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Yahoo
4 hours ago
- Business
- Yahoo
6 takeaways from Michelle Bowman's first speech as Fed vice chair
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. Michelle Bowman is a veteran of the Federal Reserve. But the ink on her newest role – the Fed's vice chair for supervision – is still drying. Following her confirmation, she spoke Friday at Georgetown University in her first appearance as the central bank's top cop. Here are six takeaways from her remarks. 1. The Fed's job is not to take the risk out of banking entirely. Banking is not and cannot be devoid of risk, and to drive out such risk 'is at odds with the fundamental nature of the business of banking,' Bowman said. 'Banks must be able to earn a profit and grow while also managing their risks.' 'Adding requirements that impose more costs must be balanced with whether the new requirements make the correct tradeoffs between safety and soundness and enabling banks to serve their customers and run their businesses,' she said. Rather than eliminating risk from the banking system, regulators must be tasked with ensuring banks manage risk effectively, Bowman said. 2. ...or make sure banks don't fail. 'Our goal should not be to prevent banks from failing or even eliminate the risk that they will,' Bowman said. 'Our goal should be to make banks safe to fail, meaning that they can be allowed to fail without threatening to destabilize the rest of the banking system.' 3. Enhancing supervision doesn't necessarily mean more rules; it means tailored rules. 'Supervision focused on material financial risks that threaten a bank's safety and soundness is inherently more effective and efficient,' Bowman said. 'We should be cautious about the temptation to overemphasize or become distracted by relatively less important procedural and documentation shortcomings.' The uniqueness of each bank, in business model and complexity, means that risks are not uniform. In the past, Bowman said, rules meant to enhance safety at the biggest banks have also been unfairly applied to smaller banks. She suggested creating a framework instead for those smaller community banks, which would insulate them from the standards designed for bigger, more complex institutions. 'While I have no objection to a deliberate, intentional policy to apply similar standards to firms with similar characteristics as conditions warrant, the gradual erosion of distinct regulatory and supervisory standards among firms with very different characteristics — essentially the subtle reversal of tailoring over time — is not a reasonable approach for implementing supervision and regulation,' Bowman said. 4. The Fed needs to reconsider some rules it has imposed on banks since the 2007-08 financial crisis. Since Congress passed the Dodd-Frank Act almost 15 years ago, rules banks must follow have 'increased dramatically,' Bowman said. And while many were important, a number of these reforms were 'backward looking — responding only to that mortgage crisis — not fully considering the potential future unintended consequences or future states of the world.' Some changes had unintended consequences, she noted, like pushing banking activities into 'less regulated corners of the financial system.' Moving forward, the Fed needs to evaluate these rules on the banking system today, rather than that of the financial crisis-era. Meanwhile, other regulations, some of which haven't been updated in more than two decades, need to be. 'Given the dynamic nature of the banking system and how the economy and banking and financial services industries have evolved over that period, we should update and simplify many of the Board's regulations, including thresholds for applicability and benchmarks,' Bowman said. 5. Ratings need a revamp. Supervisory changes have 'eroded the link between ratings and financial condition,' Bowman said, noting that two-thirds of the nation's biggest financial institutions were rated unsatisfactory in the first half of last year. Yet the majority of these institutions met all supervisory expectations for both capital and liquidity, and they're all still operating. 'This odd mismatch between financial condition and supervisory ratings requires careful review and appropriate revisions to our current approach. Under the current large bank ratings framework, a single component rating can result in a firm being considered not 'well-managed,' which has driven the disparity between well-managed status and financial condition,' she said. The Fed plans to address this mismatch by proposing changes to the Large Financial Institution ratings framework, she said. The changes will be geared toward creating 'a more sensible approach' to determining if a bank is well-managed, and won't disproportionately weigh a single framework component 'for a firm that has demonstrated resilience under a range of conditions and stresses,' she said. 6. Processing delays have not been kind to bank applications, including for M&A. Applications for regulatory approval, such as seeking a de novo charter or approval to merge, need transparency and clear timelines for action, she said. Processing delays must spur a rethinking, Bowman said, of 'whether many of the additional requests for information can be addressed through better application forms or relying on information that is available from bank examinations.' Recommended Reading Bowman nod for Fed supervision czar advances to full Senate Sign in to access your portfolio
