Republicans urge Trump to pick new top regulator at Fed

Congressional Republicans are urging the Trump administration not to drag its feet in naming a new top regulator to the Federal Reserve Board of Governors.

In a letter sent to Treasury Secretary Scott Bessent on Monday morning, 30 members of the Senate Banking and House Financial Services committees asked him to fill the Fed’s vice chair for supervision role quickly to begin the process of rolling back burdensome regulations.

“We respectfully request that you fill the role of VCS with a strong leader as soon as possible to ensure that the important task of unwinding the politicized regulations promulgated by the board during the Biden administration, ensuring that there is accountability at the board and right-sizing the regulatory and supervisory work of the board are not delayed,” they wrote.

The signing lawmakers — including committee chairs Sen. Tim Scott, R-S.C., and Rep. French Hill, R-Ark. — noted that a new vice chair is needed to address critical issues such as the so-called Basel III endgame capital reforms and supervisory practices that lead to forced account closures, often referred to as “debanking.”

The letter comes just days after former Vice Chair for Supervision Michael Barr stepped down from the post to avoid a potential legal battle with the White House over his removal. 

Technically, Bessent could not install a new vice chair position directly. President Donald Trump must nominate someone and that person would have to go through a Senate confirmation process. But Trump has empowered the Treasury secretary to weigh in on key economic appointments and the signing lawmakers indicated a belief that Bessent would “select” the nominee.

Barr, whose resignation became official on Feb. 28, has retained his governorship, meaning there are no vacancies on the Fed board. Because of this, the administration must either select an existing board member to serve as vice chair for supervision for the next four years, or wait up to a year for the next scheduled vacancy to arise. 

In their letter, the legislators did not indicate a preference for a specific Fed governor to be elevated to the position, but their request makes clear that they don’t want the position to go unfilled.

“Past gaps and poor leadership within the VCS role on the board’s committee on supervision and regulation has led to disfunction (sic) at the board and contributed to the second, third and fourth largest bank failures in our nation’s history,” the lawmakers wrote, alluding to the failures of Silicon Valley Bank, Signature Bank and First Republic Bank during the spring of 2023. “Only a VCS empowered in that position can effect necessary changes at the board as quickly as is possible.”

By law, the vice chair for supervision has the authority to oversee the Fed’s supervisory activities and bring regulatory proposals to the full board for approval. Without someone in that role, those duties revert to the full Board of Governors. 

An internal committee on supervision and regulation liaises with relevant staff groups and develops policy objectives, but Barr, who once chaired the group, has been removed from it, according to the Fed’s website. Normally composed of three governors, the committee is currently unchaired and has just two members: Vice Chair Philip Jefferson and Gov. Michelle Bowman.

Several banking groups have thrown their support behind Bowman, a former banker and Kansas state banking commissioner, being named the next vice chair for supervision. Appointed twice by Trump during his first term in office, Bowman has been a vocal opponent to many Biden-era regulatory policies. 

While lawmakers see value in having a designated point person for regulatory policy at the Fed, others say the position creates more problems than solutions. In congressional testimony last week, Fed Chair Jerome Powell told the House Financial Services Committee that the central bank was a more effective regulator before the position was first occupied.

“You’ve got a group of seven people on the board, and there will be some, as appointments change … changes in the approach to regulation. But putting it all in a single person … can lead to some volatility in these things,” Powell said, adding that it has resulted in “larger swings” in policies from administration to administration. “That’s not great for the institutions that we want to regulate. We want to have a good set of regulations that doesn’t … swing back and forth very much.”

Powell has pledged to hold off on advancing any major regulatory policies until new heads have been installed at the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. 

The vice chair for supervision position was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 but was unfilled until 2017 when Trump appointed Randal Quarles to the role. Barr, who took office in 2022, is just the second person to hold the title.