Being in charge is hard. In theory, if you are in charge of something you win praise when you do a good job and admonition if you screw up. But in practice, people in positions of power receive no credit when they get things right and get blamed for things they didn’t do when things go wrong. With modest power comes great responsibility.

This is especially true in cases when you have a titular but not effective control over something, as is the case for the Federal Reserve vice chair for supervision. The vice chair — a role created under the Dodd-Frank Act — is charged with developing “policy recommendations for the Board regarding supervision and regulation of … financial firms supervised by the Board, and shall oversee the supervision and regulation of such firms.” The vice chair for supervision is also required to appear before both houses of Congress twice a year to testify “regarding the efforts, activities, objectives, and plans of the Board with respect to the conduct of supervision and regulation” of banks under the Fed’s jurisdiction.

All of this is to say that being the vice chair of supervision can be a tough gig. Even so, the financial regulatory world was taken by surprise yesterday when the current Vice Chair for Supervision, Michael Barr, said yesterday that he would resign his position on Feb. 28 or when a successor is confirmed by the Senate, whichever comes first. Part of the reason that decision was surprising is because he said not very long ago that he intended to serve out his term — even as the incoming Trump administration was mulling whether and how to remove him from his post. Barr said he thought that, while he believes he would prevail in court if President Donald Trump made that move, the legal battle would make any victory pyrrhic and distract from the central bank’s good work.

“I came to the conclusion that the likelihood of this being a political distraction for the Fed was very high and that, on balance, it made sense for me to step away from the position, rather than have it be a political distraction for the Fed,” Barr told American Banker on Monday afternoon. 

But the more surprising turn for Barr — at least to me — was that he said he would stay on the Fed Board of Governors more or less indefinitely.

Fed officials ride off into the sunset at the onset of a new administration with considerable regularity. Daniel Tarullo, who held the vice chair of supervision title in all but name, resigned from the Board of Governors in April 2017. Barr’s predecessor, Randal Quarles, had his term as vice chair expire in October 2021 and left the Board of Governors a few months later, after his term as chair of the international Financial Stability Board expired. Barr, however, is serving a term that expires in 2032, and while almost no Fed governors serve their full 14-year terms, Barr did not offer much of an explanation for why he was staying on except that it’s what he thought was best for the American people.

“I haven’t made any decisions about the length of my term,” he said. “I feel like I’m contributing on the board on monetary policy, on financial inclusion, on payments policy, on financial stability issues, broadly. I enjoy the job and I look forward to continuing to contribute.”

I’m certain that all of those sentiments are sincere, but it is plain for anyone to see that the main consequence of resigning as vice chair of supervision and not as a Fed Board member is that it limits the Trump administration’s range of candidates for filling that role.

By statute, Fed leadership positions are selected from among the seated Fed governors, and for the first time in quite a long time, the incoming president is inheriting a Fed with no vacancies. That means that Trump will have to either select a vice chair for supervision from among the current board members or wait until Fed Gov. Adriana Kugler’s term expires a year from now to bring in someone entirely new. The Federal Vacancies Reform Act, which allows presidents to appoint acting directors pending Senate confirmation, is meant to apply to heads of agencies and hasn’t been tried for Fed leadership positions, so those prospects are at best uncertain.

The obvious choice for the Trump administration would be to select Fed Gov. Michelle Bowman for the job, since she definitely has thoughts about bank regulation, was nominated by Trump in his first administration and has thoroughly ingratiated herself to the banking industry since taking office. Bowman has been more hawkish on interest rates than the average board member, however, and that might make a difference if Trump decides the Fed is too hawkish to begin with.

But that also brings us back to the unenviable fact about leadership positions at the Fed, which is that the Fed board is a committee and each member has one vote. Whether Bowman or Barr is running point on regulation, it’s the same seven people looking at the same problems. By stepping down as vice chair, Barr has put the onus on someone else of Trump’s choosing to win his vote rather than having to win theirs.

The next couple of years could be a rocky time for the Fed. The economy is good but slowing down somewhat, the incoming administration is eager to change the bank regulatory landscape to be more consolidated and less independent and is equally eager to pursue inflationary trade and immigration policies. As others have pointed out, the conditions are ripe for a bumpy ride, and in that case, the safest place to be might be in the backseat rather than at the steering wheel.