Miami Herald
5 days ago
- Business
- Miami Herald
Trump's pick for Fed's top regulator expected to be friendly to Wall Street
A red baseball cap sits above Michelle Bowman's filing cabinet in her office at the U.S. Federal Reserve in Washington. It's emblazoned with the words "make community banks great again." The TV in her office is tuned to Fox News, and the self-described workaholic has a sticky note on her door asking visitors to knock loudly because the door is heavy. Already a Fed governor, Bowman is likely to become one of the central bank's key leaders, in charge of banking regulation. The Senate Banking Committee voted along party lines to advance her nomination as vice chair for supervision, and the full Republican-controlled chamber is set to vote on her confirmation on Wednesday. The industry has praised Bowman's nomination, highlighting her drive to scale back a massive bank-capital proposal that it says will hurt lending, erode its competitive edge and potentially reduce economic growth. Critics are concerned that she's too focused on what banks want - at a time when the White House is embarking on a deregulatory drive, threatening the Fed's independence and introducing tariff-fueled economic uncertainty that could put the financial system under pressure. That she's in line for the job now is due to Michael Barr's surprise announcement that he would leave it. Barr stepped down in February while remaining a governor, even though his term as vice chair extended to July 2026. He wanted to avoid a protracted legal fight over a possible demotion by Trump. Bowman, who asks everyone she meets to please call her "Miki," quickly made her interest in the job clear. She talked to state bank regulators who had lobbied to get her onto the Fed board in 2018, according to people familiar with the matter who didn't want to be identified discussing the private communications. She asked some of them to signal to Treasury Secretary Scott Bessent that he should push Trump to fill Barr's seat rather than leave it vacant, and pitched herself as a regulatory insider who wouldn't even need to wait for Senate confirmation to get started. Industry players like the Independent Community Bankers of America and the American Bankers Association also rallied behind her. Bowman herself points to the experience she has gained in an eventful last seven years. "I've seen a lot since I've been here at the Fed," says Bowman, 54. "We've seen the entire shutting down of the economy and restarting it again." She will have to navigate a position that has been an awkward fit for the Fed, an agency that strives to remain as apolitical as possible in setting monetary policy. The supervision job was created by the Dodd-Frank Act in response to the 2008 financial crisis. Chair Jerome Powell himself has said that placing the burden of developing recommendations on a single person rather than the entire Fed board has made bank policy more volatile. Bowman has deep roots in small-town banking. Born in Hawaii, she spent time living in Germany as a part of a military-kid upbringing, and worked in the UK. But home has always been rural Council Grove, Kansas, about 90 miles northeast of Wichita. "The closest town is about 35 miles away with a 2,200 population," Bowman says. In Council Grove, she worked at Farmers & Drovers Bank, which her great-great grandfather helped charter in 1882, before becoming the Kansas state banking commissioner in 2017. A lawyer, she also previously worked in Washington as counsel to U.S. House committees and as a policy adviser in the Department of Homeland Security during the George W. Bush administration. She was first nominated to the Fed board by Trump in 2018, to fill a position designated for an expert on community banks, which have long been losing market share to bigger lenders. Since then, Bowman has criss-crossed the country - by her count visiting all but four states. She has given detailed speeches to community banking groups on how vital these lenders are to the economy. Her travels across the U.S. and to five continents rival only Powell, among her board colleagues, in the number of engagements. Over time, she has become more vocal, often supporting easing regulations that she says are too burdensome for the smallest banks. Her missives on regulation were often a foil to Barr's attempts to significantly increase capital requirements for banks - that is, to have them further pad their financial cushions, depending on the risks they take, so they can absorb losses during a crisis. "My greatest concern about Governor Bowman is that I haven't seen any daylight between her publicly stated positions and the wish list of the largest banks for lower capital requirements and less demanding supervision," says Arthur Wilmarth, a professor emeritus at George Washington University Law School who was a consultant to the Financial Crisis Inquiry Commission created by Congress. That could change if she prioritizes coalition-building with other members of the board, he says regulation already has put banks on firmer ground. "We've created a much stronger, safer, sound banking system," she says. 