Happy Wednesday! Everyone knows the Fed Chair, but what about the Vice Chair?

IN ACTION

“I went back to academia again in 2011 and then returned to public service as the Federal Reserve Board's Vice Chair for Supervision in July 2022. In this position, I oversaw the response to the bank failures in March 2023 and have helped develop ways to reduce these and other risks going forward.” - Vice Chair for Supervision Michael Barr At Yale School of Management (February 25, 2025)

THE BASICS

The Vice Chair is the second-highest ranking position of the Federal Reserve. The role has existed since the inception of the Fed, with the Dodd-Frank Act creating the role of Vice Chair for Supervision in 2010. The Vice Chair is a Fed governor with extra powers and responsibilities; there are two Vice Chair positions: the Vice Chair takes on the role of Chair in their absence and the Vice Chair for Supervision leads the Fed’s regulatory efforts.

WHY IT MATTERS

The Vice Chair and Vice Chair for Supervision play a critical role in carrying-out the objectives of the Federal Reserve. The Vice Chair works closely with the Chair as they must be ready to step-into the role if required, while the Vice Chair for Supervision makes regulatory recommendations to the Board. Given the importance of the role, Vice Chairs are often leading candidates for the Chair position - with Janet Yellen serving as Vice Chair before becoming Chair and Vice Chair Lael Brainard emerging as the most likely to replace Powell before his reappointment.

During his testimony before the House Financial Services Committee, Chair Powell noted there was “less volatility” before the creation of the role of Vice Chair for Supervision. He went on to describe how this volatility could be harmful to the goals of the institution, and mentioned that the Fed could operate without someone in the role. Powell’s commentary called into question the necessity of the position, a sentiment consistent with many lawmakers.

2025 AND BEYOND

Michael Barr, a Democrat nominated by President Biden, stepped down from his role as Vice Chair for Supervision at the end of February over concerns of a legal battle with President Trump. There are reports that GOP members have urged President Trump’s team to quickly fill the vacancy to unwind the regulatory efforts of the former Vice Chair. Appointing Barr’s successor presents the first opportunity of President Trump’s second term to shape the Federal Reserve.

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