[Senate Hearing 117-340]
[From the U.S. Government Publishing Office]
S. Hrg. 117-340
NOMINATIONS OF SARAH BLOOM RASKIN, LISA DENELL COOK,
AND PHILIP NATHAN JEFFERSON
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
ON
NOMINATIONS OF:
SARAH BLOOM RASKIN, OF MARYLAND, TO BE VICE CHAIRMAN FOR SUPERVISION
AND A MEMBER OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
__________
LISA DENELL COOK, OF MICHIGAN, TO BE A MEMBER OF THE BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
__________
PHILIP NATHAN JEFFERSON, OF NORTH CAROLINA, TO BE A MEMBER OF THE BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
__________
FEBRUARY 3, 2022
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
__________
U.S. GOVERNMENT PUBLISHING OFFICE
48-311 WASHINGTON : 2022
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey RICHARD C. SHELBY, Alabama
JON TESTER, Montana MIKE CRAPO, Idaho
MARK R. WARNER, Virginia TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
Laura Swanson, Staff Director
Brad Grantz, Republican Staff Director
Elisha Tuku, Chief Counsel
Dan Sullivan, Republican Chief Counsel
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Hearing Clerk
(ii)
C O N T E N T S
----------
THURSDAY, FEBRUARY 3, 2022
Page
Opening statement of Chairman Brown.............................. 1
Prepared statement....................................... 47
Opening statements, comments, or prepared statements of:
Senator Toomey............................................... 5
Prepared statement....................................... 49
NOMINEES
Sarah Bloom Raskin, of Maryland, to be Vice Chairman for
Supervision and a Member of the Board of Governors of the
Federal Reserve System......................................... 8
Prepared statement........................................... 50
Biographical sketch of nominee............................... 52
Responses to written questions............................... 127
Lisa DeNell Cook, of Michigan, to be a Member of the Board of
Governors of the Federal Reserve System........................ 9
Prepared statement........................................... 83
Biographical sketch of nominee............................... 84
Responses to written questions............................... 189
Philip Nathan Jefferson, of North Carolina, to be a Member of the
Board of Governors of the Federal Reserve System............... 11
Prepared statement........................................... 112
Biographical sketch of nominee............................... 113
Responses to written questions............................... 230
Additional Material Supplied for the Record
Letters submitted in support of nominees......................... 261
Letters submitted in opposition to nominees...................... 344
(iii)
NOMINATIONS OF SARAH BLOOM RASKIN, LISA DENELL COOK,
AND PHILIP NATHAN JEFFERSON
----------
THURSDAY, FEBRUARY 3, 2022
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 8:45 a.m., via Webex and in room 106,
Dirksen Senate Office Building, Hon. Sherrod Brown, Chairman of
the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN SHERROD BROWN
Chairman Brown. The Senate Committee on Banking, Housing,
and Urban Affairs will come to order. Welcome to our three
nominees and their family members and guests. The nominees will
have an opportunity to introduce anyone they would like to.
Today's hearing is in the hybrid format. Witnesses are in
person. Members have, of course, the option to appear either in
person or virtually.
The Committee is meeting to consider the nominations of
three very, very qualified nominees. In fact, these nominees
have the support of people who have contacted this Committee,
1,000 individuals and organizations have weighed in support. I
have never seen a number like that. Not so long ago we had 100
people weigh in and we thought that was pretty overwhelming.
This is 10 times 100, if my math is correct.
The Honorable Sarah Bloom Raskin is nominated by the
President of the United States to be Vice Chair of Supervision,
a Member of the Board of Governors of the Federal Reserve
System. Dr. Lisa Cook has been nominated by the President to be
a Member of the Board of Governors of the Federal Reserve. Dr.
Philip Jefferson also to be a member, nominated by the
President of the United States, to the Board of Governors of
the Federal Reserve.
