This editorial ran in the Washington Examiner on March 18, 2022.
Under the Biden administration, climate policy has been injected into the regulation of our financial system. As a result, the credibility and apolitical nature of our financial regulators is being steadily eroded.
Consider some of the statements of President Biden’s nominees to two of the most powerful financial regulator posts; they demonstrate a clear bias toward an energy sector responsible for employing thousands of Americans. Biden’s former nominee to be the Comptroller of the Currency, Professor Saule Omarova, said of smaller fossil-fuel producers: “we want them to go bankrupt if we want to tackle climate change.”
President Biden’s former nominee for the Federal Reserve’s Vice Chair for Supervision, Sarah Bloom Raskin, has written that “[t]he Fed is ignoring clear warning signs about the economic repercussions of the impending climate crisis by taking action that will lead to increases in greenhouse gas emissions at a time when even in the short term, fossil fuels are a terrible investment.”
In a separate writing, Raskin stated that “[w]e must rebuild with an economy where the values of sustainability are explicitly embedded in market valuation” and require “our financial regulatory bodies to do all they can — which turns out to be a lot — to bring about the adoption of practices and policies that will allocate capital and align portfolios toward sustainable investments that do not depend on carbon and fossil fuels.”
These statements resemble climate activists rather than the individuals who were nominated to lead the supervision of our financial institutions. They call into question whether these individuals could have been trusted to do what is best for our financial system — and therefore Americans — over pushing an agenda guided by climate action.
The Senate’s bipartisan opposition to both nominees resulted in them withdrawing their nominations. This sends a clear signal to the Biden administration that it is inappropriate for unelected bureaucrats to use the power of an apolitical institution to advocate for or achieve political ends.
As this administration promotes climate policy regulation in the financial system, it cites two sources of so-called “climate-related risk” to justify intervention: physical and transition risks.
Despite climate alarmists’ claim that physical risks from extreme weather events are a threat to financial stability, numerous studies over the past few decades — including those by FDIC and Federal Reserve staff — have found that extreme weather events do not have a significant negative impact on bank performance. A Nov. 2021 study by the Federal Reserve Bank of New York on the subject demonstrated, unsurprisingly, that lenders have the local knowledge to appropriately manage risks from extreme weather events.
Meanwhile, transition risk — the risk of future harm from policymakers not implementing a climate agenda to significantly curb greenhouse gas emissions — is nothing more than a political prediction. And it’s not the role of the Fed to be engaged in trying to figure out the societal shifts of our nation.
Put simply, these are manufactured risks with the goal of starving politically disfavored energy producers of financing. I continue to hear more anecdotes of traditional energy companies being turned away by financial institutions, which is unsurprising given the sensitive regulatory relationship and the vast power regulators wield over financial institutions.
Even if such climate supervision never becomes explicit, the climate hysteria rhetoric from this administration’s financial regulators has had, and will continue to have, an immense chilling effect on access to credit for a vast swath of our energy industry.
President Biden should nominate an individual who will respect the independence of the Federal Reserve and work to fulfill the Fed’s congressionally authorized mission — setting U.S. monetary policy to promote maximum employment and stable prices in the U.S. economy.
The Fed should not be used to diminish the role of the energy sector or any other private sector. We need a Federal Reserve focused on its statutory mandate: maximum employment and price stability. Not a political body — unaccountable to voters — indirectly increasing costs at the pump.
Jerry Moran is Kansas's senior U.S. senator and a member of the Senate Banking Committee.