03 March 22
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The industry has donated generously to the campaigns of all twelve Republican members of the Senate Banking Committee.
The G.O.P.’s parliamentary maneuver was an almost unheard of act of obstruction. Its aim was to deprive the Senate committee, which is split evenly between Democrats and Republicans, of the quorum necessary for a vote on Biden’s nominees to take place. The Republicans’ goal was to block a single nominee: Sarah Bloom Raskin, Biden’s pick for vice-chair for supervision. Had they met to vote as scheduled, her nomination would likely have survived a party-line tie, which under the Senate’s current rules would have advanced it to the Senate floor for the full body’s consideration. Instead, after the twelve Republicans on the committee failed to show up, the meeting adjourned, and the Senate soon after went into recess. This left not just Bloom Raskin but all five of Biden’s top nominees for the Fed in limbo, including Powell.
In his State of the Union address on Tuesday night, Biden demanded that the panel confirm his nominees to the Federal Reserve, which, he said, “plays a critical role in fighting inflation.” The Senate Banking Committee’s chairman, Sherrod Brown, a Democrat from Ohio, told me that he plans to bring Bloom Raskin’s nomination back up for a committee vote as soon as possible, but so far one hasn’t been scheduled. “We just want them to show up for work,” he said of his Republican colleagues. “In the midst of an attack, the Russians attacking Ukraine… they’re saying we’re not going to confirm the chair of the Federal Reserve, the vice-chair of supervision, the vice-chair of the Fed, and the other two governors.” He added, “We can’t run the Senate this way.”
A boycott to stop a vote is extraordinary under any circumstances, but experts said they were stunned, given the magnitude of the country’s current economic challenges. “It’s an enormous dereliction of duty,” Joseph Stiglitz, a Nobel Prize-winning economist, told me. Stiglitz, a progressive professor at Columbia University who has advised Democratic presidents, stressed that “the Federal Reserve is the most important economic institution in the U.S., and the U.S. is the most important economy in the world. To leave this many vacancies is just mind boggling to the rest of the world. It is just amazingly irresponsible.”
Democrats say the situation is all the more confounding because Bloom Raskin is far from an unvetted or untested nominee. A graduate of Harvard Law School and a professor of law at Duke University, she served a term on the Fed’s board of governors from 2010 to 2014, to which she was confirmed with unanimous bipartisan support. She also served as Deputy Treasury Secretary during the Obama Administration, from 2014 to 2017, which made her the highest-ranking woman in the department’s history at the time. In addition, she is a financial regulator who has become an expert in cyber security, which would be useful at a moment when potential Russian cyber attacks pose a threat.
Perhaps because she is married to Democratic Congressman Jamie Raskin, a progressive firebrand who represents an area that conservatives have derisively referred to as “The Peoples’ Republic of Takoma Park, Maryland,” opponents have caricatured her as a wild-eyed radical. Yet her credentials and her record in office are consistent with other financial regulators in the U.S., including Powell himself. And she has received scant opposition from the banking community, over which she would become the highest-ranking federal overseer if confirmed.
So what, exactly, is the problem? In Stiglitz’s view, “It’s very simple: special interests.” In speeches and op-ed pieces, Bloom Raskin has described climate change as a potential threat to global economic security. Moreover, she’s personally expressed the view that the Fed should have resisted pressure from climate-polluting fossil-fuel companies who wanted pandemic-related bailouts, and instead encouraged a shift to renewable energy sources. Earlier this week, a report
from the Intergovernmental Panel on Climate Change warned that intensifying heat waves, droughts, and floods will affect billions of people, as well as animals and plants, across huge swaths of the planet. Yet Democrats say America’s fossil-fuel industry sees Bloom Raskin as a threat and is distorting her record in order to block her confirmation.
The fossil-fuel industry would have seemingly little say over who runs the Federal Reserve, but it has donated generously to the campaigns of all twelve Republican members of the Senate Banking Committee. According to OpenSecrets, the nonpartisan campaign-finance watchdog group, the industry has contributed more than eight million dollars to the collective campaigns of the dozen senators. The industry appears to be using this leverage to send a message that it will not tolerate the Fed, or any other financial regulators, treating climate change as a potential systemic economic risk.