In the first year of the Biden-Harris administration we
have seen tremendous economic progress: record job growth,
rising wages, the fastest economic growth in 40 years. Last
year--and think about this--last year, for the first time in
two decades, our economy grew faster than China's. That is
worth saying again, considering what this body did, in
listening to corporate interests outsource jobs to China for a
generation, especially since 1999 to 2000, that our economy
during the first year of the Biden administration grew faster
than China's economy.
Because of the action we took with the American Rescue plan
and because of this President's commitment to American
workers--he puts workers at the center of our economy and our
economic policy--we are making historic economic progress,
exceeding expectations of anybody, even the most partisan.
We are at a pivotal moment in our recovery. The Omicron
variant has caused COVID cases to increase in the last 8 weeks,
further straining our supply chains. These pandemic-related
problems are causing higher prices that eat away at Americans'
paychecks. Your job, as three future members of the Fed--and I
do think you will be confirmed--your jobs as three future
members of the Fed is to deal with that inflation.
The Black unemployment rate is more than twice that of
White workers. Women are slowly reentering the paid labor
force, after too many were forced to leave at the height of the
pandemic.
As Fed Chair Powell said, ``Getting past the pandemic is
the single most important thing we can do.'' Chair Powell is
right.
The actions we take over the next several months will
determine whether we have a truly robust recovery, with lower
prices, higher wages and plentiful job opportunities
distributed so everyone has opportunities, whether we have that
kind of truly robust recovery, or whether our economy falters,
and Americans are denied the opportunity to emerge from this
pandemic stronger than before.
That is the fork in the road, and that brings us to today.
We must have a fully functioning Federal Reserve Board--all
seven members--ready to meet these challenges, ready to ensure
our economy continues to prosper.
It has been almost a decade since the Federal Reserve
Board, the seven members, that we have had seven Board members.
That is what makes this hearing urgent. That is what makes the
importance of a vote on February 15th so important.
Governor Bloom Raskin, Dr. Cook, and Dr. Jefferson are the
proven leaders we need at this critical moment. These three
experienced public servants understand the importance of
empowering workers through full employment and the need to
combat inflation so paychecks go farther.
They are dedicated to Fed independence. I know that. They
will uphold the Fed's dual mandate--I know that--a mandate to
ensure that all Americans have job opportunities at good wages,
and to ensure that wage gains are not eroded away by exorbitant
prices. They know that when we keep our financial system safe,
and when we support working families and Main Street businesses
by putting workers at the center of economy, then our entire
economy grows. When we all do better, we all do better.
Sarah Bloom Raskin is the President's nominee to serve as
the Federal Reserve's Vice Chair for Supervision. I have not
seen a nominee for a job like this close to being as qualified
as Dr. Raskin. She was the Maryland State Bank Commissioner,
she was a Federal Reserve Governor, and she was Deputy Treasury
Secretary, the number two position at perhaps the most
important agency in the Federal Government.
No one is better equipped than Ms. Raskin to protect
Americans from risks that could bring down financial markets
and institutions and wreck people's savings, from cybersecurity
threats to climate financial risk.
Throughout her distinguished career, Ms. Raskin has worked
with the smallest community banks and the largest multinational
financial institutions. She has worked with consumers,
community groups, and businesses small and large to keep our
financial system safe.
Unfortunately, regrettably, we have seen a coordinated
effort by some to paint her as some sort of radical. That
characterization requires a suspension of common sense. For her
past confirmations she has had the support of every Republican
on this Committee, every Republican on the Finance Committee.
In fact, the entire Senate twice confirmed her--twice
unanimously.
Think about that. Sarah Bloom Raskin has been nominated to
key economic posts twice before. Both times, every single
Senator, Republican and Democrat, supported her nomination. Now
they are accusing her of some radical kinds of thoughts that do
not have weight.
As Deputy Secretary of Treasury, Ms. Bloom Raskin led the
Obama administration's effort on cybersecurity resilience for
the financial sector, a critical issue that requires vigilance
to protect our economy and national security.
