Fate of Biden’s Fed Nominees Unclear After GOP Vote Boycott

The Federal Reserve building in Washington on Oct. 22, 2021. Daniel Slim/AFP via Getty Images

Senate Republicans boycotted a Tuesday vote on President Joe Biden’s nominees to fill vacant seats on the Federal Reserve Board, with GOP opposition coalescing around Sarah Bloom Raskin, the White House’s pick for the Fed’s vice chair for bank supervision.

Sen. Sherrod Brown (D-Ohio), who chairs the Senate Banking Committee, postponed a vote on Biden’s five nominees after none of the 12 Republicans showed up for a scheduled vote on Feb. 15.

Behind the GOP boycott is concern about the suitability of Raskin, who Biden has tapped for the role of the central bank’s Wall Street regulator.

“This isn’t a garden-variety political appointment,” Sen. Pat Toomey (R-Pa.) said in a statement explaining the Republicans’ decision not to provide a quorum at Tuesday’s markup.

“Her fitness to serve, her judgment, and her probity are of utmost importance because Ms. Raskin is being considered for a 10-year term at the nation’s independent central bank and foremost financial regulator,” he wrote.

The vice chair of supervision post Raskin has been nominated for is perhaps the most consequential of all the vacancies. Whoever ends up in that role will lead Fed policymaking on issues like climate change financial risks, community lending rules, and financial technology companies.

Sarah Bloom Raskin, nominated to be vice chairman for supervision and a member of the Federal Reserve Board of Governors, speaks during a Senate Banking, Housing, and Urban Affairs Committee confirmation hearing on Capitol Hill in Washington, on Feb. 3, 2022. Bill Clark/Pool via Reuters

Toomey said the GOP vote boycott was driven by a number of “important questions” remaining unanswered around Raskin’s work history and alleged lobbying efforts around what the Republican senator described in an earlier statement as the Kansas City Fed’s unusual approval of a Fed master account for Reserve Trust, where Raskin served as a board member after leaving her Treasury job.

Republicans have argued that Raskin lobbied the Kansas City Fed on behalf of Reserve Trust, a fintech company that became classified as a bank after it retooled its initial failed application for a master account, which was later approved in 2018.

The Kansas City Fed said in a Feb. 7 statement that it “did not deviate from its review process in evaluating” Reserve Trust’s request, noting that approval came after the Reserve Trust Company (RTC) changed its business model and the Colorado Division of Banking “reinterpreted the state’s law in a manner that meant RTC met the definition of a depository institution.”

Dennis Gingold, co-founder and former chairman of RTC, said in an op-ed in the Wall Street Journal that Raskin did “nothing wrong” in the company’s obtaining a master account, arguing that the approval “turned entirely” on a Colorado banking law that authorized chartered trust companies to accept retail deposits.

“The approval was mandated on the merits in accordance with state and federal statutes as well as precedent in the Tenth Circuit,” he wrote, calling Raskin “among the most qualified, honorable and ethical nominees of any administration.”

White House spokesperson Chris Meagher said in a statement that Raskin “has committed to the strictest ethics requirements in history of any Federal Reserve Board nominee,” while claiming Toomey was waging a “baseless smear campaign” against her.

Raskin’s past comments about choking off funding to the fossil fuel industry have also triggered reluctance to her candidacy from Republicans and business groups.

The U.S. Chamber of Commerce in late January penned a letter to congressional lawmakers raising concerns about Raskin, citing her op-ed in the New York Times in which she questioned why the Fed was spending “so much money on a dying industry.”

Toomey said Raskin’s past remarks about defunding fossil fuels wasn’t the reason for the boycott but was reason enough to justify a vote against.

Raskin’s “repeated and forceful advocacy for having the Federal Reserve allocate capital and choke off credit to disfavored industries is alone disqualifying and reason enough to vote against her. But whether to proceed with a vote today is a separate question,” he wrote.

A senior administration official told Reuters in January that Raskin is “firmly opposed to the Federal Reserve allocating credit by sector or choking off sectors from access to credit,” adding that she “supports the existing policy framework on climate risks” that has been articulated by Fed Chair Jerome Powell and former Fed vice chair for supervision Randal Quarles, who resigned in December.

Brown criticized the GOP vote boycott on Twitter, saying they had “fled the room—hiding rather than voting on an experienced nominee.”

Democrats on the Senate Banking Committee weighed in as well, saying on Twitter that a full Federal Reserve Board is needed “to help our economy recover and fight inflation,” complaining that “Republicans didn’t show up” and punctuating the message with the hashtag #FedFiveNow.

The path forward on the five nominees remains unclear, with Brown thus far adamant that he would not split Raskin’s nomination from the rest.