'Thorny issues of Fed independence' The vice chair job is probably the most demanding in all of financial regulation, says Graham Steele, a Fed alumnus who also served as a Biden-era Treasury official. He adds that it's a step up in difficulty from being a single governor with one vote and giving speeches on personal views. "That person has always had to balance a complex and delicate set of policy, political and procedural issues while finding consensus between and across the views of the other banking agencies and the Fed's board members," Steele says. "In this administration, they now also have to navigate thorny issues of Fed independence with a White House that's seeking to bring independent agencies under political control, including the Fed's regulatory functions." As a board member, Bowman will also continue to have a voice in monetary policy. In that realm, she has been somewhat more hawkish on interest rates than her colleagues. She cast the first dissenting vote by a governor in almost 20 years when she voted against the Fed's decision to cut interest rates by half a percentage point in September. That was the first cut since the start of the pandemic; Bowman argued that a smaller, quarter-point cut would have been more appropriate given that inflation was still above the central bank's 2% target. She has a reputation for toughness. People who asked not to be identified discussing internal Fed matters said that tense interactions between Bowman and Fed staff led to a new practice where more senior officials with titles brief her and other governors on policy matters. But some observers see her style as a benefit. She dives into the details and makes sure she understands an analysis and its policy implications, says Mona Elliot, a former Fed official who now advises clients at Patomak Global Partners. "Ultimately, what the governors care about is really understanding the potential impact of the decisions that they're making," said Elliot, who briefed Bowman at the beginning of her time at the Fed in Quarles, who held the supervision role before Barr after being chosen by Trump in 2017, says the highly qualified staff at the Fed has a culture that can sometimes be "too sure of itself" and that this is ripe for change. Bowman has been willing to take on high-profile fights. Shortly after Silicon Valley Bank collapsed in 2023, she started calling for an independent review into what failings led to the lender's fast fall. Barr did his own review, which he called an "unflinching look" at problems in both the supervision of the bank and the regulatory requirements for an institution of that size. Some critics said the details were vague, and Bowman has insisted the report is insufficient in terms of full accountability and transparency. She has said she wants to launch a third-party review. COVID-19 lockdowns During the 2020 COVID-19-induced lockdowns, Bowman was anxious about the Fed not being able to read the economy as the government was offering loans to businesses via banks using the Paycheck Protection Program without a lot of guidance or directives. She began a campaign to reach as many of those lenders as possible. Over the next year, she managed to talk to more than 220 community-bank chief executive officers in 30-minute phone calls. "I think that really helped allow them to engage with confidence and continue to be the greatest lenders in that program," she says. Before that campaign, she worked to get her arms around the Fed's consumer compliance program. After hearing complaints about banks waiting three to five years for an exam report, she championed an effort to make the exam process more timely, while preserving its effectiveness. To help advise her, Bowman has turned to the banking world for three staff hires, who recently joined the agency's Division of Supervision and Regulation. Two sweeping proposals are on her radar: a landmark Biden-era bank-capital plan known as Basel III endgame and long-term debt requirements that would affect all lenders with more than $100 billion in assets. As originally drafted, the Basel plan would have hiked the biggest U.S. banks' capital requirements by 19%. The Fed walked it back after fierce industry opposition. Bowman is widely expected to support dramatically easing the requirements. She also plans to rescind the proposal to bolster long-term debt requirements, according to people familiar with the matter. Bowman sided with the industry on its calls to increase the transparency of the Fed's stress tests, which gauge how large banks would fare during a hypothetical recession. And she's working with other Trump regulators on potential changes to a rule-the so-called supplementary leverage ratio-that has constrained banks' trading in the $29 trillion Treasuries market. Bowman has said she wants to keep the Fed's experienced ranks of bank supervisors and examiners, arguing that they're critical to the Fed being able to carry out its regulatory responsibilities. Already, the Trump administration is set to shrink the staff of other financial regulators by more than 2,300, including examiners. The Fed plans to reduce its workforce by about 10% in the next couple of years, but it isn't clear whether that would include examiners. "Our examinations staff are of the most importance when we're talking about how we execute our responsibilities under supervision for the safety and stability and soundness of the banking system," Bowman said during her Banking Committee nomination hearing in May. "If I were to do a review of our supervision and regulation division, should I be confirmed, I would certainly be very sensitive to the fact that we need to be able to fully and effectively implement our responsibilities for bank regulation." Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Yahoo