She understands that we need to think about all the
financial risks our economy faces, including the possible
economic impact of severe weather and climate change. As we
heard from Chair Powell about the issues of climate, this is a
priority for him and for the Fed.
Looking at all the risks posed to our financial system is
not a partisan issue; just ask Chair Powell. It is not some
radical idea; just ask Citi and Morgan Stanley.
We saw in 2008 what happens to people's job opportunities
and to their livelihoods, their home, their retirement
accounts, their college saving, when we ignore big risks, and
we know that people that pay the highest price for that risk
are people of color and women. Sarah Bloom Raskin will work to
make sure our country does not repeat that same mistake.
Dr. Lisa Cook and Dr. Philip Jefferson are the President's
nominees to serve as Governors. They are highly respected and
they are experienced economists with sterling credentials. They
understand how monetary policy can contribute to our economic
growth and strengthen our economy for everyone.
Dr. Cook currently serves as Professor of Economics and
International Relations at Michigan State University. She
brings a wealth of research and international experience on
monetary policy, banking, and financial crises. That includes
serving on the Council of Economic Advisers during the Eurozone
crisis and past work with several Federal Reserve banks.
She has done groundbreaking research on how disparities in
our economy inhibit technological innovation and limit our
overall economic growth. She knows the important role that
workers and local communities play in our overall economic
growth, from the rural South, where she was raised, to the
industrial Midwest, where she now works. She has led the
American Economic Association Summer Training Program, which
builds the pipeline for diverse young economists to ascend to
institutions like the Fed.
A graduate of Spelman, a school in Oxford, and Berkeley
Ph.D., she is very qualified for this job.
To give you a sense of her impact, a mayor from my home
State, Mayor Babcock of Oak Harbor, in northern Ohio, wrote to
me about her. He got to know Dr. Cook at one of those training
programs, and he wrote, ``I know her to be kind, qualified, and
to understand the struggles and opportunities faced by Midwest
communities like mine, where we are burying the term `Rust
Belt' in pursuit of a bright future.''
Burying the term ``Rust Belt.''
We need a whole lot more people in institutions like the
Fed who understand how ignorant that term is, and misleading,
and who understand that economic growth only matters if it
reaches people like in Oak Harbor, Ohio. Dr. Lisa Cook will be
that public servant.
Dr. Jefferson is the Vice President for Academic Affairs,
Dean of Faculty, and Paul B. Freeland Professor of Economics at
Davidson College. He began his career as a Fed economist. He
grew up in the shadow, as he told me on the phone, of RFK
Stadium in Washington. He served as chair of the Economics
Department at Swarthmore College in Swarthmore, Pennsylvania.
Dr. Jefferson literally wrote the book on poverty and
economics. His research on poverty will bring a perspective to
the Fed that we need as we emerge from the coronavirus crisis.
Will you look at the diversity, not just who is sitting at
this table, and we have never had a table of people sitting at
the Fed like you. But think of the difference in perspective
and attitude and upbringing and beliefs and emphasis and how
that is going to serve all of us in this country.
Listen to what the Washington Post Editorial Board wrote.
Sometimes the board leans conservative. Think privatization of
Medicare--the Washington Post thought that was a great idea--
the Iraq War--the Washington Post really thought that was a
great idea--trade deals that outsource jobs--the Washington
Post always thought that was a good idea. So sometimes the
Washington Post board leans conservative, and sometimes they
lean more progressive. But we all agree it is hardly a bastion
of radical left-wing thought.
Listen to what they wrote about these nominees: President
Biden's latest nominees to the Federal Reserve, quote, ``are
ready to help lead the Fed and bolster its credibility. The
Senate should move quickly to put them in place.'' And early in
my remarks I mentioned the 1,000 individuals and organizations
that support the three of you for the Fed.
