Burnt buildings were still smoldering when Bill Clinton toured South Central Los Angeles, the historic center of the city’s Black community, in early May 1992. The presidential candidate had flown cross-country from the East Coast as the city was being consumed by waves of unrest following the acquittal of four police officers who had savagely beat Rodney King the year before.
By this point in the Democratic primary, Clinton had effectively sewn up the Democratic nomination, so he used the visit to contrast his vision for urban America with that of George H. W. Bush, the president he would unseat that November. Meeting with community groups and religious leaders, Clinton wasn’t focused on massive new government programs, but rather a set of ideas that hadn’t been discussed much in national politics: policies to encourage the flow of more private investment and lending into neighborhoods long starved of it. “If you don’t enable people to borrow the money to get into businesses in the neighborhoods where they live, it’s hard to have any fundamental change,” he said that day, beside charred and crumbled buildings on Vermont Avenue.
Over Clinton’s two terms, one of the aides who helped translate that sentiment into policy—groundbreaking policy, at that—was a young lawyer named Michael Barr, who returned to government about a decade later to serve in a top Treasury Department position under Barack Obama. Now Barr is, by multiple accounts, a serious contender to become President Joe Biden’s nominee for comptroller of the currency, the powerful regulator who supervises most large banks and the majority of assets in the banking system. But his nomination has become an unexpected flash point in the ongoing tussle between progressives and centrists over the direction of Biden’s presidency and the Democratic Party more broadly.
Advocacy groups that focus on improving low-income Americans’ financial access and combatting redlining welcomed the news. They see Barr as an ally who will reverse federal regulators’ traditional reluctance to press banks too hard on behalf of Americans historically excluded from the financial system. And with Biden stressing racial inequities more forcefully than either Clinton or Obama did, they believe Barr can reinvigorate the Community Reinvestment Act, or CRA, Washington’s most powerful lever to channel more investment into low-income neighborhoods, after Donald Trump’s administration pushed through regulations that weakened it.
“He would be the most progressive comptroller in my lifetime, and maybe in history,” says Jesse Van Tol, the chief executive officer of the National Community Reinvestment Coalition. Barr has led “cutting-edge efforts to promote community development, to address under-invested communities, and to address the racial wealth divide. And in a time period when these things were not, as they are now, top of mind, I think Michael Barr has shown that kind of commitment.”
Yet despite such praise, Barr is facing unexpectedly intense resistance from a younger generation of progressives. It has focused its criticism on Barr’s work during the Obama administration with Treasury Secretary Tim Geithner—who progressives feel was too soft on big financial institutions after the 2008 crash—and on Barr’s recent work advising companies that offer a range of digital financial services with little regulatory oversight.
“There are definitely housing-world people who are estimable figures who speak highly of him,” says Jeff Hauser, the executive director of the Revolving Door Project, part of the left-leaning Center for Economic Policy and Research. “But I think he is deeply, deeply tied to fintech”—financial-technology companies—”and I think that creates a conflict of interest, [because] it is one of the top issues” the comptroller will face.
Progressives, backed by Senator Sherrod Brown of Ohio, the new Senate Banking Committee chair, have their own preferred candidate for the job: Mehrsa Baradaran, a UC Irvine law professor who’s written widely praised books on the racial wealth gap and discrimination against minorities in the financial system. As a young woman of color without ties to either the Clinton or Obama presidencies, she also embodies the desire of many younger progressives for a generational turning of the page from those earlier administrations. Looking back, not only many liberal but even some centrist Democrats have concluded that both administrations overly favored the interests of the biggest financial institutions on too many issues.
But community-development and low-income-housing advocates view Barr as an implausible focal point for that larger conflict. David M. Dworkin, the president and CEO of the National Housing Conference and a former Treasury Department official under Obama and Donald Trump, is sharply critical of choices Obama and Geithner made, including those that resulted in many Americans losing their home during the mortgage crisis. That wave of foreclosures “is one of the great tragedies of American government in the 21st century,” Dworkin told me. But Barr, he said, “was the voice in the room who was willing to step up and say we need to” protect more homeowners. “Unfortunately, he was in the minority. When I hear people criticize Michael Barr, it blows my mind.”
For community-redevelopment groups, Barr’s nomination would culminate a policy evolution that can trace its roots, at least partly, back to May 1992, when Clinton toured South Central L.A. In office, the former president used various levers to fulfill the central promise he made that afternoon—to channel more private capital into low-income neighborhoods. Among other measures, the Clinton administration created empowerment zones that offered tax breaks to employers who invested in low-income areas; updated and toughened regulations for the CRA, the 1977 anti-redlining law that requires banks to serve the neighborhoods where they operate; and created a federal fund to seed the development of a nationwide network of community-development financial institutions (CDFIs), small banks and loan funds that provide credit in low-income neighborhoods usually overlooked by conventional financial institutions.
Barr was present at the creation of all these developments. The son of a labor-union lawyer, he worked on anti-poverty issues both as an undergraduate and law-school student at Yale. He joined the Clinton administration on the State Department’s policy-planning staff in 1994, then moved to Treasury as a special assistant to then-Secretary Robert Rubin.
