Senators Kennedy and Toomey Confront Fed Nominee Raskin Over Record of Steering Capital Away From Oil and Gas

https://www.youtube.com/watch?v=z1uvyxsLRl8

On 2/3/2022, Biden nominee Sarah Bloom Raskin, up for the position of vice chair for supervision at the Federal Reserve, faced withering cross-examination from Republican senators during her Senate Banking Committee confirmation hearing. Senators John Kennedy of Louisiana and Pat Toomey of Pennsylvania pressed Raskin on her extensive public record of advocating for the use of financial regulation to steer capital away from fossil fuel companies.

Senator Kennedy confronted Raskin directly about a June 2020 op-ed she authored, in which she argued that the Federal Reserve should not extend emergency lending to oil and gas companies during the pandemic-era economic meltdown. “May of 2020, the world economy is melting down because the government shut it down. We’re trying to hold it together with bailing wire, duct tape, spit and happy thoughts, and you say that’s great, but we ought to let oil and gas companies go broke. Did you really mean that?” Kennedy asked.

Raskin attempted to draw a distinction between the Fed’s emergency lending role and its supervisory and regulatory functions. “I want you to understand the context for that article. This had to do with an intent. It did not have to do with supervision and regulation,” she replied. Kennedy was not satisfied. “You said it, you ought to own it,” Kennedy responded. “You said it, you ought to own what you said. I’d respect you more if you did.”

Kennedy pressed further, asking Raskin whether she would support the Federal Reserve driving charter schools out of business by directing banks not to fund them. “If some president or some chairman of Federal Reserve said let’s all get together, allocate capital away and leave them, all the banks, so they don’t fund charter schools, you support that?” Kennedy asked. Raskin responded that it would not be the proper role of the Federal Reserve to allocate credit to any particular sector. “So you changed your mind,” Kennedy said. “I have made myself completely clear,” Raskin replied. “The whole point of the op-ed was that the Fed should not pick winners and losers.”

Senator Toomey then laid out an extensive paper trail of Raskin’s public statements that contradicted her hearing testimony. Toomey cited a Financial Times op-ed from January 2021 in which Raskin wrote, “Financial supervisors will need to know how to act on this information. Supervisory adjustments will have to take climate disclosures into account and the Fed will need to use climate risk data to make decisions on asset purchases.”

Toomey also cited a speech Raskin gave at UC Berkeley in April 2021 where she said, “I have come to a singular recognition and it is this: in order to maximize the speed and safety of a move into a sustainable, durable, net-zero economy and away from climate change disaster, we need to use the financial regulatory apparatus to engage financial markets and financial institutions in affecting both direction and pace.”

Toomey then quoted from a June 2020 report, in which Raskin wrote, “At the very least, we must rebuild with an economy where the values of sustainability are explicitly embedded in market valuation. This transformation will come in part from urging the leaders of our financial regulatory bodies to do all they can, which turns out to be a lot, to bring about the adoption of practices and policies that will allocate capital and align portfolios towards sustainable investments that do not depend on carbon and fossil fuels.”

“How is that not advocating that regulators pressure financial institutions to allocate capital the way the regulators want?” Toomey asked. Raskin again responded that “it is of course not the role of the Fed to be directing credit allocation. They do not choose winners and losers.”

“I hear you say this,” Toomey replied. “The problem is the huge documented weight where you have said something very, very different. There is no reasonable reading of these articles and speeches that can come to a conclusion other than that you want to be allocating capital away from those industries that are generating large amounts of CO2.”

“She’s repeatedly, publicly, and forcefully advocated for using financial regulation — including the Fed — to allocate capital and de-bank energy companies,” Toomey said of Raskin in his opening statement.

Key Takeaways

• Senator Kennedy confronted Raskin about a June 2020 op-ed arguing the Fed should let oil and gas companies go broke during pandemic emergency lending
• Raskin attempted to distinguish between emergency lending and supervisory roles, saying “I have made myself completely clear”
• Kennedy responded: “You said it, you ought to own it. I’d respect you more if you did.”
• Senator Toomey cited a Financial Times op-ed, a UC Berkeley speech, and a 2020 report where Raskin advocated using financial regulation to allocate capital away from fossil fuels
• Toomey concluded: “There is no reasonable reading of these articles and speeches that can come to a conclusion other than that you want to be allocating capital away from those industries that are generating large amounts of CO2”

Transcript Highlights

The following is transcribed from the video audio (unverified — AI-generated from audio).

• May of 2020, the world economy is melting down because the government shut it down. We’re trying to hold it together with bailing wire, duct tape, spit and happy thoughts, and you say that’s great but we ought to let oil and gas companies go broke. Did you really mean that?
• I want you to understand the context for that article. This had to do with an intent. It did not have to do with supervision and regulation.
• You said it, you ought to own it. You said it, you ought to own what you said. I’d respect you more if you did.
• I have made myself completely clear. The whole point of the op-ed was that the Fed should not pick winners and losers.
• In order to maximize the speed and safety of a move into a sustainable, durable, net-zero economy and away from climate change disaster, we need to use the financial regulatory apparatus to engage financial markets and financial institutions in affecting both direction and pace.
• At the very least, we must rebuild with an economy where the values of sustainability are explicitly embedded in market valuation.
• There is no reasonable reading of these articles and speeches that can come to a conclusion other than that you want to be allocating capital away from those industries that are generating large amounts of CO2.
• It is inappropriate for the Fed to make credit decisions and allocations based on choosing winners and losers. Banks choose their borrowers. The Fed does not.
• She’s repeatedly, publicly, and forcefully advocated for using financial regulation, including the Fed, to allocate capital and de-bank energy companies.
• If some president or some chairman of Federal Reserve said let’s all get together, allocate capital away and leave them, all the banks, so they don’t fund charter schools, you support that?

Full transcript: 1400 words transcribed via Whisper AI.