A couple of weeks ago, I took a look at the nomination of Sarah Bloom Raskin to become the Fed’s vice chairwoman for supervision. It didn’t seem like a great idea (and, as I reported, I wasn’t alone in thinking so).
I noted that her nomination could be a signal that mission creep at the Fed (although “creep” is becoming too leisurely a word) may be on the edge of speeding up once more.
In connection with this nomination, it’s worth reading this letter to President Biden signed by a number of state treasurers, auditors, and financial officers.
Please do read the whole thing, but here’s an extract:
The role of the Federal Reserve, as stated in the 107th Annual Report of the Board of Governors of the Federal Reserve System (2020), is to promote “a safe, sound, and efficient banking and financial system that supports the growth and stability of the U.S. economy.” Ms. Raskin, in a column published in September 2021 by Project Syndicate, demonstrated that she has a far different vision for the role of the Federal Reserve. In that column, she wrote,” financial regulators must reimagine their own role so that they can play their part in the broader reimagining of the economy.” It is clear that Ms. Raskin is willing to place the growth and stability of the U.S. economy at risk to achieve her preferred social outcomes.
All financial institutions should evaluate their relationships with reliable energy companies, just as they would any legal business, without prejudice or preference, based on risk and return. However, Ms. Raskin believes that capital allocation should not solely be based on risk and return. Instead, she argues for “the adoption of practices and policies that will allocate capital and align portfolios towards sustainable investments that do not depend on carbon and fossil fuels,” as reported in the June 1, 2020, Ceres report . . .
If there’s a time for the Fed to be sticking to its core role, it is surely now (inflation and all that) — but there is, in my view, a wider issue at stake. If there is to be any “reimagining of the economy,” that is what elections, not regulators, are for.