Houses in Falmouth look out on a road being flooded by a “bomb cyclone” storm in 2019. Seaside homes face increasing risks from storm surges and sea level rise as climate change continues.

President Joe Biden announced the nomination of Sarah Bloom Raskin, a former Fed and Treasury official, for the Federal Reserve Board’s top regulatory slot on Friday in a move that could lead to climate concerns being incorporated into bank regulation.

Biden also nominated Lisa Cook, who would be the first Black woman to serve on the Fed’s board, and Phillip Jefferson, an economist, dean of faculty at Davidson College in North Carolina and a former Fed researcher. The three nominees, who will have to be confirmed by the Senate, would fill out the Fed’s seven-member board. Cook and Jefferson would be just the fourth and fifth Black governors in the Fed’s 108-year history. And for the first time, a majority of the board would consist of female appointees.

They would join the Fed at a particularly challenging time in which the central bank will undertake the delicate task of raising its benchmark interest rate to try to curb high inflation, without undercutting the recovery from the pandemic recession. On Wednesday, the government reported that inflation reached a four-decade high in December.

In late November, Biden also nominated Jerome Powell for a second four-year term as Fed chair and chose Lael Brainard, a Fed board member, to be the vice chair.

“This group will bring much needed expertise, judgement and leadership to the Federal Reserve while at the same time bringing a diversity of thought and perspective never seen before on the Board of Governors,” Biden said in a statement Friday.

Raskin’s nomination to the position of Fed vice chair for supervision — the nation’s top bank regulator — will be welcomed by progressive senators and advocacy groups, who see her as likely to take a tougher approach to bank regulation than Randal Quarles, a Trump appointee who stepped down last month. She is also viewed as someone committed to incorporating climate change considerations into the Fed’s oversight of banks. For that reason, though, she has already drawn opposition from some Republican senators.

While much of the debate around climate concerns and bank regulation has focused on lending to fossil fuel firms, questions continue to swirl around lenders’ exposure to climate risks in the mortgage sector and other areas. The Fed has already begun exploring how it might incorporate climate risks into its regulatory framework.

Who Is Raskin?

A Harvard-trained lawyer, Raskin, 60, previously served on the Fed’s seven-member board from 2010 to 2014. President Barack Obama then chose her to serve as deputy Treasury secretary, the No. 2 job in the department.

As Fed governors, Raskin, Cook, and Jefferson would vote on interest-rate policy decisions at the eight meetings each year of the Fed’s policymaking committee, which also includes the 12 regional Fed bank presidents.

Raskin’s first term as a Fed governor followed her work as Maryland’s commissioner of financial regulation, when she oversaw the state’s banks during the 2008 financial crisis.

Kathleen Murphy, CEO of the Massachusetts Bankers Association, worked with Raskin during Raskin’s stint as Maryland’s banking regulator from 2007 to 2010. Murphy led the Maryland bankers’ group during that time. Murphy said the state’s financial industry regarded her as a “strong regulator but a fair regulator.”

“She has always had a very collaborative approach,” Murphy said. “She wanted to make sure all the voices were at the table when decisions were made.”

Still, Raskin is likely to draw fire from critics for her progressive views on climate change and the oil and gas industry. Two years ago, in an opinion column in The New York Times, she criticized the Fed’s willingness to support lending to oil and gas companies as part of its efforts to bolster the financial sector in the depths of the pandemic recession.

“The decisions the Fed makes on our behalf should build toward a stronger economy with more jobs in innovative industries – not prop up and enrich dying ones,” Raskin wrote, referring to oil and gas providers.

On Thursday, Sen. Pat Toomey, the top Republican on the Senate Banking Committee, criticized Raskin for having “explicitly advocated that the Fed allocate capital by denying it to this disfavored sector.”

Brainard Pans Climate Stress Tests

In her testimony to Congress about her own nomination Thursday, Brainard pushed back against the idea the Fed would use its supervisory authority over banks to discourage them from lending to oil and gas companies. Several Republican senators had raised the concern during the hearing.

“We would not want to tell banks what sectors to lend to, or not to lend to,” she said.

Sen. Steve Daines, a Republican from Montana, questioned whether the Fed has the “experience or expertise” to incorporate climate change into its regulation of banks. Last year, Brainard had suggested that the Fed should evaluate scenarios in which climate change could harm the financial system. An example would be widespread lending losses or insurance payouts resulting from weather disasters.

Brainard said the Fed did not engage in “environmental policy” but still has a duty to evaluate possible risks.

“We do have some sort of responsibility for understanding potential financial stability implications of a host of different kinds of things,” she said. “We don’t have any expertise in disease and pandemics. But certainly it turned out that the pandemic had enormous financial stability consequences.”

Raskin Nomination Puts Climate on Fed’s Regulatory Agenda

by The Associated Press time to read: 4 min