5 days ago
- Business
- Yahoo
Trump's Pick for Fed's Top Regulator Expected to Be Friendly to Wall Street
(Bloomberg Markets) -- A red baseball cap sits above Michelle Bowman's filing cabinet in her office at the US Federal Reserve in Washington. It's emblazoned with the words 'make community banks great again.' The TV in her office is tuned to Fox News, and the self-described workaholic has a sticky note on her door asking visitors to knock loudly because the door is heavy. ICE Moves to DNA-Test Families Targeted for Deportation with New Contract The Global Struggle to Build Safer Cars At London's New Design Museum, Visitors Get Hands-On Access LA City Council Passes Budget That Trims Police, Fire Spending NYC Residents Want Safer Streets, Cheaper Housing, Survey Says Already a Fed governor, Bowman is likely to become one of the central bank's key leaders, in charge of banking regulation. The Senate Banking Committee voted along party lines to advance her nomination as vice chair for supervision, and the full Republican-controlled chamber is set to vote on her confirmation on Wednesday. The industry has praised Bowman's nomination, highlighting her drive to scale back a massive bank-capital proposal that it says will hurt lending, erode its competitive edge and potentially reduce economic growth. Critics are concerned that she's too focused on what banks want — at a time when the White House is embarking on a deregulatory drive, threatening the Fed's independence and introducing tariff-fueled economic uncertainty that could put the financial system under pressure. That she's in line for the job now is due to Michael Barr's surprise announcement that he would leave it. Barr stepped down in February while remaining a governor, even though his term as vice chair extended to July 2026. He wanted to avoid a protracted legal fight over a possible demotion by Trump. Bowman, who asks everyone she meets to please call her 'Miki,' quickly made her interest in the job clear. She talked to state bank regulators who had lobbied to get her onto the Fed board in 2018, according to people familiar with the matter who didn't want to be identified discussing the private communications. She asked some of them to signal to Treasury Secretary Scott Bessent that he should push Trump to fill Barr's seat rather than leave it vacant, and pitched herself as a regulatory insider who wouldn't even need to wait for Senate confirmation to get started. Industry players like the Independent Community Bankers of America and the American Bankers Association also rallied behind her. Bowman herself points to the experience she has gained in an eventful last seven years. 'I've seen a lot since I've been here at the Fed,' says Bowman, 54. 'We've seen the entire shutting down of the economy and restarting it again.' She will have to navigate a position that has been an awkward fit for the Fed, an agency that strives to remain as apolitical as possible in setting monetary policy. The supervision job was created by the Dodd-Frank Act in response to the 2008 financial crisis. Chair Jerome Powell himself has said that placing the burden of developing recommendations on a single person rather than the entire Fed board has made bank policy more volatile. Bowman has deep roots in small-town banking. Born in Hawaii, she spent time living in Germany as a part of a military-kid upbringing, and worked in the UK. But home has always been rural Council Grove, Kansas, about 90 miles northeast of Wichita. 'The closest town is about 35 miles away with a 2,200 population,' Bowman says. In Council Grove, she worked at Farmers & Drovers Bank, which her great-great grandfather helped charter in 1882, before becoming the Kansas state banking commissioner in 2017. A lawyer, she also previously worked in Washington as counsel to US House committees and as a policy adviser in the Department of Homeland Security during the George W. Bush administration. She was first nominated to the Fed board by Trump in 2018, to fill a position designated for an expert on community banks, which have long been losing market share to bigger lenders. Since then, Bowman has criss-crossed the country — by her count visiting all but four states. She has given detailed speeches to community banking groups on how vital these lenders are to the economy. Her travels across the US and to five continents rival only Powell, among her board colleagues, in the number of engagements. Over time, she has become more vocal, often supporting easing regulations that she says are too burdensome for the smallest banks. Her missives on regulation were often a foil to Barr's attempts to significantly increase capital requirements for banks — that is, to have them further pad their financial cushions, depending on the risks they take, so they can absorb losses during a crisis. 'My greatest concern about Governor Bowman is that I haven't seen any daylight between her publicly stated positions and the wish list of the largest banks for lower capital requirements and less demanding supervision,' says Arthur Wilmarth, a professor emeritus at George Washington University Law School who was a consultant to the Financial Crisis Inquiry Commission created by Congress. That could change if she prioritizes coalition-building with other members of the board, he says regulation already has put banks on firmer ground. 'We've created a much stronger, safer, sound banking system,' she says. 