Federal Reserve Governor Michael Barr expressed concerns on Thursday regarding proposals to ease liquidity requirements for banks as a means to shrink the Federal Reserve's balance sheet. He argued that such actions could undermine the resilience of the financial system and increase risks during market stress. Speaking at an event hosted by the Money Marketeers of New York University, Barr stated that recent discussions about reducing the Fed's influence in financial markets by cutting its balance sheet size were misguided. He highlighted that lowering liquidity requirements could lead to a greater likelihood of banks requiring emergency support during crises. Barr's comments come in the context of ongoing debates about the Fed's future direction, particularly with Kevin Warsh, a former Fed governor, being a leading candidate to succeed Jerome Powell as chair. Warsh has criticized the Fed's extensive asset purchases made during the 2008 financial crisis and the COVID-19 pandemic, arguing that they distorted market pricing and left the balance sheet excessively large. Currently, the Fed holds around $6.7 trillion in assets and is engaged in purchasing Treasury bills to maintain adequate liquidity. Barr's remarks underscore the need for caution in adjusting liquidity requirements amid economic uncertainty.