February 03, 2022

At Hearing, Federal Reserve Board of Governors Nominees Agree with Chair Powell that the Fed Should Address Climate Risks and Safeguard Financial Stability

Warren: “We’re in a climate crisis and we need regulators with backbone.”

Warren’s line of questioning follow last month’s BHUA hearing in which Fed Chair Powell explained that the Fed plays an “important” role in addressing the climate crisis

Warren also called on nominees to commit to strong ethics agreements

Video of Hearing Exchange

Washington, D.C. – During a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, United States Senator Elizabeth Warren (D-Mass.) questioned Professor Sarah Bloom Raskin, nominee to serve as Vice Chair for Supervision on the Federal Reserve Board of Governors, and Drs. Lisa Cook and Philip Jefferson, nominees to serve as members of the Board of Governors, about the Fed’s role in the climate crisis. 

At last month’s nomination hearing, Fed Chair Jerome Powell explained that the Fed has a responsibility to address climate risk’s threats to financial stability and ensure that banks are adequately managing their climate risks. When Senator Warren asked Professor Bloom Raskin,  Dr. Cook, and Dr. Jefferson whether Chair Powell’s views described their own, the nominees agreed. The nominees also agreed with Chair Powell that climate threats have implications for the Fed’s dual mandate and responsibility for financial stability, and that climate stress scenarios should be a key tool for the Fed to address the climate risks to our financial system. Senator Warren slammed the hypocrisy of Republicans who support Chair Powell’s renomination, but launched attacks against the nominees who hold the same views on climate issues. 

Senator Warren also called on the nominees to commit to higher ethical standards to prevent conflicts of interest and close the revolving door. Following ethics scandals at the Fed last year Senator Warren called out the culture of corruption brewing at the Fed and raised concerns over conflicts of interest that have undermined public trust. Senator Warren has urged Chair Powell and Fed leaders to adopt robust and comprehensive ethics guidelines. 

Combatting the climate crisis is also one of Senator Warren's highest priorities. Last year, at a BHUA hearing, the nominee to be Assistant Secretary of the Treasury for Financial Institutions agreed with Senator Warren that addressing climate risk must be a priority for Treasury. Senator Warren also urged John Morton – the first Climate Counselor at the Treasury’s new Climate Hub – to take swift and aggressive action to tackle the climate crisis. She and Representative Sean Casten (D-Ill.) reintroduced the Climate Risk Disclosure Act, which would require public companies to disclose more information about their exposure to climate-related risks. To speed the transition to clean energy products, Senator Warren and Congressman Andy Levin (D-Mich.) introduced the Buy Green Act to use the purchasing power of U.S. federal procurement to help fight the climate crisis. They also introduced the National Institutes of Clean Energy Act of 2021, legislation that would invest $400 billion over the next ten years in the research and development (R&D) of advanced clean energy technologies. And she unveiled the BUILD GREEN Infrastructure and Jobs Act which would invest $500 billion over ten years in state, local, and tribal projects to jumpstart the transition to all-electric public vehicles and rail and help modernize the nation's crumbling infrastructure.  

Transcript: Nomination Hearing - Sarah Bloom Raskin, Lisa Cook, and Philip Jefferson to Serve on the Federal Reserve Board of Governors
U.S. Senate Banking, Housing, and Urban Affairs Committee
Thursday, February 3, 2022

Senator Warren: Let’s jump right in on climate change, and let's focus on the Chairman of the Federal Reserve, who is supported by many of the Republicans who have spoken out today and who are so alarmed about the conversations about climate. I'd like to read a series of statements by Fed Chair Powell, who has been renominated by President Biden to serve another term as Chair. 

In response to a question I asked during his confirmation hearing last month, Chair Powell said, and I quote, “our role" -- meaning the Fed's role -- "on climate change is a limited one but an important one. And it is to assure that the banking institutions that we regulate understand their risks and can manage them. It is also to look after financial stability. And with financial stability, the issue really is: can something from climate change arise to the level that would threaten the stability of the entire financial system,” end quote.

