Senator Elizabeth Warren is demanding the Federal Reserve's inspector general investigate Governor Michelle Bowman over a consultant-led review of Silicon Valley Bank's collapse.
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Warren demands Fed probe into Bowman's 4th SVB failure review
Senator Elizabeth Warren is demanding the Federal Reserve's inspector general investigate Governor Michelle Bowman over a consultant-led review of Silicon Valley Bank's collapse.
Senator Elizabeth Warren asked the Federal Reserve's inspector general to investigate Governor Michelle Bowman, alleging the vice chair for supervision commissioned a wasteful fourth review of Silicon Valley Bank's 2023 collapse through a contract awarded to a firm linked to her predecessor.
"The review may constitute government waste and raises serious questions about whether the Fed's contract, procurement and conflict of interest policies were followed," Warren, the top Democrat on the Senate Banking Committee, wrote in a letter to Inspector General Michael Horowitz on Tuesday.
Two prior investigations — one by the Fed's inspector general and another by the Government Accountability Office — already examined the lender's failure. A third was conducted by former Vice Chair for Supervision Michael Barr, who found that supervisory lapses and a 2018 law rolling back oversight of mid-sized banks left regulators ill-equipped. The new review, awarded to Starling Trust Sciences, is aimed at "identifying the shortcomings in our supervision," the Fed said in February.
Warren's letter sharpens political pressure on the Fed's leadership as it navigates a delicate regulatory reset. The Massachusetts Democrat noted that prior reviews found deregulation policies Bowman supported contributed to SVB's sudden collapse, raising the stakes for an investigation that could reshape the central bank's supervisory approach.
The contract award process itself has drawn scrutiny. Warren questioned whether Starling Trust Sciences won through a competitive bidding process, noting the firm's public affiliation with Randal Quarles, who served as the Fed's top banking regulator under President Donald Trump until 2021.
"It is difficult to believe that the contract was awarded through a truly competitive process, and that a firm publicly affiliated with Mr. Quarles just so happened to be the best applicant," Warren wrote.
The Fed tapped Starling Trust Sciences in February to conduct the review, which the central bank said would focus on supervisory shortcomings that allowed SVB's risks to go undetected. The Santa Clara, California-based lender collapsed in March 2023 after a bank run triggered by unrealized losses on its bond portfolio, marking the second-largest bank failure in U.S. history.
Prior Reviews Found Deregulation Links
Two earlier examinations of SVB's failure identified deregulation as a contributing factor. The Fed's post-mortem, led by Barr, found that the 2018 law raising the threshold for enhanced supervision to $250 billion in assets — legislation Bowman supported — left regulators unable to address the lender's growing risks. SVB held $209 billion in assets at the time of its failure.
Warren argued that Bowman's push for a fourth review may be an attempt to rewrite that narrative. "Your letter suggests that Governor Bowman may be commissioning this review precisely because prior reviews identified her own policy choices as contributing to SVB's failure," she wrote to Horowitz.
Political Pressure Mounts on Fed Leadership
The investigation request comes as Fed Chair Kevin Warsh faces his own scrutiny from Warren. During a Senate Banking Committee hearing Wednesday, Warren pressed Warsh on whether he had asked Bowman about a separate controversy — her attendance at a private dinner hosted by Bank of America during the Fed's blackout period.
Warsh declined to say whether he had questioned Bowman, deferring to the inspector general's investigation into that matter. "Out of an enormous respect for the inspector general of the Fed, his investigation, what he chooses to do with it, I'm going to leave to him," Warsh told the committee.
The dual controversies have amplified scrutiny of Bowman's conduct and the Fed's internal governance. A spokesperson for the Fed's inspector general confirmed receipt of Warren's letter but declined further comment.
The KBW Nasdaq Regional Banking Index has remained volatile since SVB's collapse, with investors closely watching any signals of regulatory tightening. A formal investigation into Bowman could accelerate calls for stricter oversight of mid-sized lenders, potentially weighing on regional bank stocks that have benefited from the lighter regulatory touch enacted in 2018.
The investigation, if opened, would examine whether Bowman violated Fed policies on contract procurement, conflicts of interest, and government resource use. It could also reignite debate over the deregulatory framework that governed regional banks before SVB's collapse, potentially influencing the Fed's approach to supervision under Warsh. The inspector general has not disclosed a timeline for its review.
This article is for informational purposes only and does not constitute investment advice.
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