Federal Reserve Gov. Michelle Bowman, the Trump administration’s nominee to be the agency’s new vice chair for supervision, was praised by Republicans but faced heavy scrutiny from Democrats during her Senate confirmation hearing on April 10.
Bowman was appointed to the Federal Reserve Board in 2018, becoming the first person to occupy the community bank seat established by Congress in 2015. She was reappointed in 2020 for a term ending in January 2034.
In her opening remarks, Bowman touted the need for supervisory reform, noting she has seen “significant shortcomings in supervision over the past few years that must be addressed to ensure that the U.S. banking system is safe and sound.” She also stated supervision “must be grounded in applicable law and provide clear standards to regulated institutions” and “supervisory expectations should not surprise regulated firms.”
The nominee also asserted the need for a “pragmatic” approach to regulations to ensure they are “efficient and effective.”
“This pragmatic approach requires identifying the problem targeted by the regulation, considering the costs and benefits of any proposed change, as well as incentive effects, impacts on markets, and potential unintended consequences,” Bowman said. “We must prioritize the identification and remediation of issues that may pose long-term structural problems to the banking system and the critical markets it supports, including addressing regulatory disincentives to Treasury market intermediation activities by banks and their affiliates.”
Republicans and community banking advocates have expressed strong support for Bowman’s views on tailoring capital requirements and other key banking regulations, based on an institution’s business model rather than asset size alone.
Responding to a question from Sen. Thom Tillis (R-N.C.) about her views on regulatory tailoring, Bowman said she believes in the past several years, federal banking agencies “have strayed from the statutory responsibility of regulatory tailoring” and would like to instill more of a focus on tailoring supervisory and regulatory requirements based on institutions’ size, risk and complexity.
Tillis asked Bowman if she believed the regional bank failures of 2023 could have been prevented if Fed examiners had received better training. Bowman said it is possible but noted she would need to undertake a thorough review of Fed examination practices to make a determination.
Ranking Member Sen. Elizabeth Warren (D-Mass.) indicated she believed the 2023 bank failures were less about examiner training and more about regulatory policy.
She noted her concerns about her support for the Trump administration’s policy positions on regulation and the economy, blaming them for the current state of financial instability in the country, reminiscent of the lead-up to the 2008 financial crisis.
She argued Bowman has consistently prioritized deregulation and Wall Street interests over financial stability and pressed her to answer whether she felt tariffs imposed by the Trump administration were also harmful to the country’s financial well-being.
“Gov. Bowman has weakened safeguards that restrict banks from gambling with people’s deposits,” Warren said. “She has loosened rules that prevent derivatives from blowing up big banks. She has reduced Wall Street loss-absorbing capital requirements – which help prevent bank failures in times of economic duress – she’s done that by tens of billions of dollars.”
She went on to cite Bowman’s 2019 vote, along with other board members, to reduce requirements regarding liquidity and capital cushions for banks with between $100 billion and $700 billion in total assets.
“How did that go?” Warren continued. “Well, a few years later, Silicon Valley Bank and two other deregulated banks failed, constituting the second-, third-, and fourth-largest bank failures in American history.”
Bowman responded to Warren’s criticisms by asserting that “economic growth has been solid, though it may be slowing, and the unemployment rate is still historically low.”
As Warren pressed Bowman on whether she believed the country’s new tariffs could cause significant financial instability, the nominee insisted the Fed would continue to monitor the impact of the administration’s trade policies and adjust accordingly when appropriate.
“We have a process for stress testing that has already been underway this year, and it will continue to move forward as we planned,” Bowman said.
In addition to Bowman, the committee also considered the following nominees: Andrew Hughes, to be deputy secretary, Department of Housing and Urban Development (HUD); David Woll, to be general counsel, HUD; John Hurley, to be under secretary for terrorism and financial crimes, Department of the Treasury; David Fogel, to be assistant secretary of commerce and director general of the United States and Foreign Commercial Service, Department of Commerce; and Landon Heid, to be assistant secretary of commerce, Department of Commerce.