'Thorny Issues of Fed independence' The vice chair job is probably the most demanding in all of financial regulation, says Graham Steele, a Fed alumnus who also served as a Biden-era Treasury official. He adds that it's a step up in difficulty from being a single governor with one vote and giving speeches on personal views. 'That person has always had to balance a complex and delicate set of policy, political and procedural issues while finding consensus between and across the views of the other banking agencies and the Fed's board members,' Steele says. 'In this administration, they now also have to navigate thorny issues of Fed independence with a White House that's seeking to bring independent agencies under political control, including the Fed's regulatory functions.' As a board member, Bowman will also continue to have a voice in monetary policy. In that realm, she has been somewhat more hawkish on interest rates than her colleagues. She cast the first dissenting vote by a governor in almost 20 years when she voted against the Fed's decision to cut interest rates by half a percentage point in September. That was the first cut since the start of the pandemic; Bowman argued that a smaller, quarter-point cut would have been more appropriate given that inflation was still above the central bank's 2% target. She has a reputation for toughness. People who asked not to be identified discussing internal Fed matters said that tense interactions between Bowman and Fed staff led to a new practice where more senior officials with titles brief her and other governors on policy matters. But some observers see her style as a benefit. She dives into the details and makes sure she understands an analysis and its policy implications, says Mona Elliot, a former Fed official who now advises clients at Patomak Global Partners. 'Ultimately, what the governors care about is really understanding the potential impact of the decisions that they're making,' said Elliot, who briefed Bowman at the beginning of her time at the Fed in Quarles, who held the supervision role before Barr after being chosen by Trump in 2017, says the highly qualified staff at the Fed has a culture that can sometimes be 'too sure of itself' and that this is ripe for change. Bowman has been willing to take on high-profile fights. Shortly after Silicon Valley Bank collapsed in 2023, she started calling for an independent review into what failings led to the lender's fast fall. Barr did his own review, which he called an 'unflinching look' at problems in both the supervision of the bank and the regulatory requirements for an institution of that size. Some critics said the details were vague, and Bowman has insisted the report is insufficient in terms of full accountability and transparency. She has said she wants to launch a third-party review. Covid Lockdowns During the 2020 Covid-induced lockdowns, Bowman was anxious about the Fed not being able to read the economy as the government was offering loans to businesses via banks using the Paycheck Protection Program without a lot of guidance or directives. She began a campaign to reach as many of those lenders as possible. Over the next year, she managed to talk to more than 220 community-bank chief executive officers in 30-minute phone calls. 'I think that really helped allow them to engage with confidence and continue to be the greatest lenders in that program,' she says. Before that campaign, she worked to get her arms around the Fed's consumer compliance program. After hearing complaints about banks waiting three to five years for an exam report, she championed an effort to make the exam process more timely, while preserving its effectiveness. To help advise her, Bowman has turned to the banking world for three staff hires, who recently joined the agency's Division of Supervision and Regulation. Two sweeping proposals are on her radar: a landmark Biden-era bank-capital plan known as Basel III endgame and long-term debt requirements that would affect all lenders with more than $100 billion in assets. As originally drafted, the Basel plan would have hiked the biggest US banks' capital requirements by 19%. The Fed walked it back after fierce industry opposition. Bowman is widely expected to support dramatically easing the requirements. She also plans to rescind the proposal to bolster long-term debt requirements, according to people familiar with the matter. Bowman sided with the industry on its calls to increase the transparency of the Fed's stress tests, which gauge how large banks would fare during a hypothetical recession. And she's working with other Trump regulators on potential changes to a rule—the so-called supplementary leverage ratio—that has constrained banks' trading in the $29 trillion Treasuries market. Bowman has said she wants to keep the Fed's experienced ranks of bank supervisors and examiners, arguing that they're critical to the Fed being able to carry out its regulatory responsibilities. Already, the Trump administration is set to shrink the staff of other financial regulators by more than 2,300, including examiners. The Fed plans to reduce its workforce by about 10% in the next couple of years, but it isn't clear whether that would include examiners. 'Our examinations staff are of the most importance when we're talking about how we execute our responsibilities under supervision for the safety and stability and soundness of the banking system,' Bowman said during her Banking Committee nomination hearing in May. 'If I were to do a review of our supervision and regulation division, should I be confirmed, I would certainly be very sensitive to the fact that we need to be able to fully and effectively implement our responsibilities for bank regulation.' (Updates status of vote in the second paragraph. An earlier version of the story was corrected to remove an inaccurate description of note in the first paragraph.) Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? Trump Considers Deporting Migrants to Rwanda After the UK Decides Not To ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
