Fed official Bowman faced questioning from Senator Warren about his stance on tariffs during a Senate hearing.
Michelle Bowman, the Federal Reserve's Vice Chair for Supervision, has outlined her views on financial regulation, inflation, and monetary policy.
In a recent Senate hearing, Bowman advocated for a pragmatic approach to regulation that ensures regulations are efficient and effective. She called for reforming and refocusing supervision to better address core and material financial risks. However, when asked about the Fed's independence on bank supervision and regulation, Bowman did not provide a direct answer.
Regarding tariffs and their impact on the economy, Bowman believes that they are unlikely to cause persistent inflation shocks. She has gained confidence that the upside risks to price stability have diminished as inflation moves closer to the Fed’s 2% target once temporary tariff effects are excluded.
In the context of interest rate policy, Bowman has emphasized signs of fragility in the labor market and slowing economic growth as key reasons to shift the Fed’s stance from restrictive to neutral by cutting rates. She proposed three rate cuts in 2025 to support employment and overall financial stability.
As for financial stability and large banks, Bowman stresses a proactive and cautious approach to supervision and stress testing. Although she did not provide specific details on her approach to stress testing, her role inherently involves strengthening supervisory frameworks and monitoring risks to financial stability, which includes regular stress tests of large banks to evaluate their capacity to withstand economic strains.
Bowman also 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. She emphasized the importance of being consistent across regulatory bodies and adhering to the principles of cost-benefit analysis.
The hearing saw various senators expressing their views on Bowman's nomination. Sen. Bernie Moreno, R-OH, expressed pleasure at seeing a regulator who "represents Main Street" up for the role. However, Sen. Elizabeth Warren, D-MA, expressed concern about Bowman's nomination, questioning her stance on tariffs and their potential impact on the financial system.
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. Warren suggested Bowman should conduct a stress test of the big banks to probe their readiness to withstand a deep and prolonged recession triggered by a massive trade shock.
Bowman's nomination hearing took place before the Senate Banking Committee on Thursday, with Sen. Tim Scott, R-SC, stating that Bowman will bring accountability and transparency to the Fed.
The hearing marked the latest development in Bowman's career, which includes serving on the Fed board since 2018 and being Kansas' state bank commissioner for nearly two years. Despite Warren's accusations of prioritizing Wall Street over Main Street during her tenure at the Fed, Bowman has been praised for her pragmatic approach to regulation and her focus on ensuring financial stability.
- Michelle Bowman, during a Senate hearing, advocated for an efficient and effective regulatory approach that focuses on addressing core financial risks.
- Bowman believes that tariffs are unlikely to cause persistent inflation shocks, but expressed concerns about their potential impact on the financial system.
- In the interest of financial stability, Bowman plans to prioritize reforming supervision, ensuring regulatory tailoring, promoting innovation, and increasing transparency and accountability.
- Sen. Tim Scott praised Bowman's nomination, stating that she will bring accountability and transparency to the Federal Reserve.
- Bowman's career encompasses her current role on the Federal Reserve board, her tenure as Kansas' state bank commissioner, and her representation of a pragmatic and balanced approach towards both Wall Street and Main Street in her regulatory practices.
