As the American economy faces market turmoil fuelled by Russia’s invasion of Ukraine, the highest inflation rate in forty years, and continuing damage from the COVID-19 pandemic, the Federal Reserve System’s board of governors has become a ghost ship. There are multiple vacancies on the panel, and its chairman, Jerome Powell, is awaiting Senate confirmation to a second four-year term. Last month, instead of voting on the confirmation of President Biden’s slate of five nominees to run the world’s most powerful central bank, the Republican members of the Senate Banking Committee staged a boycott.
The G.O.P.’s parliamentary maneuver was an almost unheard of act of obstruction. Its aim was to deprive the Senate committee, which is split evenly between Democrats and Republicans, of the quorum necessary for a vote on Biden’s nominees to take place. The Republicans’ goal was to block a single nominee: Sarah Bloom Raskin, Biden’s pick for vice-chair for supervision. Had they met to vote as scheduled, her nomination would likely have survived a party-line tie, which under the Senate’s current rules would have advanced it to the Senate floor for the full body’s consideration. Instead, after the twelve Republicans on the committee failed to show up, the meeting adjourned, and the Senate soon after went into recess. This left not just Bloom Raskin but all five of Biden’s top nominees for the Fed in limbo, including Powell.
In his State of the Union address on Tuesday night, Biden demanded that the panel confirm his nominees to the Federal Reserve, which, he said, “plays a critical role in fighting inflation.” The Senate Banking Committee’s chairman, Sherrod Brown, a Democrat from Ohio, told me that he plans to bring Bloom Raskin’s nomination back up for a committee vote as soon as possible, but so far one hasn’t been scheduled. “We just want them to show up for work,” he said of his Republican colleagues. “In the midst of an attack, the Russians attacking Ukraine… they’re saying we’re not going to confirm the chair of the Federal Reserve, the vice-chair of supervision, the vice-chair of the Fed, and the other two governors.” He added, “We can’t run the Senate this way.”
A boycott to stop a vote is extraordinary under any circumstances, but experts said they were stunned, given the magnitude of the country’s current economic challenges. “It’s an enormous dereliction of duty,” Joseph Stiglitz, a Nobel Prize-winning economist, told me. Stiglitz, a progressive professor at Columbia University who has advised Democratic presidents, stressed that “the Federal Reserve is the most important economic institution in the U.S., and the U.S. is the most important economy in the world. To leave this many vacancies is just mind boggling to the rest of the world. It is just amazingly irresponsible.”
Democrats say the situation is all the more confounding because Bloom Raskin is far from an unvetted or untested nominee. A graduate of Harvard Law School and a professor of law at Duke University, she served a term on the Fed’s board of governors from 2010 to 2014, to which she was confirmed with unanimous bipartisan support. She also served as Deputy Treasury Secretary during the Obama Administration, from 2014 to 2017, which made her the highest-ranking woman in the department’s history at the time. In addition, she is a financial regulator who has become an expert in cyber security, which would be useful at a moment when potential Russian cyber attacks pose a threat.
Perhaps because she is married to Democratic Congressman Jamie Raskin, a progressive firebrand who represents an area that conservatives have derisively referred to as “The Peoples’ Republic of Takoma Park, Maryland,” opponents have caricatured her as a wild-eyed radical. Yet her credentials and her record in office are consistent with other financial regulators in the U.S., including Powell himself. And she has received scant opposition from the banking community, over which she would become the highest-ranking federal overseer if confirmed.
So what, exactly, is the problem? In Stiglitz’s view, “It’s very simple: special interests.” In speeches and op-ed pieces, Bloom Raskin has described climate change as a potential threat to global economic security. Moreover, she’s personally expressed the view that the Fed should have resisted pressure from climate-polluting fossil-fuel companies who wanted pandemic-related bailouts, and instead encouraged a shift to renewable energy sources. Earlier this week, a report
from the Intergovernmental Panel on Climate Change warned that intensifying heat waves, droughts, and floods will affect billions of people, as well as animals and plants, across huge swaths of the planet. Yet Democrats say America’s fossil-fuel industry sees Bloom Raskin as a threat and is distorting her record in order to block her confirmation.
The fossil-fuel industry would have seemingly little say over who runs the Federal Reserve, but it has donated generously to the campaigns of all twelve Republican members of the Senate Banking Committee. According to OpenSecrets, the nonpartisan campaign-finance watchdog group, the industry has contributed more than eight million dollars to the collective campaigns of the dozen senators. The industry appears to be using this leverage to send a message that it will not tolerate the Fed, or any other financial regulators, treating climate change as a potential systemic economic risk.
In the Senate, one of the leaders of the opposition to Bloom Raskin has been the banking committee’s ranking Republican, Patrick Toomey, of Pennsylvania. He is the former president of the ultra-conservative Club For Growth, which in 2017 applauded Trump’s withdrawal from the Paris climate accords and promised to punish any Republican in 2020 who supported a modest House Republican climate plan. Toomey has expressed doubt in the past about whether human activity is to blame for climate change and has deep financial ties to the fossil-fuel industry. In campaigns for the House and Senate stretching back over the last two decades, he has received $1,071,547 from the industry, which has a major presence in his state. Between 2011 and 2016, Toomey took in $587,147. Toomey’s spokesperson, Amanda Gonzalez Thompson, denied that fossil-fuel companies had bought the senator’s support. “It’s the laziest insult in politics to claim someone who disagrees with your policy preferences is only motivated by campaign donations,” Gonzalez Thompson said in an e-mail. “In this instance, it’s lazy and pathetic since Senator Toomey isn’t even running for re-election.” Toomey, who is sixty, has not said what future employment plans he may have.
Gonzalez Thompson said that Bloom Raskin’s views on climate change accounted for his opposition to her nomination, but she claimed that this had nothing to do with Toomey’s boycott of the confirmation vote. She said it was, instead, because Bloom Raskin has failed to answer questions from him and other G.O.P. members to their satisfaction. Republicans have insinuated that, as a member of the board of directors of a state-chartered trust company called Reserve Trust, Bloom Raskin improperly intervened sometime in 2017 to get preferential treatment from the Federal Reserve Bank in Kansas City. Bloom Raskin has disclosed to the Office of Government Ethics that she sold her stock in the company in 2020 for $1.5 million. The Kansas Fed and a former chairman of Reserve Trust have denied any improper behavior, and Bloom Raskin has answered over a hundred questions posed by Toomey. Bloom Raskin declined to comment.
Chris Meagher, a White House spokesman, dismissed the charges as having been “conclusively debunked” and called the accusations “an unprecedented, baseless campaign that seeks to tarnish her distinguished career.” He said of Toomey, “Instead of simply voting no, as he has already made clear he intends to do, Toomey instead is holding up the confirmation of Chair Powell and the entire slate for the Federal Reserve at a moment when it’s never been more important to have leadership in place to ensure stable prices and maintain our strong economic recovery.”
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