Biden’s Fed Nominee Faces Growing Opposition Over Climate Views

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 in Washington on Feb. 3, 2022. Bill Clark-Pool/Getty Images

Sarah Bloom Raskin, the White House’s nominee to be vice chair for supervision at the Federal Reserve, is facing increasing opposition because of her past public statements on climate change.

Raskin’s confirmation path is expected to be contentious this month, as Republicans and business groups have raised concerns about her past statements that advocated for using financial regulations to defund the fossil fuel industry.

A Harvard-trained attorney, Raskin was formerly a member of the Federal Reserve Board. She’s currently a professor at Duke University School of Law. One of the classes she teaches is “Climate Change and Financial Markets.”

She was a key contributor to a 2020 report by Ceres (pdf), an advocacy group that has listed more than 50 recommendations for financial regulators to protect the U.S. economy from climate-related shocks.

The report outlines how and why financial regulators, who are responsible for protecting the stability and competitiveness of the U.S. economy, need to recognize and act on climate change as a systemic risk. It states that regulators could “require banks to assess and disclose climate risks, including carbon emissions from their lending and investment activities.” It also calls on the Fed to implement climate stress testing on banks.

Stress testing emerged from the Great Recession (December 2007 to June 2009) as a way to determine whether a bank has enough capital to weather various economic risks.

For the past year, some Republican lawmakers have been raising concerns about the Biden administration potentially using financial regulation as a back door to achieve its climate policy objectives. They’re concerned that the administration and financial regulators, including the Fed, could politicize access to capital and choke off bank financing for sectors they disapprove of, such as coal, oil, and gas.

Treasury Secretary Janet Yellen and Fed officials have repeatedly affirmed the government’s commitment to addressing climate-related risks to financial stability. In 2021, Yellen made it clear that Biden’s climate agenda would be a major focus of her tenure as Treasury secretary.

During her Senate confirmation hearing in January 2021, Yellen said climate change is “an existential threat” and pledged to do “whatever I can to address this impending crisis.”

More than 40 trade organizations representing U.S. oil and gas producers sent a letter to the Senate Banking Committee on Jan. 28, urging committee members to not advance the nomination of Raskin to the Federal Reserve.

“She is a strong advocate for debanking the very industry that powers America,” the letter reads. “Her multiple public statements indicate an agenda at odds with the President’s goal of providing Americans with reliable, affordable energy.”

Raskin wrote an opinion piece for The New York Times in 2020, arguing that “the Fed should not be directing money to further entrench the carbon economy.”

Sarah Bloom Raskin and U.S. Rep. Jamie Raskin (D-Md.) in the front yard of their home in Takoma Park, Md. on May 4, 2020. Drew Angerer/Getty Images

However, Raskin struck a milder tone on Feb. 3 during a Senate Banking Committee hearing on her nomination.

“It is inappropriate for the Fed to make credit decisions and allocations,” she said in response to questions by Republicans. “Banks choose their borrowers, not the Fed. It’s inappropriate for the Fed to choose winners and losers, and doing so is not the proper institutional role of the Fed.”

Raskin has been nominated alongside economists Lisa Cook and Philip Jefferson—Biden’s two other nominees for the board. They face a key committee vote on Feb. 15. However, critics say Raskin has the hardest path to confirmation.

The American Bankers Association, the largest banking trade group in the United States, has welcomed the nomination of Raskin for the top banking regulation and supervision post at the Fed.

The world’s largest central banks are pondering how to promote green financing, as they seek to introduce regulatory frameworks to mobilize more money for green and low-carbon investments. However, free-market advocates argue that the U.S. central bank’s role shouldn’t be picking winner and loser industries.

About 79 percent of U.S. energy consumption comes from oil, natural gas, and coal, according to the Competitive Enterprise Institute, a libertarian think tank.

“Ms. Raskin would have the Federal Reserve discriminate against these sources of energy—condemning America and the rest of the world to higher energy prices and greater dependence on Russia, OPEC, and China,” the group said in a statement, urging Biden to withdraw her nomination.

Raskin is married to Rep. Jamie Raskin (D-Md.), who led the second impeachment trial of former President Donald Trump.

During the hearing, Raskin was also questioned about her role as a board member for a Colorado-based financial technology trust company. She and her husband came under fire recently for not properly disclosing the sale of $1.5 million worth of stocks that she held in the company.

The Biden administration and top Fed officials earlier announced their plans to introduce regulations to address climate-related financial risks, saying they believe banks are vulnerable to the effects of climate change.

The Fed hasn’t yet proposed a framework to address climate change, but a recent study by the New York Fed shows that severe weather conditions such as wildfires, hurricanes, floods, and droughts had almost no effect on banks.

The staff study published in November 2021 found that “weather disasters over the last quarter-century had insignificant or small effects on U.S. banks’ performance.”