So, I just want to go down the line here. This should be an easy question. Does Chair Powell’s statement on the Fed’s responsibility for ensuring that banks are managing their climate risks and addressing climate risk’s threats to the financial stability correctly describe your views as well? Professor Bloom Raskin, let’s start with you.

Professor Bloom Raskin: Yes. That statement sounds correct to me. 

Senator Warren: Thank you. Dr. Cook?

Dr. Cook: Yes. 

Senator Warren: Dr. Jefferson?

Dr. Jefferson: Yes, Senator. 

Senator Warren: Thank you. So we have four people—the Chairman of the Federal Reserve and these three nominees—who are aligned on the role of the Fed in dealing with climate change. 

Now, when my colleague Senator Ossoff asked Chair Powell last year whether climate change had implications for the Fed’s dual mandate and its responsibility for financial stability, Chair Powell said, and I want to quote here, “I think it has implications for all of those things,” close quote, because quote “we know that the transition to a lower carbon economy may lead to a sudden repricing of assets or entire industries, and we need to think about that carefully in advance and be in a position to deal with all of that,” end quote.

Professor Bloom Raskin, starting with you, does this statement by Chair Powell also describe your views? 

Professor Bloom Raskin: Yes. It does. 

Senator Warren: And Dr. Cook? 

Dr. Cook: Yes. It does, Senator. 

Senator Warren: And Dr. Jefferson?

Dr. Jefferson: Yes. 

Senator Warren: Okay. And when Chairman Brown asked Chair Powell about what the Fed would do to address the risks from climate change, Chair Powell said, and I want to quote, “that climate stress scenarios will be a key tool going forward."

Does everyone agree?  Professor Bloom Raskin?  

Professor Bloom Raskin: Yes.

Senator Warren: Dr. Cook?  

Dr. Cook: Yes. 

Senator Warren: Dr. Jefferson?

Dr. Jefferson: Yes. 

Senator Warren: Alright. We'll do one more. These climate stress scenarios that the Fed are planning are, in Powell’s words, quote “about assuring that the large financial institutions understand all of the risks they are taking, including the risks that may be inherent in their business model regarding climate change over time.” 

Once again, going down the line, do you agree, Professor Bloom Raskin? 

Professor Bloom Raskin: Yes.

Senator Warren: Dr. Cook? 

Dr. Cook: Yes. 

Senator Warren: Dr. Jefferson? 

Dr. Jefferson: Yes. 

Senator Warren: Thank you. I don’t support Chair Powell’s nomination for another term running the Fed, but even he thinks that it is just common sense that the Fed should work to mitigate the risk of significant economic loss triggered by climate change. Central bankers around the world agree with him.

Heck, this position is so noncontroversial that the previous Vice Chair for Supervision Randy Quarles, who was appointed by President Trump and never met a rule he didn’t want to weaken, requested the Fed’s membership in the Network for Greening the Financial System, which is an international coalition of financial institutions that is working to meet the goals of the Paris climate agreement.

So we really have to ask: What’s going on here? Why are the Republicans so stirred up by a mainstream position? Why is it okay when Jerome Powell says that climate issues are part of the Fed’s mandate, but it’s not okay when Professor Bloom Raskin and other nominees say the same thing? Why is the Chamber of Commerce funding a multi-million-dollar campaign to kill any action by policymakers to address the climate crisis? And who is really footing the bill here? 

Perhaps the real problem here is that Professor Bloom Raskin isn’t willing to let Big Oil stand in the way of the Fed doing its job. The fossil fuel industry and their lobbyists and friends in Congress may not like that, but asking the Fed to ignore climate risk is to ask the Fed to defy its congressional mandate. An institution responsible for the security of our financial system and the growth of our economy cannot blind itself to climate issues. We’re in a climate crisis and we need regulators with backbone.

I just want to mention one other thing before I quit here. I have long advocated for rewriting our ethics rules to prevent conflicts of interest, to close the revolving door, and to restore Americans' trust in our political system. 

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

I am discussing these standards with every Fed nominee, and I look forward to their responses, including from those who are not at the hearing today.

So again, congratulations to our nominees. I look forward to your confirmation.