For the first time in almost a decade we will have a full
Board of Governors at the Fed, one that reflects the country.
We will have public servants who will not only steer us back on
to the road to normalcy, but who will reach for a stronger
economy than before.
The American people deserve a Fed that works for them. Our
country codified the Fed's dual mandate of price stability and
full employment with the 1978 Full Employment and Balanced
Growth Act--we know it as the Humphrey Hawkins bill--and borne
out of the Civil Rights Movement. For a decade, civil rights
advocates worked for something like Humphrey Hawkins. The law
makes it clear that, quote, ``Increasing job opportunities and
full employment would greatly contribute to the elimination of
discrimination based upon sex, age, race, color, religion,
national origin, handicap, or other improper factors.''
This is part of the Fed's job.
President Biden's Fed nominees will ensure all workers that
their families reap the benefits of the economic growth they
create. These nominees will fight for the communities that have
been left on their own far too often in this country, women and
Black and Brown workers, to rural towns, to all the places
derisively called the ``Rust Belt.''
I look forward to supporting these three nominees, and I
and encourage all of my colleagues to do so as well.
Ranking Member Toomey.
OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY
Senator Toomey. Thank you, Mr. Chairman. Ms. Raskin,
Professor Cook, and Professor Jefferson, welcome and thank you
for your willingness to serve.
We are here today, obviously, to consider three Fed
nominees. But today's hearing is not just about vetting them.
It is really a referendum on the Fed's independence and whether
or not we are going to abandon a core part of our democracy.
There are people on the left, including in the Biden
administration, who are advocating that the Fed use its
supervisory powers to resolve complex political issues, like
what to do about global warming, social justice, and even
education policy. These are certainly important issues, but
they are wholly unrelated to the Fed's limited statutory
mandates and expertise.
More importantly, addressing those kinds of issues
necessarily requires political decisions involving tradeoffs.
In a democratic society, those tradeoffs must be made by
elected representatives who are accountable to the American
people, not unelected central bankers. The question is not
about the merits of specific policies, but rather who should
decide if they should be put into place.
Let us take global warming. If we further limit domestic
oil and gas production, energy prices will rise. Americans will
pay even more at the pump to accomplish the stated goal of
decreasing emissions. How much more should they have to pay?
If we move aggressively to limit energy production but
other countries do not, global warming probably will not
significantly slow. Should we do it anyway? How much reduction
in global warming should we get for the pain we would put the
American people through?
Let me be clear. This is not about whether one believes
that addressing global warming is important, or how you would
answer either of those or any other questions that are related.
The point is these are difficult choices which must be made by
accountable representatives through a transparent and
deliberative legislative process. That is how a democratic
republic works.
My concern about Fed overreach is not hypothetical. The Fed
is already exceeding its mandates and engaging in political
advocacy. For example, the Minneapolis Fed is actively lobbying
to change Minnesota's constitution on the issue of K-12
education policy. Now does anyone truly think such activity is
within the Fed's mandate? If activism by a supposedly
independent central bank is accepted, then potentials for
abuse, by both parties, is limitless.
And do not just take my word about the politicization of
the Fed. Let us consider what Ms. Raskin has said the Fed
should do. She has repeatedly, publicly, and forcefully
advocated for using financial regulation, including the Fed, to
allocate capital and to debank energy companies. Now most other
like-minded regulators have been careful to say their goal is
simply to assess risk, but Ms. Raskin has said the quiet part
out loud.
In a 2020 report from a progressive organization, Ms.
Raskin urged financial regulators to adopt policies that will,
and I quote, ``allocate capital,'' end quote, away from energy
companies. In a 2021 speech at the ``Green Swan'' conference,
she proposed, and I quote, ``portfolio limits or concentration
limits,'' end quote, on banks' lending to energy companies.
