The saga of President Biden’s five nominees for the Federal Reserve Board has reached an end, but it’s important to remember how we got here, and the key issues raised by a process that will likely set a dangerous precedent. In particular, the politicization and threat to the Fed’s independence as well as to the most basic bank risk analysis from the actions of the fossil fuel industry’s political allies cannot be overstated. (Plus, such an unfair process is almost certain to cause highly qualified people of both parties to refuse to serve in public office in the future.)
After overcoming Republican obstruction and delays, the Senate confirmed Dr. Lael Brainard as Vice Chair and Dr. Lisa Cook as a Governor. We applauded those confirmations and celebrated Dr. Cook’s historic trailblazing role as the first Black woman to serve on the Fed Board in its 109-year history. We were also pleased to see the Senate confirm Dr. Philip Jefferson and Chair Jerome Powell. Finally, as discussed below, after the fossil fuel industry killed the nomination of the highly qualified, mainstream nomination of Sarah Bloom Raskin, the Senate confirmed Michael Barr to be Vice Chair for Supervision. We welcomed his confirmation and released a detailed agenda for this vital regulatory role.
Initially, all the Republican members of the Senate Banking Committee took the unprecedented action of boycotting any Committee hearings to prevent a vote on any of the then-five nominees. Rather than doing their job and voting against Sarah Bloom Raskin, nominated for the Vice-Chair for Supervision, due to their mischaracterization of her statements related to climate risks, they decided to create a de facto procedural veto on her nomination by holding the four other nominees hostage. To end this standoff and enable a vote on the other four nominees, Ms. Raskin withdrew her nomination; the Republican Committee members then attended a Committee meeting; and the full Committee voted on the other nominees, all of whom are now confirmed and working members of the Federal Reserve Board.
However, this conduct was nothing less than Republicans and other fossil fuel industry allies serving their special interests rather than the country, which, at a critical time of economic and financial peril, needed the Federal Reserve Board to be fully staffed and functioning. As we said here when they were announced, President Biden’s nominees to the Federal Reserve Board were unquestionably well qualified and brought a wealth of long-overdue experience. They were fully committed to the Fed’s statutory mandates to promote banks’ safety and soundness and financial stability while protecting the Fed’s independence. All the members of the Committee should have voted on all the nominees in the ordinary course.
Instead, critics and opponents of some of the nominees unfairly and baselessly distorted their records—especially Ms. Raskin’s prior statements on climate. That’s why, before the Senate Banking Committee hearing on Feb. 3rd, we put out a Fact Check Memo (with links to original sources) so that people could judge for themselves what she actually said vs. the caricature that others were saying she said. It’s clear her opponents were mischaracterizing and cherry-picking her statements out of context.
Unfortunately, those distortions – and more – were repeated during her Committee nomination hearing (which can be watched here). Our CEO Dennis Kelleher responded in real-time during the hearing on Twitter, which can be found here: @DennisKelleher on Twitter. Although unmentioned by the media (and distorted by Republicans), two things became clear during the hearing.
First, given that Ms. Raskin’s statements aligned with what Chair Powell, former VCS Quarles, Wall St’s biggest banks & financial industry leaders have said about climate, it’s the fossil fuel industry & their political allies who are out of the mainstream on the risks posed by climate. That was made clear in this Memo.
Second, the fossil fuel industry & their allies (again including Sens. McConnell, Toomey, other Republicans on the Committee) are trying to bully the Fed into ignoring well-known and recognized risks related to climate. They want the Fed to create a special exemption for any risks arising from the fossil fuel industry, in effect insisting on a de facto prohibition on the Fed from even looking at risks arising from climate. That is nothing less than those Senators politicizing the Fed by picking winners and losers and carving out special treatment for their special interests. That not only seriously undermines the Fed’s independence, but it also dangerously increases the risk of a financial crash, as we pointed out in a post-hearing press release and in this Op Ed: The Real Threat to the Fed.
Here are key documents and information relating to the nominations:
FINANCIAL RISKS RELATED TO CLIMATE CHANGE MUST BE ADDRESSED—REPUBLICANS, DEMOCRATS, WALL STREET BANKS, FINANCE LEADERS AGREE: There is widespread, mainstream, consensus from Washington to Wall Street and beyond that climate change poses serious and dangerous risks to the financial system and the economy. They may have different ideas about how and how fast to address those risks, but they agree on the risks and that they must be addressed. See our Fact Sheet.
DANGEROUS RHETORIC AT SENATE BANKING COMMITTEE CONFIRMATION HEARING THREATENS FEDERAL RESERVE INDEPENDENCE AND RISKS A FINANCIAL CRASH: There was dangerous rhetoric at the Senate Banking Committee hearing on Feb. 3 on the three nominees for the Federal Reserve Board that threatens the independence of the Federal Reserve and risks another financial crash. However, it didn’t come from the nominees, but from their critics and opponents. See our Press Release.
TWEETING OF THE FEBRUARY 3, 2022, CONFIRMATION HEARING OF SARAH BLOOM RASKIN, DR. LISA COOK, AND DR. PHILIP JEFFERSON: See reactions to what the Senators and media had to say, see @DennisKelleher on Twitter.
FACT CHECK MEMO: CRITICS OF SARAH BLOOM RASKIN FOR THE FEDERAL RESERVE BOARD DISTORT HER CLIMATE STATEMENTS WHICH ALIGN WITH CHAIR POWELL, FORMER VICE CHAIR QUARLES, WALL STREET BANKS & OTHERS: President Biden’s recent nominees for the Federal Reserve’s Board of Governors, Sarah Bloom Raskin, Lisa Cook, and Philip Jefferson, are all incredibly well-qualified professionals and merit Senate confirmation. See our Fact Check Memo.
FACT SHEET: FINANCIAL RISKS RELATED TO CLIMATE CHANGE MUST BE ADDRESSED—REPUBLICANS, DEMOCRATS, WALL STREET BANKS, FINANCE LEADERS AGREE: There is widespread, mainstream, consensus from Washington to Wall Street and beyond that climate change poses serious and dangerous risks to the financial system and the economy. They may have different ideas about how and how fast to address those risks, but they agree on the risks and that they must be addressed. See our Fact Sheet here.