Breakingviews: Big Oil elbows out banks as Fed’s new kingmaker

Big Oil is playing the unusual role of kingmaker at the U.S. Federal Reserve. The energy sector has come out swinging against Sarah Bloom Raskin, President Joe Biden’s pick to lead supervision at the U.S. central bank – and its objections found full voice at a Senate hearing on Thursday.

Raskin is qualified to be vice chair for supervision. She served as the No. 2 in the Treasury during the Barack Obama administration, and worked with the financial industry to shore up firms’ cyber defenses amid a spate of hacks. Earlier, as a governor at the Federal Reserve, Raskin focused on consumer protection. She was confirmed for that role unanimously.

Her views on climate risk are clear, however. Raskin, a Duke Law School professor, has argued publicly that U.S. financial regulators lacked creative thinking on how to tackle global warming. She also advocated the Fed excluding the fossil-fuel industry from emergency lending facilities established during the pandemic.

The confirmation has therefore become an argument over whether Raskin’s views would turn into Fed policy with her as vice chair. The oil and gas industry, which normally doesn’t weigh in on Fed personnel, has openly urged the Senate Banking Committee to reject her. The U.S. Chamber of Commerce sent a rare open letter to the panel expressing concerns about her candidacy.

Raskin argued on Thursday that the central bank shouldn’t choose winners and losers. While the vice chair can propose stress tests for banks that give extra focus to climate risk, or tougher capital rules around fossil-fuel lending, Fed rules are mostly decided by a vote of the board, not by any individual. Democrats have an effective one-vote majority in the Senate, so if they all back Raskin, she gets the job, although Republicans can slow-walk her nomination, a tactic that has left dozens of ambassador posts in limbo.

What about the banks? After all, they’re the ones who would face Raskin’s toughest scrutiny. Financial groups publicly support her nomination, but bank chiefs often complain that they find stress tests burdensome and excessive. Big fossil fuel lenders like JPMorgan plan to reduce their carbon intensity, but would no doubt rather do it at their own pace. Even if oil producers have fueled the anti-Raskin debate, they’re not the only ones who might see her as less than ideal.

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