Sarah Bloom Raskin, President Joe Biden’s pick for a top Federal Reserve role, has been heralded on the Left as a climate crusader — a reputation that will complicate her confirmation prospects.
The major focus of GOP arguments against Raskin will feature her view that climate change is a systemic risk to the U.S. financial system and that the Fed should play a role in mitigating that risk. The nature of her positions, and the power the role has, will also come under Republican magnifying glasses.
Raskin’s writings show she thinks the Fed should take a more pronounced role in climate change.
In an article published last September, she suggested financial regulators must “reimagine their own role so that they can play their part in the broader reimaging of the economy.”
“Climate change threatens financial stability; addressing it can create economic opportunity and more jobs,” she wrote in a New York Times op-ed in 2020. “The decisions the Fed makes on our behalf should build toward a stronger economy with more jobs in innovative industries — not prop up and enrich dying ones.”
After the start of the pandemic in 2022, she said climate change is happening and that “whether or not you believe in it, it’s the Fed’s job to be mitigating the impact of exogenous shock.”
Raskin, the wife of Democratic Rep. Jamie Raskin of Maryland, is no newcomer to the central bank’s leadership. She previously served as a governor at the Fed from 2010-14 before she was chosen by President Barack Obama to serve as deputy secretary of the Treasury Department.
Raskin’s first nomination to the Fed was far less contentious than the confirmation process will be this time around. In 2010, she and current Treasury Secretary Janet Yellen, who went on to lead the central bank, were confirmed unanimously by the Senate. This time around, it is more likely that every Democrat in the Senate will have to band together to get Raskin approved to the board.
Toomey and some committee Republicans have argued the Fed is at risk of exceeding the dual mandate given by Congress, which is maximizing employment and price stability. They have expressed concerns the central bank has started to wade into politically loaded issues, such as racial equity and climate change, which they contend do not directly align with the dual mandate.
The Fed’s involvement in climate change was discussed during last week’s hearings for Fed Chairman Jerome Powell’s renomination and Lael Brainard’s nomination for vice chairwoman of the central bank. Both nominees took a tempered approach to the matter and said that while climate “scenario analysis” of large banks may be appropriate, lending restrictions for those banks should not be in order.
Brainard said she is not an advocate for the Fed trying to influence what sectors banks lend money to, although she said there are risks posed to the financial system by climate change and that banks should heed those hazards.
During the hearing, Toomey invoked Raskin’s name to compare and contrast her with Brainard’s views. He noted Raskin’s remarks about the Fed’s COVID-19 emergency lending facilities.
“She has been explicit on this point, and she has argued regarding the implementation of the CARES act that the Fed, and I quote, ‘Should not be directing money to further entrench the carbon economy.’ So she has explicitly advocated that the Fed allocate capital by denying it to this disfavored sector,” Toomey said, asking Brainard whether she disagreed with Raskin. She said that while she is unfamiliar with Raskin’s positions, she doesn’t support climate stress tests.
A senior Republican Senate aide predicted to the Washington Examiner that Raskin’s nomination would be a tough lift for Democrats. The aide referred to Raskin as a “climate alarmist who predicts the end of days for the American financial system if the Fed doesn’t become the next [Environmental Protection Agency].”
The source also predicted Raskin’s past policy positions and remarks may come back to bite her, raising questions about whether Sen. Joe Manchin, a centrist Democrat from West Virginia, might vote against her — a prospect that could tank Raskin’s nomination.
Desmond Lachman, a senior fellow at the conservative American Enterprise Institute, told the Washington Examiner that Raskin has a reputation for taking a much tougher line on bank regulation than Randy Quarles, who she would replace in the supervisory role. He also highlighted her outspoken thoughts on the central bank and climate change.
Lachman said her hearing would be more contentious than the other Biden Fed nominees. He said some lawmakers might see Raskin’s views as advocating for “mission creep” by the Fed and that her “paper trail” on climate change and her record from the first time she was on the board will make it difficult for her to moderate her views during the confirmation hearing.
The Republican aide went as far as suggesting that Raskin’s nomination could be an “Omarova 2.0 situation.”
This was a reference to when Biden nominated Saule Omarova for comptroller of the currency last year. She faced broad opposition from the banking industry and Republicans, as well as some skepticism from centrist Democrats, over her controversial academic writings and proposals, including her advocacy for the end of banking “as we know it.”
The Cornell Law professor faced a bruising confirmation hearing that featured Republicans grilling her on those academic views. Additionally, some Democrats accused her detractors of redbaiting because she was born in Soviet-controlled Kazakhstan and attended Moscow State University.
Omarova dropped out of contention when it became apparent she would not get enough votes after a few centrist Democrats expressed opposition to her nomination.
Raskin’s nomination is unlikely to engender the same level of opposition from the banking industry that resulted in Omarova’s crash-and-burn nomination. For example, the American Bankers Association took the step of publicly pushing back on Omarova, saying it had “serious concerns” about her ideas.
This time around, with Raskin’s nomination, the ABA put out a blanket statement congratulating her and Biden’s two other nominees for the Fed board, Lisa Cook and Philip Jefferson.
“The nominees would bring a wide range of economic, regulatory and academic experience to the Board of Governors, which we have long believed benefits from having a full complement of governors from diverse backgrounds and viewpoints,” said ABA President and CEO Rob Nichols. “We look forward to learning more about all three nominees’ positions on monetary and regulatory policies during the confirmation process.”
Additionally, Elizabeth Duke, who was on the Fed board until 2013 after being nominated by President George W. Bush in 2008, served alongside Raskin and said she was confident in her ability to keep the central bank within the confines of its dual mandate.
“The characterization of Sarah Bloom Raskin as someone who will use the powers of the Fed for political purposes is simply false,” Duke told Politico. “I saw every day Sarah’s commitment to the Fed’s dual mandate, its independence, and its culture of collegiality. It would be contrary to her nature to do anything else.”
There have also been concerns from some Republicans that Biden’s nominees could work together to form a bloc on the board and pull back on the Fed’s recent hawkish bent on interest rates. Inflation recently hit 7%, and the central bank appears poised to hike interest rates several times this year.
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“If you’ve got people who are more dovish on the Fed than Powell is … people can form a majority and make his life difficult,” Lachman told the Washington Examiner. “The people coming on look like they’re more dovish.”
