I salute President Biden's nominations for the Federal Reserve Board, especially Sahra Bloom Raskin and Lisa Cook. (Philip Jefferson seems straightforward and uncontroversial, but other than reading a CV I haven't looked that hard.)
We can now have an honest conversation about where the Fed is going, and whether and how the Fed should use its tools, primarily regulation, to advance the Administration's agenda on climate, race, and inequality.
The Wall Street Journal nicely assembled crucial quotes on Ms. Raskin and climate. In 2020,
The Fed established broad-based lending programs to prevent businesses that were otherwise sound from failing due to the shutdowns.
Writing in the New York Times in May 2020,
Ms. Raskin wanted the Fed to exclude fossil-fuel companies from these facilities. “The Fed is ignoring clear warning signs about the economic repercussions of the impending climate crisis by taking action that will lead to increases in greenhouse gas emissions at a time when even in the short term, fossil fuels are a terrible investment,” she wrote. ...
“The Fed’s unique independence affords it a powerful role,” Ms. Raskin added. “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.”
Writing for Ceres,
“We must rebuild with an economy where the values of sustainability are explicitly embedded in market valuation,” she wrote. This will require “our financial regulatory bodies to do all they can—which turns out to be a lot—to bring about the adoption of practices and policies that will allocate capital and align portfolios toward sustainable investments that do not depend on carbon and fossil fuels.”
My emphasis. The report also
suggests the Fed use the “community reinvestment process to bolster the resilience of low-income communities to climate change.”
This is wonderful. For the last year that I have been following the issue, it has all been clouded in what I regard as deceitful misinformation -- Oh, we're not trying to regulate climate policy. That's beyond our mandate. We just look around at risks to the financial system and lo and behold we find that climate poses an important risk to the financial system. So we're just doing our job as dispassionate financial regulators. The idea of climate risk to the financial system is, in my view (and my reading of the scientific literature) so farcical that I called this out as a subterfuge. But there the argument lay.
No more. Thank you Ms. Raskin for stating the truth so clearly. Now we're ready to put that nonsense smokescreen aside and have an honest debate. Should the Fed get involved in allocating capital in order to pursue climate policies? Especially to go beyond what Congress, Administration, and EPA are willing to do, for fear of wrathful voters?
Ms. Raskin is superbly qualified and experienced. If you don't like these policy preferences, that makes her more dangerous as she has the knowledge and skill to implement them. That's great too -- the discussion can't get derailed over qualifications.
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A few journalists approached me to ask about Professor Cook's qualifications. Since they had an obvious agenda, I did not comment. But it is a line of argument you will hear.
My answer is simple: It depends what the job is. Just spend some time on her website. Read her CV. Cook is an academic, so her main qualification is her writing, not business or other experience which some other Fed board members bring.
Indeed, in her extensive writing for academic journals and think tank essays listed under "publications," you will find essentially nothing related to monetary policy, interest rates, inflation, financial regu...See full post