Sarah Bloom Raskin, President Joe Biden’s nominee for Federal Reserve vice chair for supervision, defended previous statements on climate policy and the Fed’s role from attacks by Senate Republicans at her nomination hearing.
Raskin appeared Thursday before the Senate Banking Committee alongside fellow Fed nominees Lisa Cook and Philip Jefferson. Committee Republicans attacked Raskin for a 2020 New York Times op-ed arguing the Fed should exclude struggling energy companies from the pandemic lending facilities.
Raskin said she made the comments in the context of taxpayer-funded pandemic relief and would not apply them to the Fed’s regulatory or supervisory role.
“I wrote it in the context of the Federal Reserve’s emergency lending facility. This was a special program set up by the CARES Act, by the Congress that appropriated taxpayer money,” she said, referring to the March 2020 pandemic relief law. “This was an issue quite unlike the issue of supervision.”
Raskin said the Fed is not in the business of picking winners and losers.
“It is inappropriate for the Fed to make credit decisions and allocations. Banks choose their borrowers, not the Fed,” Raskin said, adding that regulations work best when they’re collaborative and regulators must act within the boundaries set by Congress.
“I’ve never deviated from these three principles guiding our regulatory and supervisory advisory processes,” she said. “And I can’t think of a single moment when anyone could accuse me of having deviated from them.”
Sen. John Kennedy, R-La., used her comments Thursday to add to the Republican criticism. “You said it. You ought to own it. I’d respect you more if you did,” he told her.
If confirmed as vice chair for supervision, Raskin would be responsible for setting the Fed’s regulatory agenda. Congress established the role in the wake of the 2008 financial crisis.
Sen. Patrick J. Toomey, R-Pa., the highest ranking Republican on the committee, and other Republicans accused Raskin of distancing herself from her earlier comments on climate risk.
“I’m sorry that 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,” Toomey said. “I’m sorry, I know you’re saying something different here this morning, but that’s not what you’ve been saying and writing for several years.”
“This is one of the most remarkable cases of confirmation conversion that I have ever seen,” he said.
Moderate Democrats, including Sen. Jon Tester, D-Mont., came to Raskin’s defense. Given the 50-50 Senate, the Democrats would need all the members of their caucus to overcome unified Republican opposition to confirmation.
“I think it’s critically important that the Fed gets all the information that they can when they’re dealing with risk to our financial system. And I think that it is rather obvious that climate change has to be part of the information that you gather,” Tester said.
Chairman Sherrod Brown, D-Ohio, said Republican criticism sought to undermine an eminently qualified nominee.
Raskin spent four years on the Fed Board from 2010 to 2014. Upon leaving the board, she took over as second-in-command at the Treasury Department, where she led work on cybersecurity. She was also commissioner of financial regulation for the state of Maryland. She’s married to Rep. Jamie Raskin, D-Md.
“We’ve seen a coordinated effort by some to paint her as some sort of radical. That characterization requires a suspension of common sense,” Brown said. “No one is better equipped than Ms. Raskin to protect Americans from risks that could bring down financial markets and institutions and wreck people’s savings — from cybersecurity threats to climate financial risk.”
Inflation
Cook and Jefferson, who would be the first Black woman and fourth Black man to join the board respectively, faced questions about inflation and the Fed’s role in bringing rising prices under control. The consumer price index rose 7 percent in December from the same period in 2020, the highest annual increase since 1982.
Jefferson, an economics professor and vice president for academic affairs at Davidson College in North Carolina, said the Fed has an obligation to use its demand-side tools to slow rising prices, even though supply chain disruptions were driving inflation.
“The tools of monetary policy really cannot address these developments that occur on the supply side in terms of resolving inflation, but the mandate given to the Fed by Congress is very clear that the Fed has to be mindful of maximum employment and equally it has to be aware of price stability,” he said. “The directive is clear. The Fed must take steps to bring inflation back in line with its targets.”
The Fed has started tapering the monthly bond purchases it used to bring stability to the economy during the pandemic and forecasted several potential interest rate hikes later this year, starting as early as next month.
Toomey pressed Cook, a professor of economics and international relations at Michigan State University, on whether she supported the tapering of the Fed’s bond purchases and would back the further withdrawal of regulator’s pandemic support.
“I agree with the Fed’s path right now as we’re speaking but when we get to a decision point I would look to the data and the evidence that would be made available at that time,” Cook said.
Toomey said Cook’s answers troubled him.
“I’m very disappointed that yet again today, I’ve been unable to elicit any kind of clear response as to how she views the challenges that we face, specifically with regard to the inflation that we have, what kind of tools she would be willing to use, her thoughts on the changes in our economy,” he said. “There’s just no clear answers and that is disturbing.”
Toomey said Cook lacked the background in macroeconomics needed to join the Fed board.
“The administration cites her role as a director of the Chicago Fed as a main qualification — a position she held for only two weeks before being nominated. She has a Ph.D., but no academic work in monetary economics. And the few times she’s said anything about monetary policy, it’s cause for major concern,” he said.
Cook defended her record and qualifications against criticism from Toomey and Sen. Bill Hagerty, R-Tenn.
“I certainly am proud of my academic background. I know that I have been the target of anonymous and untrue attacks on my academic record,” she said. “I have a Ph.D. in economics from the University of California, Berkeley. I specialized in macroeconomics and international economics.” She added that she has spent decades teaching and researching economic growth and monetary policy.
Brown called the attacks on Cook’s record “abhorrent.”
“They were ginned up on the far-right blogosphere to discredit a highly respected economist with substantial monetary policy experience. She has a Ph.D. in economics. Plenty of other board governors never had that, including prominent ones today,” Brown said.
Cook was a member of both Biden’s and President Barack Obama’s transition teams. She was a senior economist on the White House Council of Economic Advisers from 2011 to 2012 and worked for the Treasury Department from 2000 to 2001. She previously held visiting positions at the Federal Reserve Banks of Minneapolis, New York and Philadelphia and the National Bureau of Economic Research.
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