Michael Brochstein/Sipa USA via AP Images
Michael Barr, vice chairman for supervision at the Federal Reserve, speaks at a hearing of the House Committee on Financial Services, May 15, 2024, at the Capitol in Washington.
One big problem with American government is that, partly because it is nearly impossible to pass normal legislation anymore, the federal agency structure is never rationalized or streamlined. New agencies are just piled up over time in an endlessly growing tangle of bureaucracy. That’s why the Federal Reserve, America’s central bank, is also tasked with some financial regulation responsibilities, along with the SEC, CFTC, OCC, and CFPB.
At the Fed, this task falls to the agency’s vice chair of supervision, a post currently filled by Michael Barr, who was appointed to a four-year term in July 2022. But, facing threats from President-elect Trump, Barr has decided to quit rather than fight. The Fed announced this week he will step down from this supervisorial role by February 28, or sooner if Trump decides to nominate someone else.
This is a great gift to Trump. As the Fed press release states, “The Board does not intend to take up any major rulemakings until a vice chair for supervision successor is confirmed.” As events would have it, the Fed is currently nearly at the end of an excruciatingly long rulemaking process to implement the Basel III capital requirements—which would require most U.S. banks to raise more capital for a larger margin of safety in case of crisis—stemming from the 2008 crash. Trump could refuse to appoint anyone as vice chair, and halt all Fed rulemaking indefinitely. Or he could, as Semafor reports is under discussion, appoint the Wall Street cat’s-paw Michelle Bowman to block the pending rules, if not start rolling back finished ones.
It’s this kind of convergence of big-business desire and establishment acquiescence with Trumpian ascent that’s exactly the kind of dynamic that plunges democracies into fascism.
In the history of successful fascist movements, a universal through line is their being enabled by myopic and established elites who were too stupid or cowardly to stop them. Neither Hitler nor Mussolini came to power in a revolution. Mussolini’s “March on Rome” was a piece of propaganda; he actually was appointed Italy’s prime minister by King Victor Emmanuel III. Hitler’s 1923 Beer Hall Putsch was a disastrous failure; he was actually and legally appointed chancellor by German President Paul von Hindenburg in 1933. Conversely, fascist would-be revolutionaries in Romania and Hungary were ruthlessly crushed by traditional authoritarian conservatives in the aftermath of World War I, only coming to prominence under Nazi occupation.
Trump’s story does not exactly follow this pattern, but the broad strokes are the same. The January 6th attempted putsch was also a failure—though it got much, much closer than the Beer Hall Putsch, which didn’t even make it to the regional capital.
Hitler was successfully prosecuted, but he got a ridiculously light sentence from a right-wing judge. The Biden administration didn’t even manage that much. Trump’s prosecution was inexcusably slow-walked by Attorney General Merrick Garland, who dithered for almost two years before even appointing a special counsel, which enabled the Supreme Court to run out the clock on the case. President Biden did not even throw out Trump’s appointee at the FBI, who resisted opening an investigation for over a year.
Barr’s preemptive capitulation isn’t nearly so damning as Garland’s, but it is of a piece with how establishment elites have behaved toward the threat of Trump—sitting on their hands and hoping someone else will deal with him, and if that doesn’t happen, then giving up without so much as a whimper of protest.
Trump almost certainly could have gotten rid of Barr through some faux-legal process—or just having a goon squad drag him out of the building—but this would have been controversial. If Barr were stubborn enough, he just might have been able to hang on until the end of his term in 2026. As the Revolving Door Project’s Jeff Hauser said in a statement: “Michael Barr could have forced the Trump administration to jump over legal hurdles to slow, and potentially thwart, the Wall Street-approved plan to prematurely oust him as the Federal Reserve’s Vice Chair for Supervision.”
But, The New York Times reports, in an interview Barr said his decision “was intended to sidestep a protracted legal battle with Mr. Trump that he believed could damage the central bank.” This is a curious definition of “damage.” Surely, one would think, allowing Trump to halt all Fed rulemaking indefinitely or appointing the bankers’ stooge to replace Barr would do more damage to the Fed than getting in a legal battle.
But this is all about public relations and perception. Better for the actual functioning of the Fed to be gravely harmed under cover of darkness than to mount a controversial fight in public to preserve that functioning, because it might erode public faith. Not coincidentally, this excuses Barr from having to put himself under the glare of public attention, particularly from deranged MAGA extremists.
This “institution über alles” mentality found a voice in the legal commentators who were outraged when the Supreme Court’s draft decision in Dobbs was leaked—not because of the outrageous contents of the decision, but because the leak violated the cherished norms of the Court. As Alex Pareene writes, “This is the mindset of the institutionalist. It is important that people retain faith in our institutions, which does not mean that our institutions should work to earn people’s faith, but instead that people shouldn’t hear about it when they don’t.”
This sentiment is, of course, utterly backwards. Countries with a recent experience of dictatorship, like South Korea, tend to be a lot more sensible about what to do when a would-be dictator attempts to seize power, and as a result their institutions are a lot stronger. As much of our establishment continues to roll over, America might just have to learn this lesson the hard way.
