President Trump is close to nominating Federal Reserve governor Michelle Bowman as the central bank’s new vice chair for supervision, according to multiple media reports, tapping a former Kansas banking commissioner as the Fed’s top banking cop.
Bowman could take oversight of giant US banks in a new direction as the Trump administration makes it clear it wants to lift constraints on lenders and overhaul a regulatory framework put in place following the 2008 financial crisis.
Last week, in a New York City speech, Treasury Secretary Scott Bessent called post-crisis regulation “backward-looking” and said he wants better coordination among bank oversight agencies.
“We need our financial regulators singing in unison from the same song sheet,” he said, citing “a broken supervisory culture.”
Bowman has signaled that she could be in favor of some changes. She opposed some of the proposals put forward by the former vice chair for supervision, Michael Barr, including a new set of controversial capital rules that would have required lenders to set aside greater buffers for future losses.
The requirements are based on an international set of capital requirements known as Basel III imposed in the decade following the 2008 financial crisis.
Federal Reserve governor Michelle Bowman in 2019. REUTES/Ann Saphir ·REUTERS / Reuters
Banks have been fighting this US proposal for the last year in an aggressive public campaign and even dropped hints about suing regulators if they don’t get their way.
Bowman has argued that the plan needed “substantive changes” and that an increase in capital requirements at the scale proposed by regulators could significantly harm the economy.
She wanted the Fed to tailor capital requirements to a bank’s size and risk profile as the regulator does now, arguing that she hasn’t seen compelling evidence that changing this approach would bolster the banking system.
“I’d be excited to see Miki Bowman appointed,” Goldman Sachs (GS) CEO David Solomon said in a Fox News interview Wednesday. “I think the industry would be excited.”
The 53-year-old Bowman was appointed to the Fed’s board of governors by Trump during his first term in office in November 2018 to fill an unexpired term ending January 2020. She was reappointed in January 2020 and is serving a term that ends in January 2034.
Scott Bessent, Treasury secretary, has called the regulatory framework put in place following the 2008 financial crisis ‘backward looking.’ (AP Photo/Seth Wenig) ·ASSOCIATED PRESS
Before the Fed, she was the state bank commissioner of Kansas and vice president of Farmers & Drovers Bank in Council Grove, Kan.
Bowman also previously worked for Senator Bob Dole of Kansas from 1995 to 1996 and Homeland Security Secretary Tom Ridge from 2003 to 2004, in addition to other roles in Washington policy circles.
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She attracted a lot of attention last fall when she became the first Fed governor to dissent against a monetary policy decision since 2005.
She voted against a 50 basis point rate cut because she was worried inflation was not yet fully under control.
“I see the risk that the Committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate,” Bowman said at the time.
She also said she was worried that a 50 basis point reduction would send the signal that central bank policymakers see economic weakness ahead.
Bowman’s ascension was made possible by the exit of Barr, who said in January he would step down because “the risk of a dispute over the position could be a distraction from our mission.”
The former Federal Reserve vice chair for supervision, Michael Barr. REUTERS/Evelyn Hockstein ·REUTERS / Reuters
Fed watchers had expected Trump to demote Barr, who was a Joe Biden appointee and a Treasury official during the Barack Obama era, although it was not clear that Trump would have had the legal power to make such a move once he took office.
Barr’s term as vice chair for supervision was scheduled to end in July 2026. He has said that he would remain on the Fed board of governors, a separate term that doesn’t end until 2032. Bowman still would require Senate confirmation to assume her new role.
The White House has made it clear it wants more control over how the Fed supervises banks with an executive order last month that gives it a closer relationship with the agency.
The new order makes clear that monetary policy — the direction of interest rates — will remain under the Fed’s full control, but the Fed’s oversight of the country’s biggest banks will now have a closer connection to the policies and priorities of the White House.
Bessent last week said the failures of Silicon Valley Bank and other regional lenders that roiled the industry in March 2023 showed that Fed “supervisors did not fully appreciate Silicon Valley Bank’s vulnerabilities as it grew in size and complexity.”
“When risks were identified, they did not take sufficient steps to ensure that SVB fixed those problems quickly. The result was the third-largest bank failure in United States history. It was a supervisory failure.”
Going forward, Bessent said, “Our financial regulatory agenda must start with a fundamental refocusing of supervisors’ priorities. Leadership must drive a culture that focuses on material risk-taking, rather than box check checking.”
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
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