No Institution Is Free From Politics, And This Includes The Fed

Economists and pundits have at times reacted negatively to President Trump’s demands that Chairman Jerome Powell decree lower interest rates. The expressed worry was that Trump was politicizing a studiously non-political entity. More realistically, Trump’s efforts were in vain. Markets bow down to no one.

Still, the perceived politicization of the Fed from the White House rates more mention in consideration of the difficulties Michelle “Miki” Bowman is presently experiencing. Recently Trump nominated Bowman as the Fed’s Vice Chair for Supervision, and the nomination hasn’t exactly been smooth sailing. One reason why appears to be related to politics…inside the Marriner Eccles Building.

About Bowman, she’s known to be less interventionist than Michael Barr, the individual she would replace. She’s seen as having a lighter touch about bank capital requirements which by their very description are excessive, plus she could represent departure from Barr’s errant decision to saddle banks with price caps on debit-card interchange fees.

Which is encouraging on its face, and can be explained by the description of Bowman’s title assuming confirmation. She would handle supervision of Fed member banks, though her less interventionist approach implies what she likely knows: banks are extraordinarily well supervised by the individuals inside them, not to mention investors outside them who have a vested interest in their healthy growth. Markets are the ultimate supervision.

All of which raises questions about internal opposition to Bowman. The impression that’s forming from the inside is that Bowman doesn’t fit traditional Fed norms. Which isn’t exactly surprising. Consider the man (Trump) who nominated her.

Which brings us to Chairman Powell. While there’s no documented evidence of his disdain for Bowman, there’s a perception that they don’t get along. Among other things, Fed culture has long put consensus on a pedestal. Yet in September of 2024, Bowman voted against Powell’s 50 basis point cut in the Fed funds rate. Perceived dislike, whether real or not, has driven speculation that Powell would prefer that Bowman not fill the Chair she’s been nominated for.

Particularly after Bowman’s nomination was advanced out of the Senate Banking Committee, leaks critical of her began to reveal themselves. For instance, Aleksandra Wells, presently a vice president at Goldman Sachs, is seen as a likely Bowman hire. About this, Wells previously worked at the Fed for over 10 years, including time under Bowman, and has only been at Goldman Sachs briefly. Despite this, Wells’s ties to Goldman are being spun as though she’s a special interest hire from “Government Sachs.”

Future “Org charts” have similarly made their way out of the Fed, and that indicate Bowman would not be asked to serve on the central bank’s Committee on Financial Stability. On its own this would be puzzling, plus it’s notable that Powell manages committee assignments.

Lastly, Bowman is being characterized as someone who wants massive deregulation of banks which, while ideal (see the above discussion of Supervision), doesn’t play well at the Fed. Furthermore, it’s a false narrative. Though policy change is the norm for new arrivals anywhere, radical deregulator Bowman is not. Yet there’s a political quality to what Bowman is enduring.

Which is the problem. While the Fed was always much more politicized than it would like those outside to believe (see past Trump nominee Judy Shelton), it has at least striven to create the impression of a central bank operating free of politics and partisanship. The latter has “doth protest too much qualities” as applied to Bowman, and calls into question why some want her nomination derailed.