Senate Democrats Question Fed Vice Chair Over New Review of Bank Failures
Commentary by Steven Lofchie
Senate Democrats asked Federal Reserve Vice Chair for Supervision Michelle Bowman to justify commissioning a new review of the Silicon Valley Bank collapse that would downplay the role of Trump-era bank deregulation.
In their letter, Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal warned the Vice Chair that a new, publicly funded investigation three years after the collapse appears to be little more than a "do-over." They argued that multiple "official post-mortem analyses" conducted by the Federal Reserve and its Office of Inspector General already concluded that the 2019 deregulatory "tailoring rule" was a key contributing factor to the bank's collapse. They noted that Ms. Bowman voted for the rule during the first Trump Administration. The Senators also highlighted concerns about conflicts of interest, pointing out that Gary Cohn, who led the National Economic Council during President Trump’s first term, serves as a key advisor for Starling Trust Sciences, the consulting firm reportedly hired to conduct the review.
The Senators cautioned that commissioning a new investigation could be used to obscure the consequences of weakened bank oversight, particularly as the Fed explores deregulating the banking sector once again. They further argued that it is inappropriate for the Vice Chair to solicit a new review without recusing herself, given that her own "policy actions were implicated" by previous investigations. The Senators requested information regarding the necessity and cost of the new review, whether the consulting firm was selected through a competitive bidding process, copies of vendor communications, and steps taken to mitigate potential conflicts of interest involving the firm's advisors.
The Senators requested a response by February 25, 2026.
Commentary
It is an unfortunate reality that the political party in power largely determines the result of any study conducted by the government. Following the 2008 market crash, the Democratic majority leading the study of the market crash found that the crash had been largely caused by derivatives. If the Republicans had been in the majority, the study would have found that the crash was largely caused by mortgage lending. (See, e.g., The Causes of the Financial Crisis and its Consequences, Peter Wallison, (June 18, 2010)).
So one can reasonably guess that the Democratic party found that the cause of bank failure was insufficient regulation and that the Republican party will find that the cause of the bank failure was a shift in the focus of the bank (and the regulators) to concerns such as the promotion of climate change, rather than minding interest rate risk.
That politicization of "studies" conducted by the U.S. government makes all such studies suspect. That is why FSOC's annual reports on financial risks should be largely disregarded and consideration given to disbanding the group altogether. (See also, Treasury Secretary Links Financial Stability to Growth with comment). It does not matter if you are a D or an R.