Fed Official Michelle Bowman Opposes Stricter Banking Regulations.
June 29, 2023: In a recent speech, Federal Reserve Governor Michelle Bowman voiced her strong opposition to proposed stricter regulations for the nation’s largest banks. Bowman, appointed by former President Trump in 2018, criticized her colleagues on the board for considering more stringent requirements. Notably, she also raised concerns about the Fed’s report on the collapse of Silicon Valley Bank, cautioning against using perceived weaknesses in the banking sector as a basis for harsher regulation.
Bowman’s remarks are significant due to their provocative nature, as disagreements within the Fed’s board of governors rarely become public. This isn’t the first time the topic of banking regulation has sparked tensions among officials. Previously, then-Fed governor Lael Brainard strongly dissented against regulatory changes led by Trump-appointed vice chair Randal Quarles.
The current disagreement between Bowman and Michael Barr, the Biden-appointed official leading new regulatory proposals, highlights the diverging opinions within the board. Bowman targeted the Fed’s post-mortem on Silicon Valley Bank, questioning the need for more input from other board members and the report’s adequacy in providing a comprehensive account of the situation.
Bowman emphasized the potential consequences of misperceptions and misunderstandings about the causes of bank failures and their associated issues. She warned that unnecessary increases in capital requirements could impede bank lending and diminish competition, harming banks, their customers, the financial system, and the broader economy.
While Barr may have the necessary votes to implement a more aggressive regulatory agenda due to the Biden-appointed board members, there must be a smoother process. Expect a potential battle as different perspectives clash.
By advocating for improved supervision rather than higher capital requirements, Bowman suggests a shift in focus toward ensuring that examiners have the appropriate tools and support to identify critical issues promptly. She reiterates the need for an independent review of recent bank failures to address underlying concerns about the effectiveness of supervision.
Bowman’s opposition to stricter banking regulations adds to the ongoing discourse surrounding this topic and showcases the divisions within the Federal Reserve’s board of governors.