Michael Barr’s sudden decision to step down as the Federal Reserve’s vice chair for supervision has just confirmed what everyone already saw coming: a full-blown clash between Donald Trump and the Federal Reserve.

Barr, who planned to stay in his position until July 2026, dropped the announcement on Monday, saying he’s stepping aside next month—if not sooner.

Trump, who already wants to take on the Fed’s regulatory framework, now has a golden opportunity to reshape it. But don’t get too comfortable. Barr isn’t going anywhere entirely. He plans to stay on as a Fed governor until 2032, ensuring he’ll have a say in key decisions.

Trump and Barr on a collision course

Trump and Barr have fundamentally different ideas on how financial regulations should work. Barr has been a thorn in the side of Wall Street and the crypto industry, pushing aggressive oversight and tighter rules. On the other hand, Trump believes in deregulation.

Even before Barr’s resignation, tensions were bubbling. Trump is not a fan of the Fed’s current leadership, though he decided not to fire Jerome Powell, whose term as chair lasts until May 2026. That temporary détente had calmed markets for a while, but Barr’s actions have now shattered it.

He himself hinted at the drama in a statement to Bloomberg, saying the potential legal challenges to his role made it impractical to stay on. He called it a “distraction” but of course conveniently avoided mentioning Trump’s name.

The president’s next step could be nominating Michelle Bowman, one of his own appointees from 2018, to take over Barr’s role.

Wall Street and crypto say ‘good riddance’

The markets didn’t wait to react. Bank stocks jumped immediately after Barr’s resignation went public. The SPDR S&P Bank ETF shot up over 1%, signaling Wall Street’s relief. Investors see this as Trump’s chance to install someone friendlier to business and crypto, shaking off the regulatory heavy hand that’s been hanging over them.

Barr’s exit also pauses some major regulatory projects, most notably the Basel endgame—a set of rules aimed at tightening oversight on the banking industry, which led to the infamous Operation Choke Point 2.0.

His policies were a major reason why banks have avoided engaging with crypto or offering custody services for crypto companies. The industry hates it, and with Barr gone, progress on these reforms is effectively frozen.

The vice chair for supervision role, created after the 2008 financial crisis, was designed to prevent another collapse of major financial institutions. Barr’s tenure included handling the fallout from the 2023 collapse of Silicon Valley Bank and other regional banks.

These crises forced the Fed to introduce emergency liquidity measures to prevent a broader meltdown.

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