Michelle Bowman is the perfect choice to take Michael Barr’s spot as vice chair for supervision on the Board of Governors of the Federal Reserve System. Not only is Fed Governor Bowman sharp on policy, but she understands the economics of the banking system, knows how regulations impact banks of all sizes and is not afraid to challenge her fellow Fed governors when opposing policies she thinks are not in the best interest of American businesses and consumers.
Bowman is the best conservative option to replace Barr. She was originally nominated by President Trump in 2018 and was reappointed to serve on the Fed’s board in 2020. Last year, Bowman received recognition from Vice President-elect Vance when he promoted a portion of one of her speeches on how immigration and limited affordable housing supply could be contributing to higher rent prices. Even The New York Times described Bowman as “arguably the most conservative member of the Fed Board.”
There is no doubt she would be a huge upgrade from Barr.
Barr’s original proposal to raise capital requirements on American banks was arbitrary and disregarded the public’s near-unanimous opposition. Latham & Watkins, LLP published a report showing that more than 97 percent of letters submitted to the banking regulators opposed or had “substantial concerns” with the U.S. implementation of Basel III Endgame.
Bowman understands bank regulation needs “a degree of balance.” Drastically raising capital requirements on banks is associated with significant costs for banks and borrowers with weaker credit scores. Bowman explained in a recent speech that forcing banks to raise more capital impacts “the availability of credit, particularly for less qualified borrowers.” Under Barr’s proposal, the most vulnerable Americans, both individuals and small businesses, would lose access to credit. If Bowman takes the helm, opportunities for economic growth would be much more abundant.
When it comes to lowering debit card interchange fees, or fees collected by banks and credit unions to fund rewards programs and fraud protection, Bowman knows it has broad implications for the entirety of the banking sector. Last year, the Fed proposed new rules to lower debit card interchange fees. In response to the changes to “Regulation II,” as it is called in legal jargon, almost 80 percent of commenters submitted letters to the Fed in opposition to lowering the cap on debit card interchange fees. Bowman points out that even though small community banks are not directly affected by the interchange fee cap, the effects of the regulations will “trickle down” to smaller banks and credit unions. According to Bowman, a decrease in fees “will have consequences for banks of all sizes, and more importantly, for their customers that rely on debit card products for payments.”
She is skeptical of artificial price controls that come with government intervention. This is important for both America’s small financial institutions and consumers’ continued access to financial products, such as credit and debit cards, mortgages, student loans, and auto loans.
Bowman is not a conformist. In September 2024, when the Fed decided to lower the federal interest rate by half a percent, Bowman was the only member of the Federal Open Market Committee to dissent. It was “the first ‘no’ vote by a governor since 2005.” Some viewed the rate cut, which occurred right before the presidential election, as a political decision to boost the economy and help President Biden’s chances of winning. Bowman’s actions show she is a free thinker and someone who will do what is best for American consumers and the broader U.S. economy—such as by not letting inflation run out of control.
Another issue where Bowman hits the nail on the head is the obsessive focus on climate-related risk. Bowman talks about how too much focus on climate risk is allocating banks’ resources in the wrong direction. Instead of bolstering safety and soundness, “nebulous” climate risk, according to Bowman, “has the potential to undermine safety and soundness, creating an expensive distraction from more pressing areas of concern.” As vice chair for supervision, Bowman would reject ESG policies that offer no real benefit to a bank’s safety and stability.
Barr’s decision to step down opens the door for a sensible regulatory agenda at the Federal Reserve. Tailoring regulation and supervision that conforms with federal law and congressional intent will likely be one of Bowman’s primary goals as vice chair for supervision.
President-elect Trump has an opportunity to pick a reformer, nonconformist, and pro-growth conservative. Bowman is the best pick for vice chair of supervision at the Fed.
The author is president of Americans for Limited Government
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