6 days ago
- Business
- Yahoo
Trump's Pick for Fed's Top Regulator Expected to Be Friendly to Wall Street
(Bloomberg Markets) -- A red baseball cap sits above Michelle Bowman's filing cabinet in her office at the US Federal Reserve in Washington. It's emblazoned with the words 'make community banks great again.' The TV in her office is tuned to Fox News, and the self-described workaholic has a sticky note on her door asking visitors to knock loudly because the door is heavy and she's working hard. The Global Struggle to Build Safer Cars At London's New Design Museum, Visitors Get Hands-On Access LA City Council Passes Budget That Trims Police, Fire Spending ICE Moves to DNA-Test Families Targeted for Deportation with New Contract NYC Residents Want Safer Streets, Cheaper Housing, Survey Says Already a Fed governor, Bowman is likely to become one of the central bank's key leaders, in charge of banking regulation. The Senate Banking Committee voted along party lines to advance her nomination as vice chair for supervision, and the full Republican-controlled chamber is almost certain to also give her its nod as early as Wednesday. The industry has praised Bowman's nomination, highlighting her drive to scale back a massive bank-capital proposal that it says will hurt lending, erode its competitive edge and potentially reduce economic growth. Critics are concerned that she's too focused on what banks want — at a time when the White House is embarking on a deregulatory drive, threatening the Fed's independence and introducing tariff-fueled economic uncertainty that could put the financial system under pressure. That she's in line for the job now is due to Michael Barr's surprise announcement that he would leave it. Barr stepped down in February while remaining a governor, even though his term as vice chair extended to July 2026. He wanted to avoid a protracted legal fight over a possible demotion by Trump. Bowman, who asks everyone she meets to please call her 'Miki,' quickly made her interest in the job clear. She talked to state bank regulators who had lobbied to get her onto the Fed board in 2018, according to people familiar with the matter who didn't want to be identified discussing the private communications. She asked some of them to signal to Treasury Secretary Scott Bessent that he should push Trump to fill Barr's seat rather than leave it vacant, and pitched herself as a regulatory insider who wouldn't even need to wait for Senate confirmation to get started. Industry players like the Independent Community Bankers of America and the American Bankers Association also rallied behind her. Bowman herself points to the experience she has gained in an eventful last seven years. 'I've seen a lot since I've been here at the Fed,' says Bowman, 54. 'We've seen the entire shutting down of the economy and restarting it again.' She will have to navigate a position that has been an awkward fit for the Fed, an agency that strives to remain as apolitical as possible in setting monetary policy. The supervision job was created by the Dodd-Frank Act in response to the 2008 financial crisis. Chair Jerome Powell himself has said that placing the burden of developing recommendations on a single person rather than the entire Fed board has made bank policy more volatile. Bowman has deep roots in small-town banking. Born in Hawaii, she spent time living in Germany as a part of a military-kid upbringing, and worked in the UK. But home has always been rural Council Grove, Kansas, about 90 miles northeast of Wichita. 'The closest town is about 35 miles away with a 2,200 population,' Bowman says. In Council Grove, she worked at Farmers & Drovers Bank, which her great-great grandfather helped charter in 1882, before becoming the Kansas state banking commissioner in 2017. A lawyer, she also previously worked in Washington as counsel to US House committees and as a policy adviser in the Department of Homeland Security during the George W. Bush administration. She was first nominated to the Fed board by Trump in 2018, to fill a position designated for an expert on community banks, which have long been losing market share to bigger lenders. Since then, Bowman has criss-crossed the country — by her count visiting all but four states. She has given detailed speeches to community banking groups on how vital these lenders are to the economy. Her travels across the US and to five continents rival only Powell, among her board colleagues, in the number of engagements. Over time, she has become more vocal, often supporting easing regulations that she says are too burdensome for the smallest banks. Her missives on regulation were often a foil to Barr's attempts to significantly increase capital requirements for banks — that is, to have them further pad their financial cushions, depending on the risks they take, so they can absorb losses during a crisis. 