Federal Reserve Gov. Michelle Bowman's ascendance to the central bank's vice chair for supervision position presents a win-loss proposition for community bankers.
On one hand, they would see one of their own, a former small town banker and one-time state banking supervisor, take the reins on regulation and supervision at the Fed. But, in doing so, they risk losing the direct access to her — and, by extension, the broader board of governors — that they have enjoyed in recent years.
"Her plate is going to be full," said Ballard Cassady, president and CEO of the Kentucky Bankers Association. "[Former Vice Chair for Supervision Michael] Barr was a fine man, obviously a very smart guy, but I do think he let a lot of stuff slide, so there's going to be a whole lot that she's going to have to do to get caught back up and get back into review. She cannot do that and, at the same time, be doing what she was doing, which was taking the pulse of the industry."
President Donald Trump
Trump appointed Bowman to the Fed board in 2018 to fill the seat
The position comes with no special authorities or obligations, but Bowman has used it as a platform to put community banking issues front and center at the Fed whenever possible. She has spent the past seven years crisscrossing the country, meeting with community bankers and giving voice to their concerns through a litany of speeches and other actions. During the Biden administration, she regularly dissented to regulatory reforms she deemed harmful to smaller banks.
"She's really paved the way for this role," said Anne Balcer, chief of government relations and public policy for the Independent Community Bankers of America. "She's been able to set a course that others can now fill … through her use of all tools available to a Fed governor, whether that's concurrent or dissenting votes, public speeches, press events and what has to be an unprecedented amount of time directly meeting with community bankers."
Balcer said Bowman's experience and connection to the banking industry make her well equipped to craft policies in ways that safeguard community banks from regulatory overreach. But, Balcer added, that the duties of supervisory vice chair will require Bowman to divide her attention in a way that would leave community banks short-changed.
Technically, Bowman's ongoing presence on the board of governors will continue to satisfy the requirement for a board member with community banking experience. But Balcer said the need for a community bank-focused governor extends beyond regulatory and supervisory matters. Given their strong ties to local economies, she said small banks are instrumental to the Fed's mandates to keep prices stable and employment full.
"Job creation, managing inflation, all of these things are so tied to a community bank business model by which community banks are the ones making the small-business loans at a very micro, local level, and facilitating the job creation that comes through that. They are investing in the small communities that prop up the broader economy," Balcer said. "We will very much be advocating to ensure the next vacancy is filled with someone with community banking experience."
The next opening on the board is set to arise early next year, when Gov. Adriana Kugler's term expires in January. But with the board at full capacity and no other scheduled departures until 2028, many have speculated that Trump would use Kugler's seat to nominate his preferred choice to succeed Jerome Powell as Fed chair when his term expires in May 2026.
Some policy experts scoff at the idea of the administration appointing a second Fed governor on the grounds that they have experience operating or supervising community banks.
"Community banks should be glad that a person from their background is going to be in charge of regulating them," said Aaron Klein, a senior fellow at the Brookings Institution and a former deputy assistant secretary for economic policy at the Department of Treasury. "The question is whether this is going to be a fox in the hen house, or someone who is really going to reign in problematic practices."
Left-leaning advocacy groups have also expressed concerns about Bowman's elevation to vice chair for supervision. In a statement on Wednesday, the consumer rights group Public Citizen called her a "roadblock" to "measures to ensure stability in the banking system and equitable access to credit across the country." It also described her
"Popularity with an industry is not a qualification to regulate it," the group wrote. "Preserving bank safety and soundness and promoting stability in the financial system must be prioritized over the short-term, profit-driven objectives of banks."
