Deregulating In A Financial Boom: Why Governor Barr Is Right

MoneyBanking & InsuranceDeregulating In A Financial Boom: Why Governor Barr Is RightByMayra Rodriguez Valladares,Senior Contributor.Follow AuthorJun 06, 2026, 01:07pm EDTGovernor Michael S. Barr© 2026 Bloomberg Finance LPIn a speech delivered on June 6, 2026, at American University, Federal Reserve Governor Michael S. Barr issued one of the most urgent warnings in recent memory about the trajectory of U.S. bank regulation. His address, titled "Deregulating in a Financial Boom: What Could Go Wrong?", laid out a meticulous, evidence-based case against the current wave of bank deregulation unfolding across federal regulatory agencies. Governor Barr is right — and the constellation of risks now accumulating in the banking sector makes his warnings not merely prudent but essential.Barr's central argument is straightforward: deregulation may deliver a short-term sugar high, but it leaves the financial system dangerously underinsured against the kind of catastrophic shocks that devastate ordinary Americans. He draws on a rich body of academic research and the bitter lessons of history — the Great Depression, the savings and loan crisis of the 1980s, and the Global Financial Crisis of 2007–2009 — to show that weakening regulatory safeguards during periods of apparent financial strength is precisely when policymakers are most tempted, and most likely, to make irreversible mistakes. I agree with this assessment entirely.The specific regulatory rollbacks Barr catalogs are alarming in their breadth. Over the past year and a half, the Federal Reserve and other banking agencies have reduced the stressfulness of bank stress tests, eroded leverage ratios for large banks, weakened the U.S. implementation of the Basel III international capital accord, and reduced the GSIB surcharge — the capital add-on specifically designed to offset the systemic danger posed by the eight largest banks, which together hold approximately 60 percent of banking sector assets. In aggre...