Senator Toomey Warns on Possible Raskin Pick as Top Fed Regulator

(Bloomberg) -- Pat Toomey, the top Republican on the Senate Banking Committee, said he has “serious concerns” about the possible nomination of former Fed governor Sarah Bloom Raskin as vice chair of supervision at the Federal Reserve.

Raskin’s advocacy for financial regulators, including the Federal Reserve, to act to counter climate-change risks has drawn praise from senior Democrats, including Banking Chairman Sherrod Brown of Ohio and Sheldon Whitehouse of Rhode Island. But Toomey took a critical tack on Tuesday.

“Sarah Bloom Raskin has specifically called for the Fed to pressure banks to choke off credit to traditional energy companies and to exclude those employers from any Fed emergency lending facilities,” Toomey said in a statement to Bloomberg News. “I have serious concerns that, if nominated, she would abuse the Fed’s narrow statutory mandates on monetary policy to have the central bank actively engaged in capital allocation. Such actions not only threaten both the Fed’s independence and effectiveness, but would also weaken economic growth.”

Raskin, a former deputy Treasury secretary, is a leading contender for the job, Bloomberg reported previously. There are two additional openings on the Federal Reserve Board for President Joe Biden to fill, and the White House is expected to name its picks soon.

Raskin declined to comment on Toomey’s remarks.

She would be empowered, if nominated and confirmed as vice chair, to propose changes to the Fed’s regulations, and a 4-3 majority on the board could enact them. Earlier Tuesday, Senator Bill Hagerty of Tennessee challenged Fed Chair Jerome Powell about the possibility of “an activist bloc” that effectively sidelines the chairman.

Powell, who said he would try to have the board continue to work in a collaborative way, told Senator Elizabeth Warren at a previous hearing that he would intend to allow votes on regulations proposed by the vice chair of supervision even if he personally opposed them.

Climate, Racial Justice

Republicans like Toomey have been railing against what they see as mission creep outside of the Fed’s narrow statutory mandates, including on issues like climate and racial justice.

The Trump administration in 2020 asked the Federal Reserve to modify a lending program meant to help small businesses survive Covid-19 and to allow money to go to help oil firms cope with the plunge in crude prices. 

The central bank did expand the Main Street Lending Program to let larger, more heavily indebted companies qualify.

Alexis Goldstein, director of financial policy at the Open Markets Institute, took issue with Toomey’s conclusion. Raskin, she said, “criticized the Fed’s bending of the rules shortly thereafter, pointing out that they loosened the rules following political pressure to help deeply indebted fossil fuel firms who were in financial trouble well before the pandemic.”

Powell said Tuesday that the Fed has an important but narrow role on climate, to make sure institutions are accounting for their risks and that there isn’t a larger risk to financial stability. But he said climate policy is largely a question for legislators to resolve.

A Republican aide said Raskin would be sure to face questions over her past writings, including a New York Times article in 2020 criticizing the Fed for directing emergency relief to subsidizing fossil-fuel company debt, as well as other advocacy for action on climate by regulators. 

Other Republicans, including Senator Kevin Cramer of North Dakota, have also previously told Bloomberg they are worried about the potential for a new Biden-nominated Fed board majority to enact climate regulations that could choke off capital for fossil-fuel companies or raise their costs.

If Republicans were to ultimately line up against Raskin, she would need every Democrat to back her in the 50-50 Senate, including Joe Manchin of West Virginia, a supporter of fossil fuels. She was previously confirmed with voice votes as deputy Treasury secretary in 2014 and as a Fed governor in 2010.

David Arkush, managing director of Public Citizen’s Climate Program, said Toomey was accusing Raskin of wanting to pick favorites and politicize the Fed. 

“That’s outrageous,” Arkush said. “He’s accusing her of what Republicans did.”

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