Fed official Bowman questioned by Warren regarding his position on tariffs
Michelle Bowman's Nomination Hearing for Federal Reserve Governor: A Focus on Bank Supervision and Regulation
Sen. Elizabeth Warren, D-MA, led a heated discussion at the Senate Banking Committee during Michelle Bowman's nomination hearing for Federal Reserve Governor on Thursday. The hearing revolved around the role of bank supervision and regulation, with Sen. Warren expressing concerns about the Fed's approach to stress testing and the potential for deregulation.
Bowman, currently serving as the Federal Reserve Vice Chair for Supervision, was questioned about the Fed's practice of conducting stress tests for big banks to gauge their readiness against shocks such as tariffs and economic volatility. While Bowman did not provide a direct answer, her commitment to reforming and refocusing supervision suggests that she is open to reevaluating the current stress testing process.
Sen. Warren pointed out that during the tenure of Randal Quarles, past Fed vice chair for supervision, an emergency stress test was initiated at the onset of the COVID-19 pandemic. Warren questioned Bowman on whether she would immediately conduct a stress test of the big banks, to which Bowman indicated that the process would continue as planned.
However, Sen. Warren expressed concern about Bowman's nomination, stating that deregulation during economic turmoil caused by tariff volatility would be especially dangerous. Warren accused Bowman of prioritizing Wall Street over Main Street during her tenure at the Fed.
Bowman, who has served on the Fed board since 2018 and has a background in banking, emphasized the need for a pragmatic approach to regulation that ensures regulations are efficient and effective. She also suggested that some of the problems encountered with the examination of Silicon Valley Bank prior to its failure may have been related to improper examiner training and execution.
In response to Warren's concerns, Bowman wrote a letter addressing over 100 questions about supervision, regulation, enforcement, bank merger considerations, the Community Reinvestment Act, and the Fed's independence.
Sen. Thom Tillis, R-NC, pointed out that Michael Barr, the central bank's previous vice chair for supervision, did not launch a stress test when Silicon Valley Bank failed or when inflation soared. Sen. Bernie Moreno, R-OH, expressed pleasure at seeing a regulator who "represents Main Street" up for the role.
Sen. Tim Scott, R-SC, stated that Bowman will bring accountability and transparency to the Fed. Bowman committed to maintaining the Fed's independence with respect to monetary policy and the economy.
The overall tenor from Democratic lawmakers implies they push Bowman and other regulators to conduct thorough stress tests reflecting current economic threats, including those posed by tariffs and market volatility. Bowman stated that supervision "must be reformed and refocused to better address core and material financial risks." If confirmed, Bowman plans to prioritize reforming and refocusing supervision, restoring regulatory tailoring, ensuring a viable path for innovation in the banking system, and promoting transparency and accountability.
[1] Source: Federal Reserve documents and congressional hearing transcripts.
- In the nomination hearing for Federal Reserve Governor, Sen. Elizabeth Warren raised questions about Michelle Bowman's commitment to bank supervision and regulation, particularly concerning stress testing and potential deregulation.
- The discussion on finance and banking, including stress testing and deregulation, seemed to be a focus during the hearing, with politics and policy-and-legislation playing a prominent role.
- General-news outlets have reported concerns over Bowman's nomination, with some accusing her of prioritizing the interests of Wall Street over Main Street during her tenure at the Fed.
- As the hearings progressed, issues such as war-and-conflicts, crime-and-justice, and fintech were not directly addressed, but they might potentially influence future regulatory decisions in the banking-and-insurance industry.
