Written by Gabriel Dillard
(AP) — Pushing back against critics, a key nominee to the Federal Reserve’s Board of Governors said Thursday before a Senate panel that she would not make it more difficult for any industry to obtain bank loans.
President Joe Biden nominated Sarah Bloom Raskin, a former Fed governor and deputy Treasury Secretary, to be the Fed’s vice chair for supervision, the nation’s top bank regulator. But Republicans have charged that Bloom Raskin’s previous statements on climate change suggest she would use her position at the Fed, if confirmed, to discourage banks from lending to oil and gas companies.
The White House has disputed that view and on Thursday, in remarks before the Senate Banking Committee, Bloom Raskin said she would not be able to take such steps in the position, if confirmed.
“It is inappropriate for the Fed to make credit decisions and allocations,” Bloom Raskin said. “Banks choose their borrowers, not the Fed.”
The Senate panel is also considering the nominations of Lisa Cook and Philip Jefferson to the Fed’s board. If approved, they would vote on the Fed’s interest rate policies and on oversight of the financial system. Cook is the first Black woman to be nominated to the Fed’s board, and Jefferson would be only the fourth Black man on the board if confirmed.
Jefferson appeared to gather broad support from senators in both parties, while Cook received bipartisan praise but also harsh criticism from Sen. Pat Toomey from Pennsylvania, the committee’s senior GOP member.
Toomey and some other Republicans were unconvinced by Bloom Raskin’s comments and will vote against her nomination.
“This is one of the most remarkable cases of confirmation conversion I have ever seen,” Toomey said, suggesting Bloom Raskin has switched her view to win the Senate’s support.
Toomey focused on several of Bloom Raskin’s writings. Two years ago, in an opinion column in The New York Times, Bloom Raskin called oil and gas a “dying” industry and criticized the Fed’s willingness to support lending to fossil fuel companies as part of its emergency support for the economy during the pandemic recession.
And at a conference last year, Bloom Raskin suggested that financial regulators should support “a rapid, orderly and just transition away from high emission assets.”
Environmental groups argue that Bloom Raskin supports analyzing the potential threat that climate change poses to banks and insurance companies as part of the Fed’s mandate to ensure the “safety and soundness” of the financial system.
Republican Senate Leader Mitch McConnell, from Kentucky, harshly criticized Bloom Raskin in a speech on the Senate floor Thursday, suggesting widespread GOP opposition to her nomination. To be confirmed, Bloom Raskin would need the unanimous support of Democrats or win over some Republicans.
Sen. Jon Tester, a Democrat from Montana, an oil and gas state, appeared sympathetic to Bloom Raskin’s views during the hearing.
“It’s critically important that the Fed gets all the information that they can when they’re dealing with risks to our financial system,” Tester said. “It is rather obvious that climate change has to be part of the information that you gather.”
Oil and gas trade associations have criticized Bloom Raskin’s nomination, though not all have explicitly opposed her. The Chamber of Commerce, in a letter to the committee last week, urged the senators to simply “raise several important issues” during the hearing.
Banking trade groups generally have not opposed Bloom Raskin’s nomination. She was Maryland’s top bank regulator from 2007 to 2010, and has won plaudits from leading Maryland bankers for her collegial approach.
Sen. Cynthia Lummis, a Republican from Wyoming, raised a new issue regarding Bloom Raskin’s nomination during the hearing. She charged that Bloom Raskin, after leaving her position as deputy Treasury secretary in 2017, joined the board of a financial technology startup, Reserve Trust, and helped it receive a “master account” at the Fed, a sought-after designation that allows financial firms to earn interest on reserves they keep at the central bank.
Lummis said that Reserve Trust is the only startup financial technology firm to receive such a designation, and that Bloom Raskin improperly contacted the Kansas City Federal Reserve in 2017 on Reserve Trust’s behalf. Bloom Raskin left the company in 2019 and in 2020 sold shares in Reserve Trust for $1.5 million.
“Something doesn’t smell right with the way this has played out,” Lummis said.
“I want to make it very clear … I have been very mindful of the rules,” Bloom Raskin responded.
The Biden administration accused Lummis of engaging in “innuendo.”
“Sarah Bloom Raskin has always taken her ethical obligations very seriously,” said White House spokesman Chris Meagher.
An administration official, speaking on condition of anonymity to discuss the issue freely, said the company received the account because it went through a lengthy regulatory process and complied with the rules around such applications.
Separately, Cook has come under attack from conservative commentators who have suggested she is unqualified.
Toomey said Cook has engaged in “extreme left wing advocacy” and “has supported race-based reparations, promoted conspiracies about Georgia voter laws, and sought to cancel those who disagree with her views.”
Sen. Sherrod Brown, the Democrat from Ohio who chairs the committee, later responded, “The attacks on Dr. Cook are abhorrent.”
“They were ginned up on the far right blogosphere to discredit a highly respected economist with substantial monetary policy experience,” Brown continued. “She has a Ph.D. in economics. Plenty of other board governors have never had that.”
Cook is an economist at Michigan State University and former staffer in President Barack Obama’s White House. She earned her economics Ph.D. from the University of California, Berkeley, and has college diplomas from Spelman College and Oxford University.
On Thursday, Cook said that she sees fighting inflation, which is currently at a four-decade high, as the Fed’s top priority.
“I agree with Chair Powell that our most important task is tackling inflation,” Cook said. “High inflation is a grave threat to a long, sustained expansion, which we know raises the standard of living for all Americans and leads to broad-based, shared prosperity.”
Jefferson, an economist and dean at Davidson College in North Carolina, also said he considers rising inflation a major risk to the economy.
“The Federal Reserve must remain attentive to this risk and ensure that inflation declines to levels consistent with its goals,” Jefferson said.