Trump to pick Fed’s Michelle Bowman to replace Michael Barr as vice chair for bank supervision

Federal Reserve Governor Michelle Bowman is expected to be Donald Trump’s choice for Vice Chair for Bank Supervision, replacing Michael Barr, according to a WSJ report on Tuesday.

Trump has yet to make an official announcement, but advisers have indicated to allies that Michelle is the leading candidate. Michelle, who has been on the Fed’s Board of Governors since 2018, was originally appointed by Trump and has a history in community banking and bank regulation.

She worked at her family’s Kansas bank before becoming Kansas banking commissioner. The seat she currently holds at the Fed is specifically designated for someone with experience in community banking.

Some Republican lawmakers are frustrated by Jerome Powell’s suggestions that the vice chair position remain vacant. Powell, who testified before Congress last month, called the position a “liability”, arguing that it made regulatory decisions vulnerable to political cycles.

Trump, speaking in an interview on Fox News last Sunday, said he would make a decision “fairly soon.” Lawmakers don’t want any delays, seeing the vacancy as an opportunity to move regulatory power away from Powell before Trump picks a new Fed chair next year.

Barr stepped down last month to avoid legal battles that could have arisen if Trump had followed through on calls to strip him of his position. He remains a Fed governor until 2032 but no longer has the regulatory authority he once did.

Michelle was always against Michael Barr’s regulatory agenda

During his tenure, Barr pushed for strict banking regulations, often facing resistance from the industry and even from some of his own colleagues inside the Fed. Michelle repeatedly opposed his policies, aligning with the view that excessive regulation could hurt banks and slow economic growth.

One of the biggest fights under Barr’s leadership was over capital requirements for large banks. His efforts to increase those requirements failed twice, with other banking agencies refusing to reach a consensus. With Michelle expected to step in, a third attempt at rewriting the capital rules could play out very differently.

Republicans have also expressed concerns over Powell’s role in setting regulatory policy. Tim Scott, who chairs the Senate Banking Committee, said last week on Fox Business:

“It is not in America’s best interest to let Jay Powell continue having dual roles. We need a vice chair of supervision that President Trump has complete confidence in to rightsize the regulatory environment.”

There is no open seat on the Fed board, which is why Michelle has been seen as the likeliest pick. Unless a current governor steps down, a nominee outside the board would have to wait until next year to fill a vacancy.

Michelle has told associates she is not planning to leave the Fed, which makes her the most logical choice if Republicans want to fill the role quickly.

Last week, over two dozen Republican lawmakers sent a letter to Treasury Secretary Scott Bessent, urging a fast appointment.

The power of the Fed’s vice chair for supervision

The vice chair for supervision has a significant role at the Fed, overseeing hundreds of bank examiners and shaping the day-to-day approach to regulation. However, major regulatory changes require a majority vote from the seven-member board, and the Fed chair ultimately controls the agenda for board meetings.

Despite this, the vice chair for supervision has the ability to influence how regulations are enforced. This makes Michelle’s stance on banking regulation critical, especially given the banking industry’s ongoing legal battles over the Fed’s stress tests and other regulatory rules.

Many trade groups representing community banks had previously encouraged Scott to select Michelle for the role, because they see her as someone who understands small and mid-sized banks and can push back against what they see as excessive oversight, said the WSJ report.

Beyond banking regulation, Michelle has taken a hawkish stance on interest rates. She has repeatedly warned that the Fed is not doing enough to combat inflation.

She was the only Fed official to vote against the half-point rate cut in September—the first time the Fed had lowered rates in four years. Her reasoning? She believed that cutting rates too soon would fail to control inflation.

Just last Friday, Michelle spoke at a Fed event, saying that while inflation had been the Fed’s primary concern, she expected the focus to change toward labor markets and the broader economy in the coming months.

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