Latest news with #MikiBowman
Forbes
21-05-2025
- Business
- Forbes
Miki Bowman's Confirmation Troubles Reveal The Fed's Political Colors
Why isn't Donald Trump-nominee Miki Bowman on a glide path to approval as Federal Reserve Vice Chairman? The answer is politics. Though the central bank's partisans will claim in breathy tones that the Fed's thinking and decisions aren't compromised by the tawdry politics that so many associate with Washington, the reality is quite different. And it's rooted in the unspoken truth that while independent in theory, there's little allowance for independent thinking inside the Fed. Consider past Fed nominee, Judy Shelton. Shelton had the credentials, including a PhD in economics that Fed Chairman Jerome Powell lacks. The problem? Shelton was a known proponent of stable money as a measure of value, as in Shelton was known to prefer a commodity standard to achieve dollar-price stability as a replacement for the dollar instability foisted on us by fallible PhDs. Notable about Shelton's views was that she was nominated not for Fed Chairman, but Governor. More to the point, even if Shelton had been the nominee to run the Fed, there still would have been no way for her to impose her monetary views on the central bank. For one, the Fed prizes consensus, and the consensus among Fed officials has long been that commodity, or gold standard systems of dollar management are hopelessly outdated. Second, the dollar's exchange value has never been part of the Fed's policy portfolio as is. Yet precisely because Shelton revealed a streak of independent thought, her nomination was met with all sorts of criticism. Implied in her failure to attain approval was that independence at the Fed is much more an affectation than it is reality. With Bowman, she's been known to stray from rate cutting consensus on occasion, but more troubling to the rigid minds inside the central bank, Bowman is a bit more skeptical about the worth of bank capital requirements. Bowman's skepticism is warranted, which is not a political assertion. In truth, it's just a comment that markets are incredibly complicated. To see why, contemplate this question: what should interest rates be? Tick tock, tick tock. It's not simple to answer precisely because rates of interest are a consequence of infinite decisions made every second of the day by individuals, financiers, and producers around the world. In other words, an interest rate is an effect of wildly sophisticated markets at work. The correct amount of bank capital is no different. And it's no different from interest rates exactly because no bank is the same. What should the capital requirement for banks be? That's like asking what the interest rate should be. Markets will quite simply tell banks how much capital they should have in reserve. Despite this, Fed officials want to decree specific capital requirements, or want to defer to Basel III. Ok, but why the deference? Will regulators do a better job than the markets? It's a question worth asking. In Bowman's case, it's not as though she wants to aggressively turn away from Fed oversight and Basel on the matter of capital requirements, but it's that she's a bit more skeptical about how effective top-down rules are. Meaning, Bowman would be a good voice of occasional opposition inside the Fed such that decisions would be informed by a greater range of thinkers. But for one problem, the Fed disdains independent thinking more than it does its reputation for independence. So, here we are. Bowman's years at the Fed make her eminently qualified, but those same years seem to have unearthed in the nominee an independent streak that is plainly not allowed. Some would say Bowman's problems are political, and they would be right.
Forbes
14-05-2025
- Business
- Forbes
No Institution Is Free From Politics, And This Includes The Fed
Economists and pundits have at times reacted negatively to President Trump's demands that Chairman Jerome Powell decree lower interest rates. The expressed worry was that Trump was politicizing a studiously non-political entity. More realistically, Trump's efforts were in vain. Markets bow down to no one. Still, the perceived politicization of the Fed from the White House rates more mention in consideration of the difficulties Michelle 'Miki' Bowman is presently experiencing. Recently Trump nominated Bowman as the Fed's Vice Chair for Supervision, and the nomination hasn't exactly been smooth sailing. One reason why appears to be related to politics…inside the Marriner Eccles Building. About Bowman, she's known to be less interventionist than Michael Barr, the individual she would replace. She's seen as having a lighter touch about bank capital requirements which by their very description are excessive, plus she could represent departure from Barr's errant decision to saddle banks with price caps on debit-card interchange fees. Which is encouraging on its face, and can be explained by the description of Bowman's title assuming confirmation. She would handle supervision of Fed member banks, though her less interventionist approach implies what she likely knows: banks are extraordinarily well supervised by the individuals inside them, not to mention investors outside them who have a vested interest in their healthy growth. Markets are the ultimate supervision. All of which raises questions about internal opposition to Bowman. The impression that's forming from the inside is that Bowman doesn't fit traditional Fed norms. Which isn't exactly surprising. Consider the man (Trump) who nominated her. Which brings us to Chairman Powell. While there's no documented evidence of his disdain for Bowman, there's a perception that they don't get along. Among other things, Fed culture has long put consensus on a pedestal. Yet in September of 2024, Bowman voted against Powell's 50 basis point cut in the Fed funds rate. Perceived dislike, whether real or not, has driven speculation that Powell would prefer that Bowman not fill the Chair she's been nominated for. Particularly after Bowman's nomination was advanced out of the Senate Banking Committee, leaks critical of her began to reveal themselves. For instance, Aleksandra Wells, presently a vice president at Goldman Sachs, is seen as a likely Bowman hire. About this, Wells previously worked at the Fed for over 10 years, including time under Bowman, and has only been at Goldman Sachs briefly. Despite this, Wells's ties to Goldman are being spun as though she's a special interest hire from 'Government Sachs.' Future 'Org charts' have similarly made their way out of the Fed, and that indicate Bowman would not be asked to serve on the central bank's Committee on Financial Stability. On its own this would be puzzling, plus it's notable that Powell manages committee assignments. Lastly, Bowman is being characterized as someone who wants massive deregulation of banks which, while ideal (see the above discussion of Supervision), doesn't play well at the Fed. Furthermore, it's a false narrative. Though policy change is the norm for new arrivals anywhere, radical deregulator Bowman is not. Yet there's a political quality to what Bowman is enduring. Which is the problem. While the Fed was always much more politicized than it would like those outside to believe (see past Trump nominee Judy Shelton), it has at least striven to create the impression of a central bank operating free of politics and partisanship. The latter has 'doth protest too much qualities' as applied to Bowman, and calls into question why some want her nomination derailed.