And, in May 2020, at the height of the pandemic, she
specifically called, in a New York Times op-ed that she wrote,
for excluding a single industry, the fossil energy sector,
which she called, and I quote, ``a dying industry,'' end quote,
excluding them from the Fed's emergency lending facilities.
Ms. Raskin's proposals would have devastating consequences
not just for energy workers, of which we have millions, but
also consumers, who would have to pay much more for energy.
Now on what basis could she justify this idea that the Fed
exercise should these extraordinary powers? Well, I think Ms.
Raskin sees two categories of climate-related financial risks.
The first is physical and the second is transition.
Now the actual data is very clear. It shows that ``physical
risks,'' that is, the result of severe weather events, do not
threaten financial stability. Economic damage from weather-
related events in America, as a percentage of GDP, has actually
trended down over the last 30 years--that is just a fact--and
we still have not found a single bank failure caused by any
weather event. So it is pretty clear that banks are perfectly
capable of managing the physical risk.
But we are also told that banks need regulation that
quantifies the ``transition risk'' from changing consumer
preferences. Well, let me tell you, bankers know how to manage
changing consumer preferences better than regulators do. Let us
be honest. The real risk here is political, as Fed Chair Powell
acknowledged last month. The real risk is unelected officials
like Ms. Raskin who want to misuse banking regulatory powers to
impose environmental policies that Congress has refused to
enact. Ms. Raskin has repeatedly and specifically advocated
that the Fed allocate capital away from the fossil fuel
industry as a way to combat climate change. She says the quiet
part out loud.
Now turning to Professor Cook, the Administration cites her
role as a director of the Chicago Fed as a main qualification.
That is a position she has held for 2 weeks prior to being
nominated. She has a Ph.D., but no academic work in monetary
economics. And the few times that she has said anything about
monetary policy, it has been a cause for concern.
Despite unemployment below 4 percent and inflation above 7
percent and real wages for workers declining, in my
conversation on Tuesday with Professor Cook she refused to
endorse the path that the Fed has decided to take finally to
pull back somewhat on its easy money policy. The fact is,
keeping monetary policy loose is going to continue to
accelerate inflation that is rising faster than wages already.
High inflation is a tax that makes everyone poorer, but
especially low-income workers.
I think it is also important to note Professor Cook's
extreme left-wing political advocacy. She has publicly
supported race-based reparations, promoted conspiracies about
Georgia voter laws, and sought to cancel those who disagree
with her views, including publicly calling for the firing of an
economist who dared to tweet that he opposed defunding the
Chicago police.
And after we highlighted these tweets for the public's
attention, yesterday Professor Cook blocked the Banking
Committee Republican Twitter account. Apparently Professor Cook
realizes how inflammatory her partisan tweets have been.
See, the Fed is already suffering from a credibility
problem because of its involvement in politics and its
departure from its statutorily limited and proscribed role. I
am concerned that Professor Cook will further politicize an
institution that has to remain apolitical.
Finally, Professor Jefferson, thank you for coming to my
office and for the conversation that we had on Tuesday. I
enjoyed and appreciated our discussion, and I admire your
decades of work on macroeconomic issues, very much including
monetary policies and issues that are central to the Fed's
important work. Based on Professor Jefferson's academic
credentials, his written work, and my meeting with him, I think
Professor Jefferson is well-suited to the position for which he
has been nominated.
Let me conclude by addressing my Democratic colleagues. You
folks have spent the last several months talking about how
passionately dedicated you are to democratic principles and
values, and I do not doubt that you have been sincere about
that. But certainly one of those principles is that the
unelected Governors of America's central bank should not be
responsible for dealing with difficult issues like global
warming, social justice, and education policy.
This is not about the importance of those issues. It is
about keeping the Fed apolitical and independent and ensuring
that elected, accountable representatives make difficult the
decisions. If that does not convince you, I would urge you to
remember that one day the shoe will be on the other foot. Thank
you.
Chairman Brown. Thank you, Senator Toomey.
