Biden's bank cop choice will draw heat

Biden is leaving his mark on the central bank, making its top echelon the most diverse in its 108-year history

  
U.S. President Joe Biden signs into law the Accelerating Access to Critical Therapies for ALS Act in the South Court Auditorium at the White House in Washington, U.S., December 23, 2021. REUTERS/Evelyn Hockstein

U.S. President Joe Biden signs into law the Accelerating Access to Critical Therapies for ALS Act in the South Court Auditorium at the White House in Washington, U.S., December 23, 2021. REUTERS/Evelyn Hockstein

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

WASHINGTON - Joe Biden may have started a storm over bank capital rules. The U.S. president on Thursday named Sarah Bloom Raskin to lead supervision at the Federal Reserve, the top regulator of America's lenders. The Fed has downplayed tying capital to global warming. But if Raskin is in charge, that could become a goal.

Biden is leaving his mark on the central bank, making its top echelon the most diverse in its 108-year history. Besides Raskin, a former deputy Treasury secretary and ex-Fed governor, the president also nominated economists Lisa Cook and Philip Jefferson to fill two other board seats. Cook, a professor at Michigan State University, would be the first Black woman on the panel, while Jefferson, vice president for academic affairs at Davidson College in North Carolina, would be only the fourth Black man.

Raskin has strong views on climate change risks to the banking industry and financial stability. In a September article in Project Syndicate, she said U.S. regulators were behind in thinking creatively about how to use existing tools to tackle global warming. She added that they would have to “leave their comfort zone and act early.”

The Fed has become more vocal about these issues, primarily through Governor Lael Brainard. Biden has nominated her to take the overall vice chair role at the central bank. But so far, the Fed has declined to tie capital requirements to climate risks. The central bank may require lenders to conduct more comprehensive analysis, perhaps next year. But both Fed chair Jerome Powell and Brainard said this week that they wanted banks to understand their exposure to climate risks as opposed to requiring a bigger financial cushion.

That's partly to defuse objections to their nominations, in Powell's case for a second term, from Republican senators. Raskin, though, has marked out her position more clearly. She has praised overseas watchdogs like the Bank of England and the European Central Bank, which laid the blueprint for global-warming stress tests. That means she will draw Republican opposition. But she has a good chance of squeaking by in the evenly divided Senate.

Assuming she is confirmed, she may find allies at the Fed in her fellow nominees, who are supported by left-leaning Democrats, although Cook and Jefferson’s academic work has focused on racial inequality, poverty and labor markets. It could add up to a tougher capital forecast for Wall Street.

CONTEXT NEWS

- U.S. President Joe Biden said on Jan. 14 that he is nominating Sarah Bloom Raskin as the Federal Reserve’s vice chair of supervision. The position, which requires confirmation by the Senate, has a four-year term. Raskin is a former deputy Treasury secretary and ex-Fed governor.

- Biden also named economists Lisa Cook and Philip Jefferson to fill two Fed board seats. Cook is a professor at Michigan State University while Jefferson is vice president for academic affairs at Davidson College in North Carolina.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Richard Beales and Sharon Lam) ((For previous columns by the author, Reuters customers can click on CHON/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS https://bit.ly/BVsubscribe | gina.chon@thomsonreuters.com; Reuters Messaging: gina.chon.thomsonreuters.com@reuters.net))


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