Biden Pick for Fed Financial Oversight Post Invests in a Bunch of Crypto Firms

Last month, President Biden announced that former Obama administration official and law professor Michael Barr was his pick to be the Federal Reserve's Vice Chair for Supervision, with a Senate committee hearing scheduled for May 19. The position is responsible for the oversight and regulation of the largest banks and financial institutions.

“Barr has spent his career protecting consumers, and during his time at Treasury, played a critical role in creating both the Consumer Financial Protection Bureau and the position for which I am nominating him,” the White House said in its statement in mid-April. “He was instrumental in the passage of Dodd-Frank, to ensure a future financial crisis would not create devastating economic hardship for working families.”

Financial disclosure documents released by Barr and reported on by the Revolving Door Project, a nonprofit think tank in D.C., reveal investments in over 80 fintech (financial technology) companies including cryptocurrency, debt collection, and microfinance firms. This is concerning, the Revolving Door Project says, given the ongoing cryptocurrency market crash and increasing scrutiny from regulators. 

“The next Vice Chair for Supervision will play a key role in determining how fintech and cryptocurrency impact the financial system. Especially after last week’s total collapse in the cryptocurrency market, the Fed needs a regulatory chief who everyone can trust is acting independent of pressures from industry, personal financial interests, and a desire for powerful private-sector jobs after their time in government,” Revolving Door Project research director Max Moran said in a press release. 

“The Jerome Powell Fed has been notoriously lax on ethics concerns," Moran's statement continues. "Senators and the press must find out the extent of Barr’s financial and personal interests in fintech and cryptocurrency, how he views these digital ‘innovations’ in finance (always a risky prospect at best), and why they should trust him to act in the public’s best interest.”

The lion’s share of Barr’s investments are in firms invested in by NYCA Partners, a fintech-focused venture capital fund with close to $1 billion under management. He invested in payday lending app Brigit and served as a consultant at LendingClub from 2013 to 2020, where he earned $133,110 in 1099 income and between $15,000 and $50,000 in capital gains according to disclosures. Barr also invested in crypto-related fintech firms such as Zero Hash (which provides infrastructure for financial institutions to facilitate crypto trades), micro-investing app Acorns Grow, Tint Technologies (a firm that offers insurance for Bitcoin mining equipment and crypto deposits), wallet anti-fraud company Sardine AI Corp, institutional blockchain company Axoni, and blockchain network monitoring firm Metrika. 

One major investment of Barr’s, GRIT Financial, offers the kind of "earned wage access" products that have come under fresh scrutiny from the Consumer Financial Protection Bureau—which Barr helped create—for their resemblance to payday loans. Another investment is in TrueAccord, a digital debt collector empowered by a Trump administration ruling allowing collectors to make contact an unlimited number of times over email and up to 7 times a week through calls or texts.

Barr isn’t the only NYCA Partners adviser to enter the public sector; one of his colleagues and frequent collaborators at the University of Michigan and fellow member of the Biden-Harris transition team, Adrienne Harris (no relation to the Vice President), was nominated as the head of New York State's Department of Financial Services (DFS). 

As the Revolving Door Project reported at the time, Harris has long been skeptical of regulatory approaches that closely scrutinize the fintech industry. Harris has served as a lawyer and adviser for Wall Street firms, Brigit, home-purchasing app Homie, "insurtech" startup States Title, and served on the board of directors for LendingClub. The day before Harris joined the board, the Federal Trade Commission announced that the company agreed to an $18 million settlement for sneaking in hidden fees to loans explicitly advertised as having none. Harris left NYCA and the LendingClub board after ascending to the DFS, which supervises nearly 1,800 insurance companies and over 1,400 financial institutions (overseeing assets in excess of $8.4 trillion).

This is just the latest in a long line of concerning developments as the tech sector—but especially the cryptocurrency industry—desperately attempts not only to establish a revolving door between the public and private sector, but protect itself from scrutiny. 

The crypto industry has spent millions of dollars lobbying Congress, the Biden-Harris transition team was full of Silicon Valley personnel, and previous nominees for this and other key regulatory positions have been crushed in nasty fights that have kept positions open for more moderate officials. When unable to block nominations, tech companies have thrown tantrums demanding the recusal of regulators like Federal Trade Commission chairwoman Lina Khan. So long as tech and crypto remain hostile to regulation, we will continue to see pain caused by the ongoing market crash, fraud, and exploitation endemic to the crypto industry.