Sarah Bloom Raskin tried again Wednesday to assuage Republicans’ concerns about her hawkish stances on mitigating climate risks ahead of a vote on her nomination to be Wall Street’s top bank regulator.
Raskin, in written responses to senators’ questions, reiterated earlier remarks that it isn’t the Fed’s job to pick winners or losers or to allocate capital. And she said she saw “no path” for the Fed to diminish the role of the oil and gas industry.
“The Federal Reserve does not engage in credit allocation and does not choose the borrowers to whom banks extend credit,” she wrote.
But she did see some potential for the Fed to act, particularly in analyzing the climate risks facing supervised institutions.
Those financial risks “might include disorderly price adjustments in various asset classes; potential disruptions in proper functioning of financial markets; and rapid changes in policy, technology, and consumer preferences that markets have not anticipated.”
Raskin, likewise, said it’s not the Fed’s job to create energy policy, but the central bank “needs to be prepared to react to it if it has economic ramifications related to the Federal Reserve’s dual mandate.”
She reiterated she shares the Fed’s concerns about high inflation and said she generally thinks recent actions on monetary policy to contain inflation “have been appropriate.”
“I expect the FOMC to begin to raise the federal funds rate, gradually, in response to economic conditions and commensurate with the FOMC’s monetary policy framework,” she wrote, referring to the bank’s Federal Open Market Committee.
She also cited other financial stability issues, including high prices for risky assets, which she said might be vulnerable to significant declines; the ongoing coronavirus pandemic; stresses in China including its real estate sector; and highly indebted emerging markets.
She also said regulations on community banks should be reduced and tailored to the size of the bank.
“Community banks, I have consistently maintained, are a source of enduring strength, provide sound financial intermediation, and are uniquely positioned to be locally responsive to local economic needs,” she wrote.
Senate Banking Chairman Sherrod Brown of Ohio has said he plans to have confirmation votes on President Joe Biden’s five Federal Reserve picks, including Raskin, on Feb. 15, and has spoken to Senate Majority Leader Chuck Schumer of New York about scheduling votes for all of them soon on the Senate floor.
