of course, Ripple has nothing but contempt for the SEC and its regulatory endeavors. The SEC is “engaged in an all-out attack on the crypto industry,” proclaimed CEO Brad Garlinghouse in a recent post on their website. “You should also know and expect that the SEC will likely do everything they can to paint Ripple, Chris and me in the worst possible light.” Garlinghouse went on to assure Ripple’s users that their lawyers were certain they would prevail in this legal dustup.
Barr no longer works at Ripple, but the connection is not distant. In 2019, the University of Michigan, where Barr currently works as a professor of law and public policy, just so happened to receive a $1 million grant from Ripple’s University Blockchain Research Initiative.
While these firms couldn’t get a supporter to become SEC chair, the OCC is a great consolation prize. OCC recently created a special bank charter for fintech startups, which would give them protection from many state-based regulations and legitimacy as banking operations. This could also be a prelude to large platforms like Amazon and Google establishing expansive banking operations.
While litigation has tied up the fintech bank charter, OCC has pushed forward with a version of the charter anyway for payment companies. Barr could expand this. He could also agree with the Alliance for Innovative Regulation, the coalition he advised, and allow fintechs to use facial recognition to comply with federal “Know Your Customer” rules, which sounds like a privacy nightmare in the making. OCC has also recently set guidances for cryptocurrencies, and is poised to be a regulatory leader in that space; there’s even talk of a crypto bank charter.
Fintech luminaries, publications, and cryptocurrency mavens are cheering the possible appointment of the person who should, in theory, be tasked with regulating them.
Of course, Barr earned his stripes abetting financial malfeasance in a less technologically sophisticated era. As the assistant secretary for financial institutions in the early days of the Obama administration, he sketched up Treasury Secretary Tim Geithner’s early proposal for responding to the financial crisis, one that went even easier on the big banks than the scandalously forgiving final legislation. Barr tried to water down the Dodd-Frank Act at every turn, and became a vocal enemy of derivatives regulations, the very same financial instruments that caused the crisis to be so explosive. He opposed the Volcker Rule and carved out loopholes that would allow financial institutions to cash in via bailout again in the future. He famously gave the quote to New York magazine that big banks could have been broken up in Dodd-Frank if Treasury agreed to it, but they didn’t. Interestingly, that break-up-the-banks provision was co-authored by then-Sen. Ted Kaufman, a key Biden ally for close to 50 years.
Perhaps more important was Barr’s work on the egregious Home Affordable Modification Program (HAMP), for which he was given the dubious moniker of being its “architect.” HAMP was a foreclosure mitigation initiative by the Obama administration that ended up accelerating the foreclosure crisis in the interest of America’s financial institutions. Because mortgage companies could grant loan modifications through the program at their discretion, they used it to trap borrowers whom they would later foreclose on anyway. Ten million Americans lost their homes. HAMP gave way to one of the more telling quotes of the Obama-world financial crisis response: All along, the plan was a way to “foam the runway” for Wall Street firms, said Geithner. More recently, Barr kind-of-sort-of apologized for HAMP and the Obama housing response in a book about the crisis last year, saying “In retrospect, we acted too ‘prudently’ and should have instead acted more forcefully from the start.”
Barr is not only closely connected to the worst of the Obama administration’s work on financial regulation; he’s in lockstep with Trump’s OCC chair. Barr’s lengthy record of advising and investing in the fintech industry indicates he has the same priorities as former acting Comptroller Brian Brooks. Brooks, the onetime chief legal officer of Coinbase, spent his eight months on the job trying to preempt the regulatory capacity of states to rein in fintech firms, and allow them to propagate freely across state borders. Coindesk directly compared Barr to Brooks, writing, “If Barr is indeed nominated and confirmed, he would become the second individual with a crypto connection to lead the federal banking regulator, which granted a national trust charter to [the crypto platform] Anchorage just last week.”
Barr would be smoothly taking up the Trump administration OCC’s mantle. His proximity to iniquitous fintechs under criminal investigation doesn’t square at all with the priorities of Senate Banking Committee Democrats like Sherrod Brown, who has recently been and continues to be an enthusiastic supporter of postal banking, which would directly address many of the problems fintechs allege to be solving without any of the novelty or the snake oil. Minority communities, meanwhile, are the most frequent victims of predatory-lending operations in their new and old guises. (Baradaran, incidentally, is also one of America’s leading experts on postal banking.)
The other problem Barr faces is the optics of getting the OCC job as a white man when the other leading contender was an Iranian American woman who is a scholar of the racial wealth gap. But the Biden team appears to have found a way around this. According to sources, they plan to pair the Barr announcement with announcing Chris Brummer, a Black professor at Georgetown, as chair of the Commodity Futures Trading Commission, which regulates derivatives. Brummer is, if anything, more embedded in the fintech world than Barr; he founded DC Fintech Week and hosts a fintech podcast. Barr blurbed his 2011 book Soft Law and the Global Financial System. Coindesk has already noted the potential Brummer selection.
Brummer authored an influential academic study decrying the lack of Black people in financial regulatory positions; he himself was denied a slot on CFTC at the end of the Obama administration. But this is another example of how diversity does not necessarily connote anything about a nominee’s ideological leanings.
There’s time for the Biden team to step back from the brink, on both Brummer and Barr. Democrats on the Hill found Barr’s work on the financial crisis alone too noxious in 2014. In the years since, he’s wedded himself to even more dubious financial entities. That should have no place in the Biden administration.
