Appearing before the U.S. Committee on Banking, Housing and Urban affairs on Thursday, Federal Reserve Governor Michelle Bowman was questioned by lawmakers on how she’ll treat her role in the Fed after being nominated for vice chairman for Supervision—a key Fed position focused on banking regulation.
Senators pressed Bowman on whether she will commit to the Fed’s independence, banking regulations, if she will enact a stress test due to tariffs and more. Her responses revealed a glimpse into what her role as the next banking watchdog might look like.
Directly criticizing Bowman’s nomination as the “top banking watchdog,” progressive Democrat Elizabeth Warren said Bowman’s tenure at the Fed—since November 2018—has been spent prioritizing Wall Street over Main Street.
She cited how Bowman has weakened safeguards restricting banks from “gambling with peoples’ deposits;” loosened rules that prevent derivatives from blowing up big banks; reduced Wall Street’s loss-absorbing capital requirements, which help prevent bank failures during economic stress, “by tens of billions of dollars” and through her 2019 vote to deregulate some of the country’s largest banks, including Silicon Valley Bank, which collapsed in 2023.
“President Trump is fanning the flames of disaster with his mismanagement of the country,” she stressed. “Instead of showing up with the fire department, Governor Bowman brings a can of gasoline.”
Recalling the “maelstrom” the tariffs brought this week, Warren noted how the Trump administration is in “desperate need of financial regulators who live in the real world.” If confirmed, Bowman would be “the No. 1 financial cop on the beat during an incredibly dangerous time,” she said. “As we’ve learned from previous crises, the tremors in the financial system can lead to avalanches in the rest of the economy, and vice versa.”
Indirectly calling out Warren, Senator Bernie Moreno (R-Ohio) clarified with Bowman, asking about her Kansas background and if she, or her family, has ever lived in New York City.
“So to say that somebody in Kansas understands the plight of Main Street, that’s the heartland, like Ohio, you understand what crippling banking regulations—explain to me what that means to a small business,” he said. “Nothing against J.P. Morgan, Chase or Bank of America, but have they had a tough four years; have they been suffering?”
Citing her background as a community banker and a compliance officer at her family’s bank—which she added has $200 million in assets—Bowman said that just implementing regulations, like the Dodd-Frank regulations, is very complex, especially when it comes to helping staff understand the expectations for implementation.
Moreno said he’s glad to have someone who’s representing Main Street and understands what the working people of this country need for banking, as “Wall Street has had plenty of representation.”
Recalling Fed Chair Jerome Powell’s speech last week, where he said that Trump’s tariffs will have risks for higher unemployment and higher inflation, Warren asked Bowman how she sees the risks of the current administration and its tariffs threatening the stability of our financial system.
Responding with the Fed’s dual mandate goals instead of answering the question, Warren pleaded for her to use the word tariff in her answer. Ultimately, Bowman said that it is unclear at this point.
Pressing further on tariffs, Warren asked Bowman if she would immediately conduct a stress test on the big banks to probe whether they could endure a deep, prolonged recession triggered by “a massive trade shock.”
“All of the things that have happened in the last week and in the last two months, you’re just going to cover your eyes and cover your ears and say, ‘I’m sure the banks will be fine. We’ll check them out in several months.’” Responding to Bowman’s lack of a yes or no answer, Warren added, “always watching, but not running a stress test.”
Oversight and control
Quizzing Bowman, Senator John Kennedy (R-Louisiana) asked her to define the Basel III endgame and its objective.
Summarizing it as “an international agreement of different countries that participate in the Basel Accords,” she said its objective is to “ensure there is parity across jurisdictions for financial regulation and a level playing field.” When asked if it calls for more regulation for American banks, Bowman said it does, in some cases.
“Your predecessor, Mr. Barr, loved Basel III Endgame like the Devil loved sin, didn’t he?” asked Kennedy. “He bearhugged it; he french kissed it.”
When asked what problem Basel III is supposed to solve—not in Barr’s original proposal but what is broken with our stress tests and capital standards—Bowman said, “We need to take a fresh look at the last Basel agreement and determine what’s appropriate for U.S. banks and their ability to have a level playing field around the world.”
He noted that during Mr. Barr’s tenure, he never got a straight answer to that question either.
