Fed Nominee Barr Faces Senators in Crucial Hearing

He also would have a voice on monetary policy when inflation is at a four- decade high and the central bank is trying to engineer a “soft landing,” in which growth slows enough to bring down inflation without triggering a recession.

“Inflation is running far too high, affecting communities across our country,” Mr. Barr said Thursday before the Senate Banking Committee.

Mr. Barr would round out Mr. Biden’s slate of appointees to the central bank. Fed Chairman

Jerome Powell

and three other appointments were confirmed in recent weeks.

Mr. Barr, 56 years old and dean of public policy at the University of Michigan, has a record that suggests he might seek to restore at least some of the financial rules that were eased by the Fed during the Trump administration.

Randal Quarles,

who previously held the Fed supervision post, focused on simplifying financial regulations enacted after the 2008-09 financial crisis. Supporters have said those moves clarified or better calibrated the central bank’s rules, but some Democrats said they inappropriately softened the impact of the Wall Street rulebook.

The changes included steps to revamp big-bank stress tests, tailor the Fed’s rules for U.S. lenders based on their size and ease compliance with postcrisis regulations such as the Volcker rule prohibition on proprietary trading.

The banking system that Mr. Quarles oversaw is emerging from the Covid-19 pandemic in strong health, in part because of an aggressive response by monetary- and fiscal-policy makers that stopped a panic and showered the economy with cash.

The lack of a Fed bank supervisor since Mr. Quarles’ departure at the end of last year has slowed decisions on regulatory policy and meant there was no one on the Fed board whose job was to articulate a broad vision for financial oversight

Thursday’s hearing could yield clues to Mr. Barr’s priorities should he win confirmation in the coming weeks. One early decision revolves around a potential adjustment to how the Fed counts deposits held at the central bank toward banks’ so-called leverage ratio. The Fed allowed a temporary, pandemic-related reprieve from the capital requirements to expire last spring, but it said it would consider a broader revamp to the rule’s treatment of ultrasafe assets. It has yet to do so.

Mr. Biden’s first nominee for the banking-supervision post,

Sarah Bloom Raskin,

withdrew from consideration in March after Sen.

Joe Manchin

(D., W.Va.) said he couldn’t support the nomination, citing her views on addressing climate change. His vote was key in the 50-50 Senate with unified Republican opposition to Ms. Raskin.

On Tuesday, Mr. Manchin said he planned to support Mr. Barr, after meeting privately with him last week. Progressive Democrats such as Sen.

Elizabeth Warren

(D., Mass.) also have said they would support him.

Also testifying Thursday are two nominees for the Securities and Exchange Commission, Republican Mark Uyeda and Democrat Jaime Lizárraga.

Mr. Uyeda has advised former SEC Chairman Jay Clayton and two former Republican commissioners. Since January 2021, Mr. Uyeda has been detailed to the Senate Banking Committee as securities counsel to the panel’s top Republican, Sen. Pat Toomey of Pennsylvania. Mr. Toomey has been a frequent critic of current Chairman Gary Gensler’s policy agenda.

Mr. Lizárraga has served as an aide to House Speaker Nancy Pelosi (D., Calif.) for nearly 15 years. Though he isn’t well-known among lawyers and lobbyists in the SEC’s orbit, Mr. Lizárraga said in prepared testimony that he played key roles in all financial regulation moving through Congress in recent decades, including the Sarbanes-Oxley Act and Dodd-Frank Act.

The SEC currently comprises three Democratic commissioners and one Republican. If confirmed, Mr. Lizárraga would replace Commissioner Allison Herren Lee, a Democrat, who plans to leave once a successor arrives. Mr. Uyeda would fill a vacant seat.

—Paul Kiernan contributed to this article.

Write to Andrew Ackerman at [email protected]