Gov. Bowman is the Regulator of a Banker's Dreams

"As many of you may already know, I strongly believe in a pragmatic approach to policymaking."

Music to my ears.

Complying with regulators can feel like one part cat and mouse, one part shooting at a moving target, without a full set of rules, and you're responsible for billions of dollars of assets and deposits. So it's not surprising to see bankers' elation in the news on March 17, when President Trump nominated Bowman to succeed Michael Barr as Vice Chair of the Federal Reserve for Supervision. Even the ABA is happy, and their whole purpose is to butt heads with the regulators

Let's take a quick look at who Gov. Michelle "Miki" Bowman is as she's set to take over this regime and determine why she could be the key to a constructive relationship between banks and those who regulate them.

Career Timeline

Law school --> Politics (Bob Dole + FEMA + DHS) --> Entrepreneur (Consulting Firm in London)--> Banking (VP Community Bank + Kansas Bank Commissioner) --> Regulator (Federal Reserve)

I checked out both of her Senate confirmation votes, where she was confirmed about two-thirds with no obvious diversion from the norms of party voting. (Senate banking committee members voted along the same lines as general Senate; Rand Paul was the lone Republican naysayer.

The Boogeyman She's Replacing: Gov. Barr

1. Key architect of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010

2. Played a central role in developing the Consumer Financial Protection Bureau

3. A proponent of the Volcker Rule

4. Described as "Wall Street's nemesis" by Bloomberg Businessweek

The ABA CEO's letter makes even more sense now; the brick wall that he and bank executives have been hitting their heads against for the last decade and a half has disappeared.

Next up, let's try to deduce what Gov. Bowman's plans are for Wall Street, if confirmed. I dug into her speeches over the last few years and have come up with a few common themes, each of which, at least on the surface, is hard to dislike and quite reasonable. We may have a bait-and-switch scenario on our hands, where she lets banks run free compared to the years since 2010, but I'm optimistic that her focus and approach will foster a newfound respect between banks and their regulators.

What to Expect From Gov. Bowman Ruling the Roost (Quotes are Her Words, Not Mine)

1) Safety & Soundness: I'm Not Sure Out

• “Many of the core problems in the lead-up to the bank failures involved well-known, core banking risks - interest rate risk, liquidity risk, and poor risk management.”

• "No efficient banking system can eliminate all bank failures. But well-designed and well-maintained systems can limit bank failures and mitigate the harm caused by any that occur."

• "Another area that is ripe for review are several of the Board's rules that address core banking issues... Many of the Board's regulations have not been comprehensively reviewed or updated in more than 20 years."

2) Tailoring & Alignment: Empowering Banks to Compete and Comply

• "For those familiar with my philosophy on bank regulation and supervision, my interest and focus on tailoring will come as no surprise...calibrating the requirements and expectations imposed on a firm based on its size, business model, risk profile, and complexity—as a reasonable, appropriate and responsible approach for bank regulation and supervision. In fact, tailoring is embedded in the statutory fabric of the Federal Reserve's bank regulatory responsibilities."

• "Tailoring is important for all banks, but it is particularly important for community banks. There are real costs not only to banks, but to communities, when the framework is insufficiently tailored, as community banks faced with excessive regulatory burdens may be forced to raise prices or seek to merge or be acquired."

3) Transparency & Accountability: (Hopefully) No More 'Because I Said So" Nonsense

• "When done appropriately, regulations require regulators to 'show their work.'"

• "Accountability is critical to maintaining an effective regulatory system."

• "When we identify areas that suffer from a lack of transparency, we should act promptly to address those concerns."

I'd love to hear what you think of this appointment and what you expect will come of it in the industry!