Several Democratic senators pressed Vice Chair for Supervision Michelle Bowman on changes at the Federal Reserve in two letters Thursday, addressing her alleged removal of some bank examiners and alleged decision to launch a new review of Silicon Valley Bank’s 2023 failure.
“It is critical that examiners be allowed to evaluate banks’ safety and soundness and their compliance with applicable laws and regulations without fear or favor,” Sen. Elizabeth Warren, D-MA, and several colleagues wrote in one of the letters Thursday, following a Wall Street Journal report that examiners were sidelined after bank executives lodged complaints with the Fed.
Some bank examiners, according to Journal sources, interpret Bowman’s policy shifts as “mean[ing] they should refrain from being tough on the banks they oversee.”
“If the reporting is accurate, your decision to remove bank examiners at the request of banks themselves would be highly inappropriate and would create a chilling effect across the entire bank examiner workforce,” the senators wrote.
Bowman announced a 30% headcount reduction in the Fed’s supervision and regulation arm in October “to operate with a flatter organizational structure and fewer management layers.” The division cuts are part of a previously announced Fed-wide 10% headcount cut by 2027. That same month, the Fed unveiled major revisions to the bank supervision process.
“This is a toxic mix of actions that leaves our banking system vulnerable to more bailouts and financial crashes, which will harm American families already struggling in President Trump’s economy,” the senators wrote.
A second letter penned by Warren and Sens. Bernie Sanders, I-VT, and Richard Blumenthal, D-CT, questioned Bowman on a Journal report that she hired an outside consultant to re-examine SVB’s failure after allegedly calling her predecessor’s internal postmortem on the collapse “inadequate.”
“Multiple government reviews conducted in the wake of SVB’s failure have already concluded that the big bank deregulation you voted for during the first Trump Administration was a key contributor to the second, third, and fourth largest bank failures in U.S. history,” the senators wrote Thursday.
“We are concerned that this new review, three years later, may be little more than a publicly funded effort designed to shift blame for SVB’s failure away from your and President Donald Trump’s decisions to weaken bank oversight,” the senators wrote.
Bowman’s predecessor, Michael Barr, said in late 2023 that SVB failed due to a “textbook case of mismanagement,” and that Fed supervisors were slow to identify problems and take action.
The Fed did not respond to a request for comment on the lawmakers’ letters by press time. The senators requested responses by Feb. 25.
The senators’ inquiries come several months into an ongoing debate about Fed independence, spurred in part by Trump’s attacks, in court and in public, against central bank personnel such as Gov. Lisa Cook and Chair Jerome Powell.
Until recently, Stephen Miran controversially held dual roles as Fed governor and chair of the White House’s Council of Economic Advisers. He resigned from his White House role this month. His term at the Fed expired in January, but he’s allowed to stay until a successor is confirmed.
