(Bloomberg) -- President-elect Donald Trump’s advisers are considering how they will reshape the leadership of the Federal Reserve including elevating Fed Governor Michelle Bowman to be the central bank’s next vice chair for supervision, according to people familiar with the matter.
The revelations come after Michael Barr announced Monday that he will step down from the vice chair role while retaining his seat on the Fed’s Board of Governors. Trump’s advisers have also begun drawing up a short-list of potential replacements for Chair Jerome Powell, whose term as chair ends in May 2026, and are closely watching current Fed officials’ interest-rate commentary as they add and subtract names from consideration.
While Trump chose Powell to become chair during his first term, he’s repeatedly expressed unhappiness with the decision.
Trump’s advisers are so far considering the following people to replace Powell: Kevin Hassett, who is currently set to serve as director of the White House National Economic Council, former George W. Bush White House officials Larry Lindsey and Marc Sumerlin, former World Bank President David Malpass, former Fed official Kevin Warsh and Bowman, according to people familiar with the matter.
Fed Governor Christopher Waller, who has previously been considered a possibility for chair, may no longer be under serious consideration after he backed a half-point interest-rate cut in September, the people familiar said. Trump called the larger-than-usual Fed cut, just weeks before the presidential election, “a political move to try and keep somebody in office.”
Beth Hammack, head of the Cleveland Fed, is also said to be in the mix for a possible seat on the Fed’s board during Trump’s second term.
Bowman, Hassett, Sumerlin, Waller and Hammack declined to comment while Warsh, Malpass and Lindsey didn’t respond to a request for comment. The Trump transition team didn’t immediately respond to a request for comment.
Barr Move Limits Options
Barr’s decision to keep his seat as a regular member of the Fed’s board, where he can remain as governor until 2032, means Trump won’t be able to nominate a new candidate from outside the central bank to fill the vice chair for supervision position. Instead, he’ll have to choose someone who is already serving on the seven-member board.
Trump said during a press conference Tuesday that a replacement for Barr would be announced “soon.”
The next Fed vacancy isn’t expected until January 2026, when Governor Adriana Kugler’s term is set to expire, although another board member could decide to step down before then, creating an opening for Trump to nominate someone new.
Of the four current Fed governors who could be elevated to the vice chair for supervision role, two are Trump appointees: Bowman and Waller.
Semafor reported earlier this week that Bowman was a candidate for the position.
Trump nominated Bowman to the Fed in 2018. A fifth-generation banker, she served as the state banking commissioner of Kansas at the time. Bowman was the first appointee to fill a spot earmarked for a community banking expert on the board.
She has spoken widely about bank regulation, often to community banking audiences. She strongly opposed Barr’s bank-capital proposal, part of an international agreement known as Basel III that is intended to prevent future bank failures and another financial crisis, arguing that increased capital requirements would likely curb lending activity at a time when the banking sector was healthy. Instead, she has said banks need better supervision.
“Bowman is the most obvious successor. She has been Barr’s foil, critical not only of the Basel endgame proposal but of how he has managed the process,” Ian Katz, managing director at Capital Alpha Partners, said in a note.
Bowman was also critical of how the Fed handled the failure of Silicon Valley Bank and others in 2023.
Though Bowman focuses on banking in the majority of her public speeches, she has also emerged as one of the Fed’s more hawkish monetary policymakers, often expressing concern about inflation pressures. In September she became the first governor in 19 years to cast a dissenting vote on the policy-setting Federal Open Market Committee. She voted against a larger-than-usual half point interest-rate cut in favor of a quarter-point move.
“Bowman’s done an outstanding job as a governor on the Federal Reserve,” Representative French Hill said in an interview with Bloomberg Television earlier this week. He said if Trump nominated her for the role it would be a good decision.
Hammack, who dissented against the Fed’s decision to lower rates by a quarter-point in December, was appointed to be president of the Cleveland Fed last year. Before that, she spent three decades at Goldman Sachs, holding a variety of roles dealing with agency bonds, rates and repo trading. She was also formerly chair of Treasury’s Borrowing Advisory Committee, which is made up of Wall Street dealers and debt investors and provides the Treasury Department advice.
Potential Fight
Barr said Monday his choice to step down from his role as the Fed’s top banking cop came down to the calculus that even winning a fight with the incoming Trump administration to stay would be a loss for the central bank.
“At the end of the day I would, according to my counsel and to the general counsel of Fed, prevail on any legal merits if this came to litigation,” he said. “But even if it didn’t come to litigation, or if it did come to litigation that prevailed, it would be just a huge distraction, and that didn’t seem to me to be a prudent way of proceeding.”
Barr’s departure further clouds the future of the landmark proposal which would see the largest lenders in the US face a hike in capital requirements. He has been a key figure in negotiations for that plan, which the Fed, in conjunction with the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, unveiled in 2023.
--With assistance from Katanga Johnson.
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