In the Senate, one of the leaders of the opposition to Bloom Raskin has been the banking committee’s ranking Republican, Patrick Toomey, of Pennsylvania. He is the former president of the ultra-conservative Club For Growth, which in 2017 applauded Trump’s withdrawal from the Paris climate accords and promised to punish any Republican in 2020 who supported a modest House Republican climate plan. Toomey has expressed doubt in the past about whether human activity is to blame for climate change and has deep financial ties to the fossil-fuel industry. In campaigns for the House and Senate stretching back over the last two decades, he has received $1,071,547 from the industry, which has a major presence in his state. Between 2011 and 2016, Toomey took in $587,147. Toomey’s spokesperson, Amanda Gonzalez Thompson, denied that fossil-fuel companies had bought the senator’s support. “It’s the laziest insult in politics to claim someone who disagrees with your policy preferences is only motivated by campaign donations,” Gonzalez Thompson said in an e-mail. “In this instance, it’s lazy and pathetic since Senator Toomey isn’t even running for re-election.” Toomey, who is sixty, has not said what future employment plans he may have.
Gonzalez Thompson said that Bloom Raskin’s views on climate change accounted for his opposition to her nomination, but she claimed that this had nothing to do with Toomey’s boycott of the confirmation vote. She said it was, instead, because Bloom Raskin has failed to answer questions from him and other G.O.P. members to their satisfaction. Republicans have insinuated that, as a member of the board of directors of a state-chartered trust company called Reserve Trust, Bloom Raskin improperly intervened sometime in 2017 to get preferential treatment from the Federal Reserve Bank in Kansas City. Bloom Raskin has disclosed to the Office of Government Ethics that she sold her stock in the company in 2020 for $1.5 million. The Kansas Fed and a former chairman of Reserve Trust have denied any improper behavior, and Bloom Raskin has answered over a hundred questions posed by Toomey. Bloom Raskin declined to comment.
Chris Meagher, a White House spokesman, dismissed the charges as having been “conclusively debunked” and called the accusations “an unprecedented, baseless campaign that seeks to tarnish her distinguished career.” He said of Toomey, “Instead of simply voting no, as he has already made clear he intends to do, Toomey instead is holding up the confirmation of Chair Powell and the entire slate for the Federal Reserve at a moment when it’s never been more important to have leadership in place to ensure stable prices and maintain our strong economic recovery.”
The real cause of the boycott, Democrats say, is the G.O.P.’s fealty to oil, gas, and coal interests. “The Republicans are always at the beck and call of their fossil-fuel contributors,” Brown told me in a phone interview. “They’re on lifetime lease to the fossil-fuel industry. But this,” he said, referring to the Bloom Raskin nomination, “has been one of the most obvious examples of it.”
In reality, the Fed has little if any authority over environmental policy. Its mandate is to try to insure economic stability and full employment. But Bloom Raskin would become the central bank’s vice-chair for supervision, a powerful new position that was created after regulators disregarded the reckless lending that led to the 2008 economic crash. Its explicit role is to assess long-range, systemic economic risks. What the oil, gas, and coal producers oppose is the possibility that Bloom Raskin might push for the Fed to identify climate change as one such risk. If the Fed did so, banks could be required to take greater precautions when lending to firms that have particularly large financial exposure to climate risks. To the consternation of the industry, as a private citizen, Bloom Raskin has suggested that it could be advisable for banks to consider the value of stress tests for extreme climate scenarios, or even to limit how many especially vulnerable businesses they include in portfolios of loans.But during her nomination hearing, Bloom Raskin made clear that, if confirmed, she had neither the intention or the legal authority to take any such steps. “I have no desire, and if I had the desire, I couldn’t accomplish it,” she promised one of the Republican senators who was pressing her.
The industry’s fears were made clear at the end of January, when a coalition of forty-one energy-business trade associations that opposed Bloom Raskin’s nomination wrote a letter to the committee in which they called Bloom Raskin “a strong advocate for debanking” fossil-fuel companies. It’s rare for the special interests that hold Congress back from action on climate change to show their hands so openly. (The full text of the letter and the list of signatories are below.) Few of the associations are household names. Many of them represent small, private companies that operate without shareholder pressure, or, indeed, much public scrutiny. In their letter, the associations called Bloom Raskin an environmental “alarmist” with “a crisis mentality” because she has stated that climate change could result in “an unlivably hot planet.” They expressed outrage that she had described the fossil-fuel industry as “dying.”
Watchdog groups said that the potential derailing of Bloom Raskin’s nomination sets a dangerous precedent. “What you have are extreme elements of the industry, ones that are in financial trouble and have sought federal bailouts in the past that are trying to kill this nomination,” said David Arkush, a managing director of Public Citizen. “It’s a risky sector to lend to, and they want regulators that actively push banks to loan to them.”