Would the three witnesses rise, please, and raise your
right hand.
Do you swear or affirm that the testimony you are about to
give is the truth, the whole truth, and nothing but the truth,
so help you God?
Ms. Raskin. I do.
Ms. Cook. I do.
Mr. Jefferson. I do.
Chairman Brown. Do you agree to appear and testify in front
of any duly constituted committee of the Senate?
Ms. Raskin. I do.
Ms. Cook. I do.
Mr. Jefferson. I do.
Chairman Brown. Thank you. Please be seated.
Again, we welcome the three of you to the Committee. If you
would like to introduce family members or friends with you
today I invite you to do that at the beginning or during your
testimony.
Ms. Bloom Raskin, please begin your testimony. Thank you
for joining us.
STATEMENT OF SARAH BLOOM RASKIN, OF MARYLAND, TO BE VICE
CHAIRMAN FOR SUPERVISION AND A MEMBER OF THE BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
Ms. Raskin. Well thank you, Chairman Brown, Ranking Member
Toomey, and Members of the Committee for the opportunity to
appear before you today. Thank you also to your exemplary
staff, who provide essential support, something I know from
serving this Committee as Banking Counsel.
With me today is our daughter, Hannah Grace Raskin. There
she is. Hannah is a real live banker, and we have animated
conversations about banker-like topics such as what goes into
the numerator for the Allowances for Loan Loss Reserves and
what gets subtracted out of Net Interest Margins. Our other
daughter, Tabitha, teaches middle school algebra. She would
have been here but for the fact that today is the review day
before the exam for slope and intercept equations.
Our son Tommy, who we lost in 2020, is with me always. He
came into the world when I worked for this Committee. I
remember where I was standing, actually, in these very offices
in 1995, when he started kicking as I went into labor, and I
remember returning to these halls to show my friends here my
sparkling little boy. Boundless gratitude too to my beloved
husband, Jamie, who provides bedrock strength and love to our
family.
As a child growing up in Illinois, my family made a weekly
Saturday morning pilgrimage to the Bank of Homewood, where my
mother would withdraw money for the week. From this experience,
the importance of banks to the economic well-being of a
community was never lost on me. As my brother and I eyed donuts
in the lobby, my mom would direct us to get in line for the
right bank teller: ``This line,'' she would say, ``We want
Shirley.'' We would get weekly updates on Shirley's children,
their Little League games, bowling scores, and family camping
trips.
In 2007, I was honored to become Maryland's State banking
commissioner, which enabled me to demonstrate my lifelong
appreciation for community banking. Later, I was confirmed by
the Senate to be a Governor on the Federal Reserve Board from
2010 to 2014, and Deputy Treasury Secretary from 2014 to 2017.
I also worked in the private sector as a banking lawyer and
general counsel.
I am proud of my work at the Federal and State levels to
champion the interests of consumers and community banks, while
ensuring the resilience of our financial system, particularly
in the areas of cybersecurity and appropriately tailored rules.
These experiences helped me understand the importance of bank
supervision to the ability of our financial system to work for
all Americans.
I also learned from the subprime mortgage crisis, which
cost us tens of millions of jobs and homes, and trillions of
dollars lost to our families, businesses, and communities in
equity and savings. Like the crises before it, the subprime
mortgage crisis showed how weak regulatory oversight and
unattended problems can reverberate, rattle, and ravage our
entire economy.
I learned that to be effective for all Americans bank
supervisors must make sure that the safety of banks and the
resilience of our financial system are never compromised in
favor of short-term political agendas or special interest
groups. They must stay attentive to risks no matter where they
come from: inside or outside the financial sector, well-
identified asset bubbles or speculation, a set of threat actors
that launch cyberattacks, or from nature and cataclysmic
weather-related events.
