Federal Reserve Governors Michelle Bowman and Christopher Waller pose for a photo, during a break at a conference on monetary policy at Stanford University’s Hoover Institution, in Palo Alto, California, U.S. May 6, 2022. Picture taken May 6, 2022.
Ann Saphir | Reuters
The early departure of the Federal Reserve’s top financial regulator allows for a more industry-friendly official to take his place, the latest boon for U.S. banks riding a wave of post-election optimism.
Federal Reserve Vice Chair for Supervision Michael Barr said Monday that he plans to step down from his role by next month to avoid a protracted legal battle with the Trump administration, which had weighed seeking his removal.
The announcement, a reversal from Barr’s previous comments on the matter, ends his supervisory role roughly 18 months earlier than planned. It also removes a possible impediment to Trump’s deregulatory agenda.
Banks and other financial stocks were among the big winners after the election of Donald Trump in November on speculation that softer regulation and increased deal activity, including mergers, were on the way. Weeks after his victory, Trump selected hedge fund manager Scott Bessent as his nominee for Treasury Secretary.
Trump has yet to name nominees for the three major bank regulatory agencies — the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.
Now, with Barr’s resignation, a more precise image of incoming bank regulation is forming.
Trump is limited to picking one of two Republican Fed governors for vice chair of supervision: Michelle Bowman or Christopher Waller.
Waller declined to comment, while Bowman didn’t immediately respond to request for comment.
Bowman, whose name had already appeared on short lists for possible Trump administration roles and is considered the frontrunner, has been a critic of Barr’s attempt to force American banks to hold more capital — a proposal known as Basel III Endgame.
“The regulatory approach we took failed to consider or deliver a reasonable proposal, one aligned with the original Basel agreement yet suited to the particulars of the U.S. banking system,” Bowman said in a November speech.
Bowman, a former community banker and Kansas bank commissioner, could take on “industry-friendly reforms” around a number of sore spots for banks, according to Alexandra Steinberg Barrage, a former FDIC executive and partner at Troutman Pepper Locke.
That includes what bank executives have called an opaque Fed stress test process, long turnaround times for merger approvals and what bankers have said are sometimes unfair confidential bank exams, Barrage said.
Easier ‘Endgame’?
When it comes to the Basel Endgame, first announced in July 2023 before a toned-down proposal was released last year, it’s now more likely that its ultimate form will be far gentler for the industry, versus versions that would’ve forced large banks to withhold tens of billions of dollars in capital.
Barr led the interagency effort to draft the sweeping Basel Endgame, whose initial version would’ve boosted capital requirements for the world’s largest banks by roughly 19%. Now, Barrage and others see a final version that is far less onerous.
“Barr’s replacement could still work with the other agencies to propose a new B3 Endgame rule, but we think such a proposal would be capital-neutral industry-wide,” Stifel analyst Brian Gardner said Monday in a note. “Bowman voted against the 2023 proposal, and we expect she would lead any B3 re-write in a different direction.”
If lenders ultimately beat back efforts to force them to hold more capital, that would enable them to boost share buybacks, among other possible uses for the money.
Bank stocks traded higher Monday after Barr’s announcement, with the KBW Bank Index rising as much as 2.4% during the session. Citigroup and Morgan Stanley, which have both garnered headlines for regulatory matters last year, were among the day’s biggest gainers, each rising more than 2%.
Notably, Barr is not resigning from his role as one of seven Fed governors, which preserves the current 4-3 advantage of Democrat appointees on the Fed board, according to Klaros Group co-founder Brian Graham.
“Barr’s resignation of the vice chair role, while remaining a governor, is actually very clever,” Graham said. “It preserves the balance of power for board votes for a year or so, and it constrains the choices for his replacement to those currently serving on the board.”
UnitedHealth Group saw some of its insiders step in and purchase declining shares this week.
Kristen Gil, a director at the firm, bought 3,700 shares worth roughly $1 million on Thursday.
Shares of UnitedHealth plunged nearly 11% to $274.35 on Thursday following a report in The Wall Street Journal that the Department of Justice is conducting a criminal investigation into possible Medicare fraud.
UnitedHealth Group , whose stock has been in a tailspin amid a tumultuous period for the health-care giant, saw some of its insiders step in and purchase declining shares this week. Kristen Gil, a director at the firm, bought 3,700 shares worth roughly $1 million on Thursday, while Timothy Patrick Flynn and John Noseworthy, also directors, scooped up about 1,500 and 300 shares , respectively, on Wednesday, according to InsiderScore, which tracks regulatory filings from corporate insiders. Shares of UnitedHealth plunged nearly 11% to $274.35 on Thursday following a report in The Wall Street Journal that the Department of Justice is conducting a criminal investigation into possible Medicare fraud. The stock rebounded 6% Friday, cutting its weekly losses to 23%. UNH 5D mountain UnitedHealth The reported investigation also follows the surprise exit of UnitedHealth Group CEO Andrew Witty, who will be replaced by the company’s former longtime chief executive Stephen Hemsley. Shares of UnitedHealth Group are down roughly 43% this year following a string of setbacks for the company. The company has been grappling with a historic cyberattack, higher-than-expected medical costs and a torrent of public blowback after the murder of UnitedHealthcare CEO Brian Thompson.
