Raskin Signals She Won’t Target Energy Industry in Fed Role

(Bloomberg) -- The Federal Reserve's chief bank watchdog shouldn't tell lenders what sectors they can do business with, Sarah Bloom Raskin told the Senate committee weighing her confirmation as the most important U.S. supervisor of Wall Street banks.

Raskin has drawn Republican opposition over her past remarks on climate change, and her remarks prepared for a Thursday hearing appear to address that criticism. Raskin said that bank regulators must not be distracted by “short-term political agendas or special interest groups,” so they can focus on big-picture risks, including “from nature and cataclysmic weather-related events.” But, she also said that the supervision role isn't about picking favorite industries.

“The role does not involve directing banks to make loans only to specific sectors, or to avoid making loans to particular sectors,” she said in written testimony for the Senate Banking Committee.

The Washington insider, who has held senior posts at the Treasury Department and the Fed, is up for the role as the Fed's next vice chairman for supervision -- a position created after the 2008 financial crisis. She must clear Senate confirmation before the full weight of the administration's banking agenda can be felt, and she's expected to be questioned Thursday about her positions on climate-change, cryptocurrencies and bank mergers.

She's also likely to be grilled about how she plans to treat the biggest U.S. banks as their most prominent supervisor. Raskin was pushed by liberal Democrats as a champion of tighter regulation for Wall Street.

In opening remarks at the hearing, Sherrod Brown, the Ohio Democrat who chairs the panel, touted Raskin's qualifications and said that there was a “a coordinated effort by some to paint her as a radical.” He said that such assertions require “a suspension of common sense” to be believed.

Biden's other Fed nominees -- including Lisa Cook and Philip Jefferson -- face a confirmation made more challenging by the 50-50 split in the Senate. Raskin, now a Duke University law professor, has drawn much of the ire from Republicans who were already expected to oppose her. On Thursday, all eyes will be on moderate Democrats, who have so far signaled support.

Senator Joe Manchin, the West Virginia Democrat who has opposed some of Biden's big-picture initiatives, said Tuesday all three Fed candidates are “extremely qualified.” Jon Tester of Montana said his recent conversation with Raskin “went well.” Brown has been marshaling support for all three nominees.

Global Warming

The primary line of attack from the GOP and business groups has been about Raskin's views on what the Fed should do about global warming. Raskin has been accused of pushing extreme ideas for advocating the Fed use its powers to steer the U.S. toward a greener economy.

“She's repeatedly, publicly, and forcefully advocated for using financial regulation —- including the Fed —- to allocate capital and de-bank energy companies, Senator Pat Toomey, the banking panel's ranking Republican, said in opening remarks. He said he fears she'd abuse the central bank's authorities by intervening in the industry.

Raskin's defenders argue her views on climate align with others at the Fed and in the finance industry. Her critics have invented an “inflammatory position,” that Raskin doesn't actually advocate, according to Dennis Kelleher, president of Better Markets, a progressive group.

The Biden administration is poised to overhaul the Fed's leadership with a more progressive and diverse slate of governors. In addition to the three nominees facing the hearing, his pick for vice chair -- current Fed Governor Lael Brainard -- and his effort to return Chair Jerome Powell to his seat for another term still await confirmation.

Apart from the hazards of a warming planet, Raskin said bank supervisors “must stay attentive to risks no matter where they come from.” Those include “well-identified asset bubbles or speculation” or “a set of threat actors that launch cyberattacks.”