The Federal Reserve aims to cut the headcount of its supervision and regulation division by 30% by the end of 2026, Vice Chair for Supervision Michelle Bowman wrote in a memo Thursday seen by Banking Dive.
“The goal is to accomplish this reduction as much as possible through natural attrition, retirements, and by offering a voluntary separation incentive to all S&R division employees, with details to come in the following weeks,” Bowman wrote in the memo.
The move would shrink the central bank’s supervision and regulation workforce to about 350 employees, from 500. That means the division would carry a heavier burden than others, at least by percentage, amid a larger plan, announced in May, to cut the Fed’s overall workforce by 10% by 2027.
In the memo, Bowman expressed her goal for the unit “to operate with a flatter organizational structure and fewer management layers,” the Financial Times reported.
The announcement comes months after the supervision and regulation division’s director, Michael Gibson, took a voluntary resignation offer. Two of Gibson’s deputies, Art Lindo and Jennifer Burns, also retired around the same time, Gibson wrote in an email seen this summer by Politico.
At a meeting Thursday with employees, according to Bloomberg, Bowman emphasized that the unit should focus on issues that present material risks to banks rather than process-related errors that carry no impact on a business’s safety and soundness.
That would mirror a proposal from the Federal Deposit Insurance Corp., which last month suggested that examiners should issue warnings or impose penalties only for matters that materially affect a bank’s risk of failure or would impose costs on the Deposit Insurance Fund.
Bowman also pressed the unit to lean on examinations of a bank’s primary federal regulator rather than duplicate efforts, Bloomberg reported.
However, Bowman noted that the supervision and regulation division’s operations unit will be renamed the “business enablement group” and will include a new position focused on industry engagement, according to The Wall Street Journal.
News of the headcount reduction drew criticism from Sen. Elizabeth Warren, D-MA, who accused the Fed of “recycling its pre-2008 financial crisis playbook.”
“The Fed is actively undermining American financial stability at a moment when Donald Trump is taking a wrecking ball to our economy,” Warren, the Senate Banking Committee’s ranking member, wrote in a statement Thursday. “We all know what happened the last time we let Wall Street run rampant, and I’m deeply concerned American families will pay the price once again.”
At least one Republican administration official, Treasury Secretary Scott Bessent, has said he sees the Fed’s purview as too big, calling out “mission creep” and “institutional bloat” at the central bank in an essay this spring in International Economy magazine.
“The core problem is structural: the Fed now regulates, lends to and sets the profitability calculus for the very banks it oversees,” Bessent wrote in the essay. “This is an unavoidable conflict that blurs accountability and jeopardizes monetary policy independence.”
Fed Chair Jerome Powell, for his part, directed Fed leadership to find "incremental" ways to trim operations, pushing a target headcount of 24,000 for the Fed.
