Trump's advisory team is considering reshaping the leadership of the Federal Reserve

According to informed sources, Trump's advisors are considering how to restructure the leadership of the Federal Reserve, including promoting Federal Reserve Governor Bowman to the position of the next Vice Chair for Supervision.

This news comes after Barr announced he would resign from the Vice Chair for Supervision position but retain his seat on the Federal Reserve Board. Trump's advisors have also begun drafting a list of potential candidates to replace Powell, whose term will end in May 2026, and they are closely monitoring current Federal Reserve officials' comments on interest rates to decide whether to add or remove names from the candidate list.

Although Trump chose Powell as chairman during his first term, he has repeatedly expressed dissatisfaction with that decision.

According to people familiar with the matter, the candidates currently being considered by Trump's advisors to succeed Powell include: Kevin Hassett, currently appointed as the Director of the White House National Economic Council; Larry Lindsey and Marc Sumerlin, former officials from the George W. Bush administration; David Malpass, former President of the World Bank; Kevin Warsh, a former Federal Reserve official; and Governor Bowman.

Informed sources say that Federal Reserve Governor Waller was previously seen as a candidate for Federal Reserve Chair, but after he supported a 50 basis point rate cut last September, he may no longer be seriously considered. Last year, Trump stated that a larger-than-usual rate cut by the Federal Reserve just weeks before the presidential election was a "political move to keep someone in power."

Cleveland Federal Reserve President Mester has also been rumored to potentially gain a seat on the Federal Reserve Board during Trump's second term.

Bowman, Hassett, Sumerlin, Waller, and Mester declined to comment, while Warsh, Malpass, and Lindsey did not respond to requests for comment. Trump's transition team also did not immediately respond to requests for comment.

Barr's Decision Limits Options

Barr's decision to retain his seat as a regular member of the Federal Reserve Board until 2032 means that Trump cannot nominate a new candidate from outside the Federal Reserve to fill Barr's Vice Chair for Supervision position. Instead, he must choose a member from the Federal Reserve Board to serve as Vice Chair for Supervision.

Trump said at a press conference on Tuesday that Barr's replacement would be announced "soon."

The next vacancy at the Federal Reserve is not expected to occur until January 2026, when the term of Federal Reserve Governor Quarles will expire.

Among the four current Federal Reserve Governors who could be promoted to Vice Chair, two were appointed by Trump: Bowman and Waller.

Bowman was nominated by Trump to the Federal Reserve in 2018 while she was serving as a state bank commissioner in Kansas.

She has delivered extensive speeches on bank regulation, often addressing community bank audiences. She strongly opposed Barr's proposal on bank capital requirements, which is part of the Basel III framework aimed at preventing bank failures and financial crises, arguing that increased capital requirements could suppress lending activity, especially during healthy times in the banking sector. She advocates for better oversight of banks Bowman also criticized the Federal Reserve's handling of the Silicon Valley Bank and other bank failures in 2023.

Although most of Bowman's public speeches have focused on the banking sector, she has also become one of the more hawkish monetary policy makers at the Federal Reserve, frequently expressing concerns about inflationary pressures. She became the first governor to cast a dissenting vote at the FOMC in 19 years last September. She voted against an extraordinary 50 basis point rate cut, favoring a 25 basis point cut instead.

Representative French Hill said earlier this week, "Bowman has done an excellent job as a Federal Reserve governor, and it would be a good decision if Trump nominated her for that role (i.e., Vice Chair for Supervision)."

Harmack was appointed president of the Cleveland Fed last year, having spent thirty years at Goldman Sachs in various roles related to agency bonds, interest rates, and repo trading. She also served as the chair of the Treasury Borrowing Advisory Committee, which consists of Wall Street dealers and debt investors providing advisory services to the Treasury.

Potential Conflict

Barr stated on Monday that he chose to resign from his position as the Federal Reserve's top bank regulator because he weighed that even if he fought and successfully remained in office against the incoming Trump administration, it would still be a loss for the Federal Reserve.

He said, "According to my lawyer and the Federal Reserve's general counsel, if this turns into litigation, I would win legally. But even without litigation, or even if there was litigation and I won, it would cause tremendous disruption, which I do not think is a wise course of action."

Source: Jin Shi Data