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Sarah Bloom Raskin, nominee to be vice chairman for supervision and a member of the Federal Reserve Board of Governors, speaks during the Senate Banking, Housing and Urban Affairs Committee confirmation hearing onon February 3, 2022, in Washington, DC. (Photo by Bill Clark / POOL / AFP) (Photo by BILL CLARK/POOL/AFP via Getty Images)
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Sen. Pat Toomey, oil and gas leaders oppose Fed nominee Sarah Bloom Raskin over climate, Fed independence

POOL/AFP via Getty Images

Sen. Pat Toomey, oil and gas leaders oppose Fed nominee Sarah Bloom Raskin over climate, Fed independence

Banking industry supportive, Powell expressed similar views on climate stress tests

WASHINGTON — Questions about how and whether the Federal Reserve should assess the financial risks of climate change dominated much of Thursday’s U.S. Senate Committee on Banking, Housing and Urban Affairs hearing to consider three nominees to the U.S. central bank’s Board of Governors, with particular attention paid to former board member Sarah Bloom Raskin, whose nomination is opposed by Sen. Pat Toomey, R-Pa., and the oil and gas industry.

The Fed and central banks across the globe have begun to consider whether increased and more severe storms, wildfires and floods could affect financial markets and investments.

Ms. Raskin, who also previously served as second-in-command at the U.S. Department of Treasury, backs the idea that banks should assess climate-related risks.

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Mr. Toomey said he is concerned that Ms. Raskin's past statements on the fossil fuel industry could position the Fed to “choke off credit to traditional energy companies.”

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During his opening remarks, Mr. Toomey, the committee’s ranking member, called the hearing a “referendum on the Fed’s independence” and said he is concerned about the Fed using “its supervisory powers to resolve complex political issues, what to do about global warming, social justice, even education policy. These are certainly important issues but they are wholly unrelated to the Fed’s limited statutory mandates and expertise.”

Ms. Raskin, of Maryland and the spouse of Democratic U.S. Rep. Jamie Raskin, is up for the board’s position of vice chair for supervision, a post formally created in 2010 under the Dodd-Frank financial reform law following the Great Recession.

In the days leading up to her hearing, dozens of energy companies and associations issued letters opposing the nomination, including one letter signed onto by the Marcellus Shale Coalition that stated “[t]he fact that oil and natural gas are used in just about every facet of modern life speaks to their intrinsic value, and hence, their investment worthiness.”

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The U.S. Chamber of Commerce issued a letter raising several questions about Ms. Raskin's positions on pandemic relief, climate change and financial regulations.

Ms. Raskin, whose previous appointment to the Fed board was unanimously approved by the Senate in 2010, said in her testimony that the subprime mortgage crisis illustrated the need for regulators to assess risks.

“I learned that to be effective for all Americans, bank supervisors must make sure that the safety of banks and the resilience of our financial system are never compromised in favor of short-term political agendas or special interest groups. They must stay attentive to risks no matter where they come from, inside or outside the financial sector,” she said.

Ms. Raskin sat on the central bank’s Board of Governors from 2010 to 2014 when she was nominated and confirmed as Treasury’s deputy secretary, a position she held until 2017.

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Her supporters highlight that Fed Chair Jerome Powell has expressed — including during his own nomination hearing last month — that the U.S. central bank is exploring the tool of climate stress test scenarios, which are “likely to become a very important priority.”

Mr. Powell, nominated by then-President Donald Trump and re-nominated by President Joe Biden, is currently awaiting for a recommendation to the full Senate from the committee.

Lawmakers on the committee opposed to Ms. Raskin highlighted previous speeches and statements by the nominee, including a May 2020 New York Times opinion article penned by Ms. Raskin in which she argued that debt, including risky debt, taken on by the fossil fuel industry should not have been eligible for the Fed’s pandemic program of cheaper refinancing.

“At the height of the pandemic, she specifically called [...] for excluding the single industry, the fossil energy sector, which she called and I quote, a dying industry, end quote, excluding them from the emergency lending facilities,” Mr. Toomey said.

Ms. Raskin says the opinion piece was in the context of emergency lending and “the whole point of the op-ed was that the Fed should not pick winners and losers.”

Ms. Raskin’s nomination has garnered support from the banking industry, including the American Bankers Association.

Ahead of the hearing, the Washington-based group Better Markets, created in 2008 to advocate for financial reform, released a 13-page memo disputing what it called “misleadingly cherry-picked and distorted” representations of Ms. Raskin’s previous statements.

Fed watchers say that in recent history Fed board members generally govern by consensus with very rare dissent and that one member cannot unilaterally impose policies.

“The idea that one or two governors are going to make these radical changes always gives me a pause,” said Aaron Klein, senior fellow at the left-leaning Brookings Institution and former chief economist for the Senate Banking Committee. 

“For better or worse ... the vast majority of rules and regulation and monetary policy decisions are done with unanimous support of the board of governors,” he said. 

While much of the time was devoted to questions about Ms. Raskin’s views on climate risk, the hearing was also marked by the diversity of the nominees. Lisa DeNell Cook, Michigan State University professor of economics and international relations, and Philip Nathan Jefferson, former Fed economist and vice president for academic affairs, dean of faculty and an economics professor at Davidson College in North Carolina — both respectively the first African-American woman to be nominated to the board, and if confirmed, the fourth African-American male board member.

Members of the Fed’s seven-seat board are nominated by the president and must be approved by the Senate. 

The committee could vote on the nominees as soon as Feb. 15.

Ashley Murray: amurray@post-gazette.com 

This story has been updated to clarify Mr. Toomey's concerns in Ms. Raskin's past statements on the fossil fuel industry and to correct the characterization of the U.S. Chamber of Commerce letter. 

First Published: February 3, 2022, 2:02 p.m.

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Sarah Bloom Raskin, nominee to be vice chairman for supervision and a member of the Federal Reserve Board of Governors, speaks during the Senate Banking, Housing and Urban Affairs Committee confirmation hearing onon February 3, 2022, in Washington, DC. (Photo by Bill Clark / POOL / AFP) (Photo by BILL CLARK/POOL/AFP via Getty Images)  (POOL/AFP via Getty Images)
FILE - U.S. Deputy Treasury Secretary Sarah Bloom Raskin is shown before the opening ceremony of the Asia-Pacific Economic Cooperation (APEC) finance ministers meeting at the Diaoyutai State Guesthouse in Beijing, China on Oct. 22, 2014. President Joe Biden has forwarded three nominations to the Senate for the Federal Reserve's Board of Governors, including former Fed official Sarah Bloom Raskin for the top regulatory slot, and Lisa Cook, who would be the first Black woman to serve as a governor. Biden is also nominating Phillip Jefferson, an economist, dean of faculty at Davidson College in North Carolina, and a former Fed researcher. (AP Photo/Andy Wong, File)  (Andy Wong)
Ranking Member Sen. Pat Toomey, R-Pa., speaks as Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell testify during a Senate Banking Committee hearing on Capitol Hill in Washington, Tuesday, Nov. 30, 2021.  (AP Photo/Andrew Harnik)
POOL/AFP via Getty Images
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