As created by Congress, the role of Vice Chair of
Supervision requires consultation with other Governors of the
Federal Reserve, the Fed's expert staff, the banks themselves,
and other experts about the extent to which financial
institutions are identifying, analyzing, and managing their
risks. The role does not involve directing banks to make loans
only to specific sectors, or to avoid making loans to
particular sectors. And the role exists within the laws passed
by Congress that govern the Federal Reserve and its
responsibilities.
I understand that anyone confirmed to this position must
act not only with as much knowledge as possible but also with
humility. Knowledge, especially about the future, can be
imperfect.
Finally, I also want to recognize the toll inflation exacts
on working people who are concerned about how far their
paychecks will go for essentials like food, housing, and
transportation. It is an important task of the Federal Reserve
to reduce inflation and one that must be a top priority while
we continue to sustain our economic growth.
If confirmed, I commit to pursue this work with the highest
ethical standards. I look forward to meeting the considerable
challenges and opportunities before us: the indispensable work
of defending and safeguarding the financial sector, the Federal
Reserve's dual mandate, and the economic future of all
Americans.
Thank you.
Chairman Brown. Thank you, Ms. Raskin.
Dr. Cook, you are recognized to begin your testimony. Thank
you.
STATEMENT OF LISA DENELL COOK, OF MICHIGAN, TO BE A MEMBER OF
THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Ms. Cook. Senator Brown, Ranking Member Toomey, and other
Members of the Committee, thank you very much for the
opportunity to appear before you today. I am humbled and
honored to have been nominated by President Biden to be a
member of the Board of Governors of the Federal Reserve System.
I earned my Ph.D. at Berkeley, served on the President's
Council of Economic Advisers, and have spent decades teaching,
studying, and researching economic growth and monetary
policies. The depth and breadth of my experience in both the
public and private sectors qualify me to serve as a Federal
Reserve Governor, and should I be confirmed I would be honored
to work with my colleagues to help navigate this critical
moment for our nation's economy and the global economy.
In terms of priorities, I agree with Chair Powell that our
most important task is tackling inflation. High inflation is a
grave threat to a long, sustained expansion, which we know
raises the standard of living for all Americans and leads to
broad-based, shared prosperity. That is why I am committed to
keeping inflation expectations well anchored.
My approach to complex problems is to be guided by facts,
data, and analysis and to work collaboratively. I have served
in the Administrations of Presidents from both parties, and
when I make decisions, I do so based on the facts and not
politics. In this respect, I will follow the example of Paul
Volcker, whom I greatly admire for his unwavering dedication to
a nonpolitical and independent Federal Reserve.
My convictions are shaped by my upbringing in
Milledgeville, Georgia. It was the desegregating South, and
both sides of my family were promoting nonviolent change
alongside our family friend, the Rev. Dr. Martin Luther King,
Jr. While my sisters, Pamela and Melanie, and I were
integrating our schools and pools, my parents were integrating
their places of work. My mother, Professor Mary Murray Cook,
and my aunt, Professor Loretta Murray Braxton, integrated their
universities and STEM departments by gender and by race,
preparing students for a desegregating South that promised
greater opportunity for all.
My cousin Floyd McKissick, Sr., spoke at the March on
Washington and integrated the University of North Carolina law
school. My uncle, Dr. Samuel DuBois Cook, studied with Dr. King
at Morehouse College, was the first African-American tenured
professor at a southern university, and later was president of
Dillard University. I want to thank Senators Warren, Kennedy,
and Tillis, as well as the many other Senators who honored my
uncle in a Senate resolution upon his death in 2017.
The sense of discipline, hope, and mission instilled in me
by my family has taken me from Spelman College to Oxford
University, the Hoover Institution, and Harvard, but I have
never forgotten where I came from and the dedicated teachers
who supported me. I chose to seek my current tenured position
as a macroeconomist in the industrial Midwest in this same
spirit of being close to how our economic decisions affect
working families. Living in a manufacturing hub during the
financial crisis has underscored the effect that deep
recessions have on everyday lives, and that is one reason I
have dedicated much of my career to preventing the next
financial crisis. A strong and resilient financial system
supports American families, businesses, and our economy.
