Fed’s Barr warns that weakening bank rules courts financial instability in World Economy News 07/06/2026 Federal Reserve Governor Michael Barr delivered a sharp critique of the recent regulatory push to ease oversight on Wall Street lenders, according to prepared remarks for his speech at American University. He cautioned that the systemic changes enacted over the past year threaten the long-term safety and soundness of the U.S. banking sector. The remarks highlight a growing ideological divide within the central bank regarding the proper scope of financial oversight. Since Vice Chair for Supervision Michelle Bowman took the regulatory helm a year ago, the Fed has advanced several proposals designed to reduce the regulatory burden on major lenders. Under the current trajectory, proposed rollbacks are projected to slash the aggregate capital requirements for the nation’s largest institutions by 6 percent. Barr noted that this shift translates to “$60 billion less in capital to protect against bank failure and instability that could spread through the financial system.” The warning comes at a time when the eight largest global systemically important banks (GSIBs) command roughly 60 percent of all domestic banking assets. Barr compared the ongoing wave of financial deregulation to a short-term “sugar high” that ultimately exposes society to disproportionate long-term economic damage. Beyond capital buffers, the central bank has adjusted its internal rating systems for the 36 largest financial institutions in the country. Barr criticized these modifications as form of “grade inflation” that permits poorly managed institutions to mask foundational vulnerabilities in risk management. Supervisory actions have already decelerated significantly, with the issuance of critical warnings falling to roughly half of their 2024 levels by the end of 2025. Concurrently, the share of large firms officially designated as well-managed has doubled under the newly softened metrics. The re