Bankers want reforms at the Fed, but which ones?

Fix the Fed, somehow
Kevin Warsh fashions himself as a disrupter (relatively speaking; we are after all talking about banking here, not Silicon Valley.)  The new Federal Reserve chair has talked a bunch about making changes at the central bank. Lowering rates, shrinking the balance sheet, embracing technology. Apart from talking less, though, it isn't exactly clear what he really wants to do,  or more importantly can do.

Bankers for the most part seem to agree with that completely. They also want change, but it isn't exactly clear what they really want Warsh to do. At least that is my takeaway from the latest survey of bankers from IntraFi, which our Kyle Campbell writes about this morning.

More than 80% of the bankers surveyed said they wanted the Fed to implement reforms. That's a lot! The problem with the survey is that the consensus breaks down after that. Only 18% were actually in favor of Warsh's signature proposal of having the Fed communicate less. Only 43% were in favor of shrinking the Fed's balance sheet. The only idea that garnered a majority – 54% – was the idea of the Fed using a broader range of data in its decision-making, and the most surprising thing about that is it means 46% were not in favor of it. 

You might wonder why all those numbers are not zero. After all, banks are historically profitable and shielded (we hope!) from the worst risks in the economy, which are supposedly all over in the private credit world. Who would want to change that landscape at all? Well, the problem is that  landscape is perfect for the big banks, but the small banks, the community banks, are out there struggling. The 400 people surveyed came mostly from community banks, and they had a lot of things they were worried about, from technology to AI to the rising cost of bank deposits. 

The best performing banks
Speaking of smaller banks, American Banker this morning is publishing our list of the top-performing banks with assets between $2 billion and $10 billion, based on data from 2025 from Capital Performance Group. This is the second crop of our best-performing banks series. Our first batch looked at banks with assets under $2 billion.

What linked the best banks was strong net interest margins, profitability in their core lending operations and solid loan and deposit growth. And a number of banks in the top-performing ranking have built their businesses around specialized lending niches, including the oil and gas, agriculture and hospitality sectors. 

And there will be a lot of Fed talk this week 
The survey was well timed. This week brings another two-day meeting of the Fed's rate-setting committee, and Wednesday there is a press conference in which Warsh will probably complain about the fact that he's got to be up there talking. But the important point is he'll be up there talking. As much as he might want to make changes, the Fed is an institution that makes snails look fast. 

He almost certainly will not be lowering interest rates, judging from the Fed funds futures market. The odds of a rate cut are at 0%. The majority (64%) expect no change. The rest, a fairly sizable minority, is betting on a rate hike. 

Read more:

• Four factors that drove banks' blowout 2Q performance
• Banks face a dilemma: More loan growth or better margins?
• The top-performing 20 public banks with under $2B of assets in 2025
• Will banks get in on the prediction market gold rush?

It's hard to see how the FOMC could justify lower rates right now anyway. Unemployment is low and inflation is high. Even though the Consumer Price Index unexpectedly fell in June, it is still up 3.5% from a year ago, and more importantly the June reading comprised a period before the Trump administration ramped up the Iran war, pushing crude-oil prices up again. And that might be one place where the Fed and the banks are in lockstep. In the IntraFi survey, only 13% were in favor of cutting rates in the face of rising inflation.

Kyle Campbell will be in the room for Warsh's press conference and he'll have the story about what it means for bankers.