Senator Mark Warner (D-Virginia) asked Bowman to commit to the Fed’s independence, even if it meant going against the Office of Management and Budget (OMB). Further pressing on the issue, he asked what would happen if the OMB suddenly placed a requirement in place “that said the Fed has to check on all of their rulemaking process with the White House before your rulemaking,” adding he hopes she would respond that it would be inappropriate and that it would forgo the Fed’s independence.
Warner was seemingly referring to pressure from President Donald Trump, who recently publicly called for the Fed to cut rates, and has also taken more substantive steps to exert control over the central bank.
The Fed hasn’t seen that happen at this point, said Bowman. “I wouldn’t think we would have challenges with any rulemaking that we might like to engage in.”
Bringing up a speech given by Bowman in March 2024, where she said, “In the execution of its bank’s regulatory and supervisory responsibilities, the board is meant to operate independently and apolitically,” Senator Jack Reed (D-Rhode Island) asked if she still held that same view, to which she responded in the affirmative.
Adding that both the OMB and treasury “seem to have a concerted effort to involve themselves in Fed affairs,” Reed cited an executive order from February saying that independent agency officials must be supervised by the president. He pressed Bowman on if the Fed will remain independent on supervision and regulation, asking if she would involve the OMB or the treasury.
In regard to collateral, Bowman said that, generally, the Federal Home Loan Bank System (FHLB) provides liquidity to the entirety of the banking system and a few others in the financial system as well. Since most banks use the FHLB for daily liquidity in some cases, she added, it’s important to have an efficient process in place if there is a need to use that discount window.
Through another indirect remark about Warren’s line of questioning, Senator Thom Tillis (R-North Carolina) asked Bowman if Mr. Barr issued a stress test when Silicon Valley Bank fell or when inflation reached 40-year highs. Responding no to both, Bowman answered, “That would be more appropriate, yes” when Tillis criticized Warren, saying she should be asking Barr those questions instead of Bowman.
Moving on to banking trends, Tillis asked if Bowman was aware of any instances when Fed supervision failed to focus on blaring core credential risks or an instance when Fed supervision was encouraged to focus on ancillary issues that distracted from assessing core credential risk. Citing Silicon Valley Bank for the first question, Bowman said, in response to the latter, that she has seen reports of that in the Fed’s supervision and regulation reports published twice a year.
Asking about instances where Fed examiners change supervisory expectations, even within the course of an ongoing examination, Bowman said she has heard accountings of that. Following, he questioned Bowman’s position on whether she believes that the Fed has always adequately considered the distinct differences between the four separate supervisory strata of banks when crafting regulations and requirements.
Though she admitted that the central bank has strayed from regulatory tailoring for different types of banks, Bowman said she would like to refocus on that tailoring, appropriate to the size, risk and other business models of each institution.
“I think it’s important that we adhere to the principles of cost-benefit analysis, that we’re identifying the problem that we’re trying to solve,” she said. When asked if she’s suggesting that the Fed has been frivolous, Bowman said that “The Fed is not required to apply cost-benefit analysis in its regulatory duties, and I think that is a very important part of the regulatory process. If I’m confirmed, I intend to strictly comply with cost-benefit analysis.”
Reed then asked if DOGE—the pseudo-government agency tasked with cutting federal programs—is required to comply with cost-benefit analysis, Bowman said she isn’t familiar with the mission of DOGE.
“Very few people are,” said Reed.
He ended by encouraging her to think hard about her decision to submit regulations to the OMB or the Treasury Department.
Recalling how Barr “never answered the question” of why there was zero accountability from the Fed “when we saw the second, third and fourth largest bank failures,” the committee’s chairman, Senator Tim Scott, pressed Bowman on whether she believed there was appropriate accountability for the failures given that nobody at the central bank or San Francisco’s Fed were fired or suspended.
Ultimately, Bowman committed to fully investigating supervisory failures and holding people responsible.
Given extra time and responding to Tillis’ line of questioning, Warren asked Bowman the following yes or no question: At the onset of COVID, when the markets were volatile like we saw them last week, did Vice Chair Randal Quarles initiate an emergency stress test or a so-called scenario analysis to understand whether or not the banks would be resilient to that shock?
Bowman, although she said it was a very unique time, ultimately said yes. Warren claimed that it’s reasonable to ask for this stress test.
“People, reasonably, can ask why you aren’t doing this now or if you’re just worried about embarrassing President Trump,” Warren said.