'My greatest concern about Governor Bowman is that I haven't seen any daylight between her publicly stated positions and the wish list of the largest banks for lower capital requirements and less demanding supervision,' says Arthur Wilmarth, a professor emeritus at George Washington University Law School who was a consultant to the Financial Crisis Inquiry Commission created by Congress. That could change if she prioritizes coalition-building with other members of the board, he says regulation already has put banks on firmer ground. 'We've created a much stronger, safer, sound banking system,' she says. 'Thorny Issues of Fed independence' The vice chair job is probably the most demanding in all of financial regulation, says Graham Steele, a Fed alumnus who also served as a Biden-era Treasury official. He adds that it's a step up in difficulty from being a single governor with one vote and giving speeches on personal views. 'That person has always had to balance a complex and delicate set of policy, political and procedural issues while finding consensus between and across the views of the other banking agencies and the Fed's board members,' Steele says. 'In this administration, they now also have to navigate thorny issues of Fed independence with a White House that's seeking to bring independent agencies under political control, including the Fed's regulatory functions.' As a board member, Bowman will also continue to have a voice in monetary policy. In that realm, she has been somewhat more hawkish on interest rates than her colleagues. She cast the first dissenting vote by a governor in almost 20 years when she voted against the Fed's decision to cut interest rates by half a percentage point in September. That was the first cut since the start of the pandemic; Bowman argued that a smaller, quarter-point cut would have been more appropriate given that inflation was still above the central bank's 2% target. She has a reputation for toughness. People who asked not to be identified discussing internal Fed matters said that tense interactions between Bowman and Fed staff led to a new practice where more senior officials with titles brief her and other governors on policy matters. But some observers see her style as a benefit. She dives into the details and makes sure she understands an analysis and its policy implications, says Mona Elliot, a former Fed official who now advises clients at Patomak Global Partners. 'Ultimately, what the governors care about is really understanding the potential impact of the decisions that they're making,' said Elliot, who briefed Bowman at the beginning of her time at the Fed in Quarles, who held the supervision role before Barr after being chosen by Trump in 2017, says the highly qualified staff at the Fed has a culture that can sometimes be 'too sure of itself' and that this is ripe for change. Bowman has been willing to take on high-profile fights. Shortly after Silicon Valley Bank collapsed in 2023, she started calling for an independent review into what failings led to the lender's fast fall. Barr did his own review, which he called an 'unflinching look' at problems in both the supervision of the bank and the regulatory requirements for an institution of that size. Some critics said the details were vague, and Bowman has insisted the report is insufficient in terms of full accountability and transparency. She has said she wants to launch a third-party review. Covid Lockdowns During the 2020 Covid-induced lockdowns, Bowman was anxious about the Fed not being able to read the economy as the government was offering loans to businesses via banks using the Paycheck Protection Program without a lot of guidance or directives. She began a campaign to reach as many of those lenders as possible. Over the next year, she managed to talk to more than 220 community-bank chief executive officers in 30-minute phone calls. 'I think that really helped allow them to engage with confidence and continue to be the greatest lenders in that program,' she says. Before that campaign, she worked to get her arms around the Fed's consumer compliance program. After hearing complaints about banks waiting three to five years for an exam report, she championed an effort to make the exam process more timely, while preserving its effectiveness. To help advise her, Bowman has turned to the banking world for three staff hires, who recently joined the agency's Division of Supervision and Regulation. Two sweeping proposals are on her radar: a landmark Biden-era bank-capital plan known as Basel III endgame and long-term debt requirements that would affect all lenders with more than $100 billion in assets. As originally drafted, the Basel plan would have hiked the biggest US banks' capital requirements by 19%. The Fed walked it back after fierce industry opposition. Bowman is widely expected to support dramatically easing the requirements. She also plans to rescind the proposal to bolster long-term debt requirements, according to people familiar with the matter. Bowman sided with the industry on its calls to increase the transparency of the Fed's stress tests, which gauge how large banks would fare during a hypothetical recession. And she's working with other Trump regulators on potential changes to a rule—the so-called supplementary leverage ratio—that has constrained banks' trading in the $29 trillion Treasuries market. Bowman has said she wants to keep the Fed's experienced ranks of bank supervisors and examiners, arguing that they're critical to the Fed being able to carry out its regulatory responsibilities. Already, the Trump administration is set to shrink the staff of other financial regulators by more than 2,300, including examiners. The Fed plans to reduce its workforce by about 10% in the next couple of years, but it isn't clear whether that would include examiners. 