Carter Dougherty, the communications director of Americans for Financial Reform, a nonpartisan progressive group that follows regulatory issues closely, pointed out that the U.S. Chamber of Commerce has also thrown its considerable weight against Bloom Raskin. “The U.S. Chamber,” he told me, acts as “a smokescreen” for companies including the big Wall Street banks, “who want to shy away from” waging publicly unpopular fights. The Chamber’s board of directors also includes executives from such major oil concerns as Chevron, Phillips 66, ConocoPhillips, and Shell Oil.
Yet the irony is that much of Wall Street shares the view that climate change poses financial risks. Last week, Bloomberg reported that the private-equity giant Blackstone, following in the footsteps of several big banks and asset managers, is telling clients that it will no longer invest in the exploration and production of oil and gas. The Wall Street Journal reported last month that some of the largest banks in the country, including Bank of America and Wells Fargo, had formed a consortium to confront the risks that climate change poses to financial institutions.
“When you think about climate change, and then you think about what the science is telling us is going to happen, it will literally have implications and impact across a broad spectrum of industries,” Mary Obasi, a global climate-risk executive at Bank of America who chairs the consortium, told the Journal. “This is an enormous problem for us all to tackle,” added Nancy Foster, the president of the Risk Management Association, a group that helps financial institutions analyze their liabilities. “I think it’s so important for banks to lead, as opposed to react.”
The Biden Administration is pushing banks as well. Last year, Michael Hsu, the acting Comptroller of the Currency, warned that all banks, not just the largest ones, needed to begin closely monitoring potential climate-associated risks that could undermine their financial stability. At last year’s COP26 conference in Glasgow, many of the world’s largest banks and their regulators signed a pledge to direct funding toward efforts to control carbon emissions.
Stiglitz said that Congress, not Bloom Raskin, is out of step and causing the U.S. to lag behind other nations. “It’s the United States that’s an outlier in this discussion. The central banks and economists all over the world realize there’s a climate risk.” He argues that even climate skeptics ought to pay attention to the potential risks, if only to guard against the possibility that they could be proven wrong. “Sarah Bloom Raskin is a lawyer, and she knows that it’s not the Fed’s responsibility to ‘de-fund’ the fossil fuel industry,” Stiglitz said. “But she also knows that the Fed has responsibility for financial stability, and you can’t provide that if you turn a blind eye to the possibility that the prices might be wrong of some assets.” Stiglitz added, “Banks are supposed to assess risk.”
Yet, on February 16th, ten Republican senators sent a strongly worded letter to President Biden demanding that he withdraw Bloom Raskin’s nomination. It accused her of being “an activist, not someone who should be placed in a supervisory role at the independent, non-partisan central bank.” They argued that “the Federal Reserve was explicitly structured to be as removed and insulated as possible from changeable political whims.”
They failed to note, however, that Jerome Powell, the Fed chairman, and Randal Quarles, the Fed’s previous vice-chair for supervision, a Trump appointee whose vacancy Bloom Raskin would fill, agree that climate change can no longer be ignored. Last July, under Quarles’s supervision, the Financial Stability Board, an international body that monitors and makes recommendations to strengthen the global financial system, issued a report calling on financial regulators worldwide to coördinate in addressing climate-related risks.
What became known as Quarles’s “climate roadmap” urged financial regulators around the world to, as he put it in a subsequent speech, “press forward as quickly as possible” to come up with uniform standards by which they can disclose and assess such environmental risks. Last October, Powell lauded the report as well. “Climate change poses significant challenges for the global economy and the financial system,” he said. “The public rightly expects us to work to ensure the financial system is resilient to climate-related financial risks. We appreciate the magnitude of the challenges ahead of us, and the Federal Reserve is committed to doing our part.”
Quarles has since called some of Bloom Raskin’s statements about climate change “too controversial” for his taste. But her approach to the job, experts say, is consistent with her peers in the U.S. and around the world. “They’re all pretty much on the same page in saying that climate can rise to a systemic risk. It’s not a controversial issue in central-bank circles,” Simon Johnson, a professor of entrepreneurship at M.I.T. and the former chief economist at the I.M.F., told me. “Sarah Bloom Raskin is not an extremist in any way. She isn’t out of line at all.” As for the attacks on her in Congress, he said, “I think this is what’s called mudslinging.”
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