U.S. Federal Reserve in Washington, DC, on January 30, 2024.
Mandel Ngan | Afp | Getty Images
The Federal Reserve will look to reduce its headcount by 10% over the next couple of years, including offering deferred resignation to some older employees, central bank chair Jerome Powell said in a memo.
“Experience here and elsewhere shows that it is healthy for any organization to periodically take a fresh look at its staffing and resources. The Fed has done that from time to time as our work, priorities, or external environment have changed,” Powell said in a memo obtained by CNBC.
The central bank chief added that he has instructed leaders throughout the Fed “to find incremental ways to consolidate functions where appropriate, modernize some business practices, and ensure that we are right-sized and able to meet our statutory mission.” One method for shrinking the staff will be to offer a voluntary deferred resignation program to employees of the Federal Reserve Board who would be fully eligible to retire at the end of 2027.
The central bank said in its 2023 annual report that it had just under 24,000 employees. A 10% reduction would bring that number below 22,000.
The memo comes as the Trump administration has pushed for cost cuts across civil service agencies, spearheaded by Elon Musk and the so-called Department of Government Efficiency. Musk has previously called the Fed “absurdly overstaffed.” Powell’s memo did not mention Musk or DOGE as a factor in the decision to shrink headcount.
The planned staff cuts were first reported by Bloomberg News.
Check out the companies making headlines in midday trading. Applied Materials — Shares of the semiconductor manufacturer dropped 6% after Applied Materials posted disappointing fiscal second-quarter revenue. The company’s revenue of $7.10 billion was below the LSEG consensus of $7.13 billion. Semiconductor revenue of $5.26 billion also disappointed the $5.31 billion analysts were looking for. Take-Two Interactive Software — The stock slid 1.8% after the video game company gave weaker-than-anticipated guidance for full-year bookings, expecting the figure to come between $5.9 billion and $6 billion. That missed the $7.82 billion StreetAccount consensus. Take-Two also projected bookings of between $1.25 billion and $1.30 billion for the current quarter, while analysts had penciled in $1.28 billion. Vistra — Shares of the power producer gained 3% after the company purchased seven natural gas facilities from Lotus Infrastructure Partners for $1.9 billion. The gas plants are located in the PJM market, New England, New York and California. Constellation Brands — Shares of the Corona and Modelo importer climbed 1.4% after Berkshire Hathaway disclosed doubling its stake in the company, putting its position at around $2.2 billion in value. Galaxy Digital — The Mike Novogratz-led crypto firm began trading at the Nasdaq on Friday, opening at $23.50 per share in a direct listing. Galaxy Digital has traded in Canada since 2020 . Cava — The eatery chain’s stock dropped more than 2% after the company reiterated its full-year guidance for same restaurant sales, implying a slowdown from first-quarter results. Cava said it achieved 10.8% same store sales growth. However, it maintained a full-year projection of 6% to 8% improvement in that category. Cava’s earnings per share of 22 cents for the period was ahead of projections for 14 cents per share, according to LSEG. Fiserv — The financial services provider jumped more than 4% as the stock recovered some of its steep losses for the week. Fiserv is down more than 9% this week and is one of the most oversold names on Wall Street, with a relative strength index below 30. Coinbase — The crypto exchange jumped more than 9%, recovering losses from the previous session. Some Wall Street analysts called the sell-off overdone and a buying opportunity . On Thursday, the company confirmed the Securities and Exchange Commission has been investigating whether it has misstated its user numbers , sending the stock down 7.2%. Novo Nordisk — Shares stumbled 3% after the pharmaceutical company announced that CEO Lars Fruergaard Jørgensen would be stepping down from his position , citing recent market challenges. Jørgensen, who was in the position for the last eight years, will remain “for a period to support a smooth transition to new leadership” as Novo Nordisk searches for a successor. Doximity — The health care platform issued weak guidance, sending the stock down 11.8%. Doximity expects adjusted EBITDA for the first quarter to come in between $71 million and $72 million. That’s short of the $74 million expected from analysts polled by StreetAccount. Revenue guidance for both the first quarter and full year also missed expectations. — CNBC’s Tanaya Macheel, Lisa Han, Jesse Pound and Michelle Fox contributed reporting.
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