Senate Republicans are mounting a campaign against President Joe Biden’s pick to fill a watchdog position at the Federal Reserve, the country’s central bank, over her views on girding against the financial risks of human-caused climate change.
Biden nominated former Deputy Treasury Secretary Sarah Bloom Raskin in January to be vice chair for supervision at the Federal Reserve, a role created by the Dodd-Frank financial reform law to oversee major banks and monitor emerging threats to the economy.
Since then, GOP senators from oil- and gas-producing states have vowed to oppose her confirmation, while environmental and labor groups have supported her.
Raskin is scheduled to appear for her confirmation hearing at 8:45 a.m. Thursday before the Senate Banking, Housing and Urban Affairs Committee, where Lisa Cook and Phillip Jefferson — Biden’s two other nominees to sit on the Fed’s board — will also testify.
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The fight over Raskin’s nomination comes as central banks worldwide have expanded their work on the financial risks posed by climate change and governors at the U.S. central bank, including Federal Reserve Chair Jerome Powell and Lael Brainard, the bank’s vice chair, have grown increasingly wary of how a warming world threatens the global economy.
When Biden announced his choices to fill the three empty seats on the seven-person Fed board, he said Raskin, Cook and Jefferson were qualified and would help navigate the country through choppy economic waters.
“They will continue the important work of steering us on a path to a strong, sustainable recovery, while making sure that price increases do not become entrenched over the long term,” Biden said.
Cook is an economics professor at Michigan State University, and Jefferson is an economist and administrator at Davidson College. Both are Black and would usher in a new era of diversity among the Fed’s board of governors. If Biden gets all his picks through, the majority of the board seats would be filled by women.
Climate risk
Republicans have focused their criticism of Raskin, the wife of Rep. Jamie Raskin, D-Md., on her public climate statements, in particular through a column The New York Times published in May 2020 called “Why Is The Fed Spending So Much Money on a Dying Industry?”
In the piece, Raskin, who has also been a Fed governor and the top financial regulator in Maryland, quarreled with the central bank’s decision to issue pandemic-relief loans to fossil fuel companies that were in “deep financial trouble long before the pandemic began.”
She wrote: “The Fed is ignoring clear warning signs about the economic repercussions of the impending climate crisis by taking action that will lead to increases in greenhouse gas emissions at a time when even in the short term, fossil fuels are a terrible investment.”
In a Jan. 27 interview with Fox Business, Sen. Kevin Cramer, R-N.D., said he hopes the Senate blocks Raskin, calling her climate stance “radical.”
Sens. John Barrasso, R-Wyo., and Patrick J. Toomey, R-Pa., the top Republican on the Senate Banking Committee, have also been critical of Raskin, saying her opinions stray from the economic mainstream and that the Fed should focus on its dual mandate of maximizing employment and stabilizing prices.
In a Jan. 31 letter to Toomey and Sen. Sherrod Brown, D-Ohio, the Banking Committee chairman, Barrasso said he opposed the pick.
“This country still will be using fossil fuels for many decades to come,” he said.
Toomey criticized Raskin and other Fed nominees in a Jan. 25 letter to Biden. He noted in the letter that Raskin in her Times op-ed “advocated for the Federal Reserve to pressure banks into choking off credit to traditional energy companies.”
Citing access to credit, a top oil and gas lobby in Washington also said it is concerned about Raskin’s confirmation.
“We believe that climate-related stress testing and restrictions on capital could undermine our industry’s efforts to deliver affordable and reliable energy while addressing the climate challenge,” Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute, said in an emailed statement.
Central banks on climate
Raskin’s public statements on the financial risks climate change poses track with those of other central bankers and Powell.
The Fed in 2020 joined the Network for Greening the Financial System, a group of more than 80 central banks and regulators. Last year, it created two internal committees on climate risk to measure banks’ exposure to climate impacts. And during his confirmation hearing in January, Powell said the bank considers climate change a possible threat to instability.
“Our role on climate change is a limited one, but it’s an important one, and it is to assure that the banking institutions that we regulate understand their risks and can manage them,” Powell said. “It’s also to look after financial stability,” he said. “With financial stability, the issue really is ‘Can something from climate change rise to the level that would threaten the stability of the entire financial system?’”
Asked at his hearing by Sen. Chris Van Hollen, D-Md., about prioritizing climate, Powell replied: “We have responsibility for the stability of the financial system, and over time, climate risk can play into that as well.”
And in a June 2021 speech in Venice, Italy, Randal Quarles, whose seat Raskin would fill, said there was a growing “understanding and monitoring climate-related financial risks.”
Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, said in an interview Raskin’s climate positions broadly matched those of Quarles and other Fed officials and U.S. banking regulators, including at the Office of the Comptroller of the Currency and the Financial Stability Oversight Council, both offshoots of the Treasury Department.
“My hope is that there’ll be a deep conversation about the real issues, not polarizing views,” Rothstein said of the hearing. “Climate is a real risk. We’re talking trillions of dollars of risk to our marketplace.”
David Arkush, director of the climate program at Public Citizen, a watchdog group, said in an interview Raskin would be tasked with “looking at the horizon and watching out for emerging risks to financial stability” if confirmed.
Environmental, housing and labor groups, such as the United Auto Workers, the AFL-CIO, Greenpeace, the League of Conservation Voters, the National Urban League and the National Housing Resource Center, gathered behind Raskin’s nomination in a letter Wednesday.
“She’s not going to carve an issue like climate change out of the mission and ignore it, because she’s not going to be intimidated by people saying it’s too political,” Arkush said. “If it poses risks to the banks and it poses risks to financial security, that’s the job. And it’s just like any other risk.”
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