Few government officials had much background in steering private investment to low-income neighborhoods, and Barr, with his interest in anti-poverty work, was drawn to the emerging field. Working with allies such as Gene Sperling, the director of Clinton’s National Economic Council, Barr quickly became an advocate for community-development policies, from getting the CDFI fund off the ground to expanding the earned-income tax credit for the working poor.
In that role, Barr showed sensitivity to a crucial factor in banking policy: ensuring local involvement and input, says Lisa Mensah, the president and CEO of the Opportunity Finance Network, the nationwide association for CDFIs. “He’s a known quantity to all of us who have been in a very long fight … to move capital into poor neighborhoods via the institutions that come from those neighborhoods, not just via the mainstream,” she told me. “He’s a believer that it matters who runs the institutions.”
After Clinton left office, Barr taught at the University of Michigan Law School, where he was among those who pioneered research on the financial system’s failures to serve the “unbanked”—low-income consumers reliant on expensive payday lenders or check-cashing services. After Obama’s election, Barr returned to Washington as the assistant secretary for financial institutions under Geithner. During his two years in the administration, Barr spent almost all of his time on the sweeping Dodd-Frank legislation to rebuild the financial system after the 2008 crash. In that effort, he earned praise from one segment of the Democratic coalition—but also experienced his first bout of criticism from another.
Community-development and consumer advocates hailed Barr’s work in shepherding the law’s provisions creating the Consumer Financial Protection Bureau. That new agency, designed specifically to safeguard consumers in the financial marketplace, was associated primarily with the then–law professor Elizabeth Warren, but advocates (including her) considered Barr a central ally in winning Congress’s approval for it. But as Geithner’s point person, Barr drew his first flak from the left during negotiations over the legislation, when the Obama Treasury Department opposed several measures that progressives had pushed to cap the size of the biggest banks and limit their risk taking. “Barr tried to water down the Dodd-Frank Act at every turn,” the liberal American Prospect wrote in a recent piece opposing his nomination. Although that charge ignores Barr’s work on consumer protection, similar earlier criticism derailed a potential Barr nomination to the Federal Reserve Board of Governors during Obama’s second term.
For Hauser, of the Revolving Door Project, the principal problem with Barr isn’t his history working in the Obama administration—he knows that assessments of Barr’s role in creating Dodd-Frank depend on “what issues you worked on.” Rather, “the key thing” for progressives is Barr’s recent work in fintech. The phrase refers to the growing number of software-based companies that allow people to send and receive, spend and borrow, or invest money online. While proponents see these companies as creating valuable competition for traditional financial institutions (and offering new options for the unbanked), critics such as Hauser believe they are designed in many instances to evade consumer protection and financial-soundness regulations. The House Financial Services Committee, for instance, is holding a hearing today on whether Robinhood, an online-trading platform popular with young people, was fair to its customers during the recent dizzying market gyrations surrounding the company GameStop.
After Barr returned to the University of Michigan following two years with Obama (eventually becoming the dean of its Gerald R. Ford School of Public Policy), he consulted for several fintech interests, including LendingClub, an online lender; Ripple Labs, a blockchain-payments company; and NYCA Partners, a fintech venture-capital firm. Those associations form the core of the case against Barr from his progressive critics, who maintain that fintech companies systematically enlisted a wide range of former Obama officials as consultants in order to provide cover among Democrats and fend off potential future regulation.
Barr’s links to the industry constitute a “conflict of interest that makes it challenging to be an impartial regulator at a time when fintech will either get regulated or not in the next four years,” Hauser told me.
Barr’s supporters, meanwhile, say the charge that he will favor fintech companies disregards evidence from throughout his career that he’s sought to bolster financial institutions’ obligation to serve low-income Americans. During the legislative debate over the CFPB, for instance, he fought (ultimately unsuccessful) efforts from Apple, Google, and other technology companies to exempt themselves from the bureau’s authority. Mensah, for her part, argues that Barr’s consulting work better equips him to make any upcoming regulatory decisions. “I feel like we can’t get away from the fact that fintech is here, so I would rather have a comptroller that understood it, and that understood both the negative impacts it can have on low-income communities and its potential,” she told me.
Most of the Barr supporters I talked with praised Baradaran, progressives’ preferred pick—there isn’t a “major gulf between the two of them,” as Van Tol put it. For example, advocates consider it likely that either nominee would try to freeze Trump’s regulations weakening the CRA and join other bank regulators in designing new rules. (Van Tol told me that he’s asked Barr and Baradaran about each other, and “the great irony is … they have great admiration and respect.”)
If Barr’s backers have a tipping point, it’s probably his experience both designing policy and studying the broader financial system. For all the focus on the comptroller’s authority to write regulations influencing community investment and fintech, the heart of the job is the grinding, unglamorous work of supervising the nation’s largest financial institutions. That work doesn’t generate many headlines until it goes wrong—as it did during the 2008 financial crisis.
“The real issue is, what is the primary mission for the [comptroller]: Is it safety and soundness of the banking system, or is it community development, community reinvestment?” Dworkin said. “The answer to that needs to be yes, it is both of those things.”
“If you get the Community Reinvestment Act wrong, what you end with is another battle over the CRA,” he continued. “If you get safety and soundness wrong, you end up with a major financial crisis.
In other words, the next comptroller faces a balancing act. And with each appointment he makes, so does Biden—as he navigates between his own instinct to command the center and the rising demands of his party’s energized left.