'Our examinations staff are of the most importance when we're talking about how we execute our responsibilities under supervision for the safety and stability and soundness of the banking system,' Bowman said during her Banking Committee nomination hearing in May. 'If I were to do a review of our supervision and regulation division, should I be confirmed, I would certainly be very sensitive to the fact that we need to be able to fully and effectively implement our responsibilities for bank regulation.' (Adds planned Wednesday vote in second paragraph.) YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? Trump Considers Deporting Migrants to Rwanda After the UK Decides Not To Mark Zuckerberg Loves MAGA Now. Will MAGA Ever Love Him Back? ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Journals
01-06-2025
- Business
- Business Journals
Uneven ground: Why state-chartered banks bear the brunt of proposed legislation
The United States has one of the most diverse and robust banking sectors in the world and is represented by banks of all sizes that serve every segment of the American economy. The nation's approximately 4,500 banks include community banks, midsize banks, regional banks, and large banks. Banks of every size add unique value and are critically important to our financial system and our economy. While banks may have different business models and strengths, institutions succeed when they meet the needs of their communities. Part of what makes the U.S. banking system special is the dual banking system which provides bankers with a choice of operating under a national charter or a state charter. Unfortunately, the California state charter is under attack and its value proposition is diminishing. Just this year, several California legislative measures target state-chartered banks or will be preempted limiting the measure's application. One such measure allows the commissioner of the Department of Financial Protection and Innovation to enforce violations of the federal Dodd-Frank Act (DFA) through unfair, deceptive, abusive acts or practices claims. Proponents claim that this measure is necessary because the Consumer Financial Protection Bureau (CFPB) under President Donald Trump's administration will not enforce DFA. The reality is that the commissioner already possesses this authority; however, to deploy it, the commissioner must provide notice to the CFPB, which may become a party to the action and/or can seek to remove the action to federal court. The rationale behind this potential intervention is to avoid duplicative and uncoordinated enforcement actions. Large big box retailers are pushing a measure to limit the charging of an interchange fee by prohibiting the fee being assessed against sales tax. These retailers need to remember the convenience and certainty credit card payments have provided them, and that the underlying infrastructure that facilitates these transactions has a cost. Additionally, interchange fees support low and no-cost bank accounts and credit card reward points programs that customers appreciate. The bill will be preempted for federally chartered banks, leaving its application to state-chartered banks. Another measure establishes a state-level Community Reinvestment Act (CRA) applicable to certain state-licensed entities, including California-chartered banks. This effort is duplicative and potentially contradictory to the federal CRA, which all banks are subject to. Rather than layering on top of state banks, the measure should be amended to apply solely to California-chartered credit unions, which do not have a federal CRA requirement, though they are depository institutions and may operate similarly to banks. As we have fiercely advocated for our member banks, we commonly hear legislators express appreciation for community banks. But with measures advancing like those described above, we are increasingly convinced that those are just words and that their actions prove otherwise. Banks are highly regulated entities and miraculously excel at finding a path to compliance on what seems to be a never-ending list of new laws and regulations. But there is a breaking point. Consolidation within the industry has been driven, in part, by over-regulation. Smaller community banks, just like small businesses, are struggling to keep up with overregulation and are finding that they must get to scale to survive the regulatory avalanche. We are gravely concerned that new laws and regulations will accelerate consolidation and may leave communities who need access to banking services in financial deserts. This unfortunate result could push the door more widely open to the less-regulated shadow banking industry where there is often less consumer protection. And because of the dual-banking system, banks can exercise their choice and operate under a national charter, which leaves the state with less oversight. If policymakers really care about the important role of community banks, as they have suggested, it's time they put a stop to efforts that could make the state charter less valuable.
