Sarah Bloom Raskin Faces a Narrow Path to Confirmation

Sara G. Norris

Sarah Bloom Raskin’s past statements on climate regulation are stoking heated Republican opposition to her nomination to be the Federal Reserve’s vice chair for supervision and could leave President Biden’s pick with a narrow path to confirmation.

Ms. Raskin, a former Fed and Treasury official who previously argued that financial regulators should police climate risks more diligently, faced resistance during her hearing before the Senate Committee on Banking, Housing and Urban Affairs on Thursday.

She has been nominated alongside Lisa D. Cook and Philip N. Jefferson, economists up for seats on the Fed’s Board of Governors. The three need to first pass out of the committee and then must attract support from a majority of senators to win confirmation. It is unclear if Ms. Raskin, in particular, will clear those hurdles.

“The margin here is slim to none for her,” said Ian Katz, a managing director at Capital Alpha Partners.

That is especially true if Senator Ben Ray Luján, a New Mexico Democrat who is recovering from a stroke, is not present for coming votes on the Fed nominations. A senior aide to Mr. Luján said Wednesday that he was expected to make a full recovery and would return in four to six weeks, barring complications.

If the banking committee deadlocks along party lines over Ms. Raskin’s nomination, a majority of America’s 100 senators could vote to move her past the committee. But unless Ms. Raskin can win Republican support, that may need to wait until Mr. Luján returns, since Democrats need all 50 senators who caucus with them and the vice president’s tiebreaker vote if all Republicans are opposed. And even then, Ms. Raskin may need to secure support from centrist Democrats like Senator Joe Manchin III of West Virginia to win confirmation.

“I’m not expecting her to get any votes from Republicans in the committee,” Mr. Katz said, estimating that she has less than a 60 percent chance of being confirmed. “It’s really, really close.”

Republicans have interpreted Ms. Raskin’s statements on climate-related regulation to mean that she would use her perch at the Fed to dissuade banks from lending to oil and gas companies. The energy industry has galvanized opposition to her nomination with a lobbying push to thwart confirmation. Ms. Raskin has faced much less resistance from the banks that she would oversee.

Senator Patrick J. Toomey of Pennsylvania, the top Republican on the committee, called Thursday’s hearing a “referendum on the Fed’s independence” during his opening remarks, and sharply criticized Ms. Raskin over her climate regulation views, which he previously called “disqualifying.”

Several Republican lawmakers referred to an opinion piece critical of government support for fossil fuel companies that Ms. Raskin wrote for The New York Times in 2020, as well as a post for Project Syndicate last year in which she argued that “all U.S. regulators can — and should — be looking at their existing powers and considering how they might be brought to bear on efforts to mitigate climate risk.”

Ms. Raskin struck a gentler tone Thursday, rebutting the idea that she would favor using bank supervision to choke off lending to oil and gas companies.

“It is inappropriate for the Fed to make credit decisions and allocations based on choosing winners and losers — banks choose their borrowers, the Fed does not,” Ms. Raskin said, repeatedly, in response to questions from senators. She also emphasized that Fed policymaking was a collaborative process.

But those assurances may not placate her critics. Republicans including Senator John Kennedy pushed her on her opinions, and Mr. Toomey expressed disbelief.

“This is one of the most remarkable cases of confirmation conversion I have ever seen,” Mr. Toomey said.

Ms. Raskin’s climate views were not the only thing Republicans focused on.

Senator Cynthia Lummis, Republican from Wyoming, called into question whether Ms. Raskin had used her Fed connections to help to get a Fed master account for a financial technology firm, Reserve Trust, for which she served as a board member.

Ms. Lummis said it was “her understanding” that Ms. Raskin had called the Federal Reserve Bank of Kansas City about the matter, which Ms. Raskin neither confirmed nor denied during the hearing. The Kansas City Fed had no comment.

“Senator Lummis engaged innuendo with no facts presented to back up her false claims,” Chris Meagher, a White House spokesman, said following the hearing. The White House did not dispute that the Fed granted the Reserve Trust’s account while Ms. Raskin sat on its board.

Ms. Raskin served on the board of Reserve Trust from 2017 to 2019. The company was granted a Fed charter in 2018. Master accounts give companies access to the U.S. payment system infrastructure, allowing it to move money without partnering with a bank, among other advantages.

The company, which could not be immediately reached for comment, advertises on its website that it “is the first fintech trust company with a Federal Reserve master account,” and describes the advantages that confers.

Mr. Lummis suggested that Ms. Raskin may have financially benefited from her involvement with Reserve Trust. Ms. Raskin cashed out stocks in the firm for more than $1 million in 2020, her husband’s newly updated financial disclosures showed. That transaction is reflected as capital gains income on her own financial disclosures. Ms. Raskin is married to Representative Jamie Raskin, a Maryland Democrat.

It is unclear how, or whether, Ms. Raskin’s private sector dealings will influence her chances. Mr. Katz at Capital Alpha said it was probably not going to determine the outcome, but noted that “it’s not nothing” and it “could gain some legs.”

Senator Elizabeth Warren, Democrat of Massachusetts and a critic of the revolving door between regulators and private sector, seemed to hint at the issue during the hearing.

“I believe that we must examine a nominee’s total balance of qualifications,” she said. “But I’ve asked nominees from both the Republican and Democratic administrations to abide by higher ethical standards.”

Some centrist Democrats have sounded content with Ms. Raskin. But one critical lawmaker, Senator Manchin, said on Wednesday that he hadn’t yet studied the nominees.

He added that he was “going to get into that” because he’s “very concerned” about issues including inflation.

A Harvard-trained lawyer, Ms. Raskin is a former deputy secretary at the Treasury Department and a former Fed governor, and she also spent several years as Maryland’s commissioner of financial regulation.

Mr. Toomey made it clear that he also had some reservations about Dr. Cook, but other Republicans seemed inclined to support her — including Senator Kennedy. That means that her nomination is likely to succeed unless she loses Democratic votes. Mr. Jefferson seems poised to clear the Senate easily, with the support of Mr. Toomey and others.

The Fed has seven governors — including its chair, vice chair and vice chair for supervision — who vote on monetary policy alongside five of its 12 regional bank presidents. Governors hold a constant vote on regulation.

Dr. Cook, who would be the first Black woman ever to sit on the Fed’s board, is a Michigan State University economist well known for her work in trying to improve diversity in economics. She earned a doctorate in economics from the University of California, Berkeley, and was an economist on the White House Council of Economic Advisers under President Barack Obama.

Dr. Jefferson, who is also Black, is an administrator and economist at Davidson College who has worked as a research economist at the Fed. He has written about the economics of poverty, and his research has delved into whether monetary policy that stokes investment with low interest rates helps or hurts less-educated workers.

Dr. Cook, Dr. Jefferson and Ms. Raskin are up for confirmation alongside Jerome H. Powell — for his renomination as Fed chair — and Lael Brainard, a Fed governor who is the Biden administration’s pick for vice chair.

Senator Sherrod Brown of Ohio, the committee chairman, said on Wednesday that all five candidates would face a key committee vote on Feb. 15, and that Senator Chuck Schumer of New York, the majority leader, “knows to move quickly” for a full floor vote.

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