If confirmed, Sarah Bloom Raskin would lead the central bank away from its core mandate.
If confirmed, Sarah Bloom Raskin would lead the central bank away from its core mandate.
A mericans do not need the federal government telling banks who can and cannot receive credit based on politics. However, if on February 3, the Senate Banking Comitttee approves President Biden’s recent nominee to the Federal Reserve, Sarah Bloom Raskin, our country will be taking a giant step in that direction.
Ms. Raskin, who wishes to become vice chairwoman for supervision of the Board of Governors and a member of the Federal Reserve System, believes that the Fed should discourage bank’s lending to companies that she deems insufficiently green. If she prevails, oil and gas companies risk being squeezed out of bank loans — a plight that may eventually befall any company that fails to meet her environmental standards. Not only is that a potential threat to the livelihood of many Americans; it’s a threat that should never emanate from the Fed. President Biden should withdraw her nomination immediately.
The freedom that Americans have to make their own decisions about allocating capital is one of the distinguishing characteristics of our country. Beyond investor protection, the purpose of financial regulation is not to make those decisions for us; it is, when it comes to the financial system, to prevent the taxpayers from having to bail out financial institutions. As CEO of the State Financial Officers Foundation (SFOF), I represent state treasurers and other state financial officers who subscribe to that philosophy. Together, through the SFOF network, we stand for state government officials who oversee the management of over $1.5 trillion.
Ms. Raskin disagrees with us and objects to the fundamental tenets that make this country — and the states we are privileged to serve — prosperous. We understand that our job is to protect the economic systems that sustain funds that families set aside to pay for their kids’ college education, support pensions for teachers and firefighters, and nourish accounts for disabled Americans, among many other state funds.
Raskin’s priorities are different. She wants to use the federal financial-regulatory system to “mitigate the risks of climate-related events” and has called for “all” financial regulators — “a non-exhaustive list includes the Federal Reserve System, the Securities and Exchange Commission, the Federal Housing Finance Agency, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and the Comptroller of the Currency” — to look at their existing powers and consider how they could be used to do so. Having served as chief financial regulator for the State of Maryland, and been appointed to the Fed’s Board of Governors under President Obama, she should know better. As should Mr. Biden.
Financial regulators have no better way to predict the future effect of the climate on financial stability than does anyone else; moreover, they’re much less able to predict its effects on any individual company than, say, that company’s management and shareholders. Thus, any claim that climate risk requires financial regulators’ intervention is a sham — a delusion that Mr. Biden wants to promote for reasons unrelated to the financial health of our states.
We are not alone in being deeply concerned about Ms. Raskin’s nomination. The U.S. business community is to boot. For the first time in the history of the U.S. Chamber of Commerce, its members sent a public letter on a nominee to the Fed. The letter urges lawmakers in the Senate Banking Committee to ask Ms. Raskin about her opposition to fossil-fuel companies having access to emergency pandemic funding. What’s more, they rightly request the committee ask her this fundamental question: “Is it the role of the Federal Reserve to direct capital away from certain industries that are politically disfavored or direct capital towards industries that are politically favored?”
The answer should be obvious. By law, the Federal Reserve mandate is to promote “maximum employment, stable prices, and moderate long-term interest rates.” By its very definition, the Fed is to remain independent from any political influence. But Mr. Biden wants to end that. By subscribing to heated rhetoric about the effects of climate change on the financial system, he is attempting to force the private sector to direct capital in ways that advance his political agenda while punishing his perceived political enemies. This has never been viewed as an acceptable use of government power in America. Ironically, it poses a far greater risk to America’s financial system than does climate change.