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— Regulatory —
Barr, confirmed in May to be the Treasury Department's assistant secretary for financial institutions, has spent most of his academic career examining how the financial services industry can better reach the poor and other underserved segments of society. His scholarly work is especially relevant in the wake of last year's financial panic, which was sparked by a wave of reckless and predatory subprime lending to lower-income Americans. Barr, 43, who a year ago was a law professor at the University of Michigan and a fellow at the Center for American Progress in Washington, tapped a deep well of his own research in the first weeks of the crisis to argue for government intervention to keep troubled borrowers in their homes and rein in abusive-lending practices. "He's an expert on people who have been left out of our financial system," says Brookings Institution senior fellow Robert Litan, who collaborated with Barr on a 2007 Brookings publication, "Building Inclusive Financial Systems." "Lending to underserved populations has been a big interest of his."
Barr served in the Clinton Treasury as Secretary Robert Rubin's special assistant and as deputy assistant secretary. He was a law clerk to Supreme Court Justice David Souter and U.S. District Judge Pierre Leval and he earned a law degree from Yale University and graduate degree from Oxford University. As the crisis unfolded, Barr testified several times before Congress as a representative of the Center for American Progress, which has deep ties to the Obama administration. Many of Barr's ideas for new consumer protections were incorporated into what became the Obama administration's financial reform plan. While still a think tank scholar, Barr was a persistent critic of Bush administration Treasury Secretary Henry Paulson for not doing more to promote mortgage modification for troubled homeowners. "If Paulson can nationalize much of the housing finance system and even large swaths of banking in America, why can Treasury not slow the tide of foreclosures?" he asked in a CAP paper last October. Barr has advocated programs that would have gone well beyond what the Obama administration ended up proposing. He called for a modern version of the Home Owners' Loan Corp., the Depression-era program that gave assistance to families threatened with losing their homes. To provide incentives for mortgage servicers to sell loans to a government-managed fund, Barr also called for changes to tax rules for real estate mortgage investment conduits. Barr was among the first to call for legislation that would require lenders to offer plain-vanilla financial products, such as 30-year fixed-rated mortgages, before signing borrowers up for riskier products such as loans with negative amortization or large payment resets they are likely to fall behind on. "He wanted national institutions to offer simple products to unsophisticated buyers," Litan says. The plain-vanilla requirement was once the centerpiece of the White House proposal to create a Consumer Financial Protection Agency. That specific idea has been killed in the face of opposition from lobbyists, but the CFPA itself appears likely to be included in the overhaul and will be empowered to write and enforce sales practices rules. Now that politics has sidelined his plan to require simple financial products, Barr isn't looking back. Instead, he's taking on the broader opposition of the CFPA. In June, he argued that such opposition is misguided. "It should be obvious to anyone who's gone through the financial crisis ... that we didn't sufficiently protect consumers," Barr said. "That's a very hard argument for the big banks to make — that the status quo on protection is enough." In the long run, he said heavily regulated banks would benefit if mortgage brokers and other poorly regulated operations had to answer to the same regulator of consumer protections. "It will be a good thing," he said, "not a bad thing for most financial institutions." He's also happily touting the Obama Treasury's record on foreclosure prevention. He cited the success of the Making Home Affordable program, announced in February to help reduce mortgage payments and prevent foreclosures. The program made available $75 billion to lower monthly mortgage payments for at-risk borrowers, providing modifications for up to 4 million troubled borrowers. He told the House Subcommittee on Housing and Community Opportunity last month that the program is "providing modifications on a scale never previously attempted." |
Michael Barr has a rare opportunity for a scholar. He's been hired by the federal government to put some of his ivory tower ideas into practice.
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