WASHINGTON — Federal Reserve Gov. Michelle Bowman, President Donald Trump's nominee to be the Federal Reserve's top bank regulator, said that the Fed's political independence is important, but declined to say whether she would insulate the bank regulation she pursues from vetting by the Trump administration.
Bowman — who has been a member of the Federal Reserve Board since 2018 —
She also answered questions from Democratic lawmakers, including Sen. Jack Reed of Rhode Island, about the political independence of the Fed — a hot topic as Trump administration officials have promised to leave monetary policy, but not bank regulation, alone.
"Will the Fed remain independent on supervision and regulation?" Reed asked, referencing a February
Bowman responded that she wants to keep bank regulation consistent across agencies.
"We should be applying similar requirements across the prudential regulators and we should be holding banks to standards that are transparent and clear," Bowman said. "To the extent that we can work together with our other regulators, I think that's an important and appropriate focus and goal that we could accomplish."
Reed doubled down: "Do you plan to submit your regulations to OMB for review and provide the Treasury Department with a say in those rules?"
"It's important that we're being consistent across — especially with my counterparts in other regulatory bodies, that our expectations are similar," Bowman answered.
Bank regulators already typically coordinate their rules. Prudential regulators — including the Fed, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — at minimum issue rulemakings together, and are often joined by the CFPB, the head of which has a seat on the FDIC Board of Directors.
"But submitting rules to the OMB would be contrary to the previous practice of the Federal Reserve, is that correct?" Reed asked.
"I think it's important that we adhere to the principles of cost-benefit analysis … and I think that will be a part of the process that will … ," Bowman said.
Reed interrupted her answer to clarify whether she was suggesting that the Fed's rules to date have not complied with federal cost-benefit analysis requirements.
"Actually, the Fed is not required to apply cost-benefit analysis in our regulatory duties, and I think that's an important part of the regulatory process," Bowman said. "If confirmed I intend to strictly comply with cost-benefit analysis."
Sen. Mark Warner, D-Va., also addressed Fed independence, asking if Bowman would "stand up for the independence of the Fed, even if that means going against Mr. Vought and OMB."
"Absolutely," Bowman said. "It is important that we maintain our independence with respect to monetary policy and the responsibilities that we have that are related to the economy."
Warner continued: "What happens if OMB suddenly put a requirement in place that said the Fed had to check on all the [rules] with the White House before you make your rulemaking. That would also be part of the Fed independence in my mind. I hope you would say that would be inappropriate."
"We haven't seen that happen at this point … ," Bowman said.
"The key word … in that sentence is 'at this point,'" Warner interrupted.
"But I appreciate that concern," Bowman said. "I agree with the principles of cost-benefit analysis and ensuring that we've identified a problem that needs to be solved and we need to provide an analysis that supports rulemakings that we put forward. So I wouldn't think we would have challenges with any rulemaking that we might want to engage in."
Bowman also was guarded in her answers to Senate Banking Committee ranking member Elizabeth Warren's, D-Mass., questions about tariffs and the financial system, including if she would stress test
At one point, Bowman and Warren talked over each other for sentences at a time in a testy exchange between the pair. Warren tried to pin Bowman down on whether she would stress test banks on a tariff scenario, which Bowman did not commit to.
Warren pointed out that Randal Quarles, who was at the time the vice chair for supervision, conducted an emergency stress test at the onset of the economic shutdown caused by the COVID-19 pandemic.
"People reasonably can ask why you're not willing to do this now, and whether you're just worried about embarrassing President Trump," Warren pressed. "Because this shock is one, unlike a virus, that is self-inflicted by the president of the United States."