My research on economic growth has been informed by my
interactions with families, businesses, policymakers, and
financial institutions. I have extensive experience working for
many types of banks, including serving on the board of a CDFI
in Grand Rapids, Michigan. I am particularly proud that
community banks were among those who elected me to serve on the
board of the Federal Home Loan Bank of Indianapolis. I have
also worked closely with the Federal Reserve over the course of
my career, conducting research at Reserve Banks before and
after receiving my doctorate, attending policy conferences, and
serving on advisory panels and as a director of the Federal
Reserve Bank of Chicago.
There is still much to learn to make sure the Fed does its
job even better. Our economy is constantly evolving. Learning
to do better will require humility, perseverance, and diverse
perspectives.
Again, it is an honor to be considered for this position,
and I look forward to working with Members of this Committee.
If confirmed, I will faithfully support the congressionally
mandated goals of stable prices and maximum employment, which
Congress has entrusted to the Federal Reserve.
Thank you. And I would like to thank my aunt, Wivona Ward
from Virginia Beach, Virginia, and my sisters, Pamela Cook and
Melanie Cook McCant, for escorting me here today.
Chairman Brown. Thank you, Dr. Cook.
Dr. Jefferson, you are now recognized to begin your
testimony.
STATEMENT OF PHILIP NATHAN JEFFERSON, OF NORTH CAROLINA, TO BE
A MEMBER OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM
Mr. Jefferson. Chairman Brown, Ranking Member Toomey, and
Members of the Committee, thank you for the opportunity to
appear before you today. I am honored to have been nominated by
President Biden to serve as a member of the Board of Governors
of the Federal Reserve System. If confirmed, I would draw upon
my background and skill set to contribute positively to the
well-being of the American people by helping the Federal
Reserve to adhere to the dual mandate set for it by Congress--
promotion of maximum employment and stable prices.
As some of you may know, I was born and raised here in
Washington, DC, in the Northeast section, just blocks away
from Robert F. Kennedy stadium. The neighborhood is called
Kingman Park, and in my youth it was a place where the line
between a future of success and struggle was thin. The Capitol
is a mere 25 blocks from the row house where I grew up.
My first job after graduating from college was here in
Washington, DC, as a research assistant for the Board of
Governors. Since that time, I have been fortunate to pursue a
career that spanned a valuable combination of experiences both
within and outside academia. I have served as a professor of
economics, department chair, college dean, college vice
president, president and director of various professional
organizations focused on economics, a college trustee, a
borough council member, and have held additional professional
roles within the Federal Reserve System.
In the leadership positions I have held, the essential
qualities for success have included a spirit of collaboration,
the capacity to compromise, and the ability to achieve
consensus. Further, I am a Ph.D. economist with an unusual
combination of specializations: macroeconomics and monetary
economics, poverty and economic inequality, and applied
econometrics. If confirmed, these specializations would enable
me to analyze from multiple perspectives the complex issues
that come before the Board.
Today, the economy is facing two major challenges: the
COVID-19 pandemic and inflation. The pandemic has disrupted the
supply side of the economy and changed the composition of
aggregate demand. The spike in inflation we are seeing today
threatens heightened expectations of future inflation. The
Federal Reserve must remain attentive to this risk and ensure
that inflation declines to levels consistent with its goals.
The mandates set by Congress for the Federal Reserve have
served the American people well. As we know from experience,
the pursuit of maximum employment and stable prices fosters an
economic environment characterized by a dynamic labor market,
entrepreneurship, private saving and investment, and
sustainable growth in consumption and production over the
longer run.
Importantly, the dual mandate provides a critical
foundation for monetary policy amid our current challenges and
those that lie ahead. The tools of monetary policy can be
deployed with clear goals in mind. Adherence to these goals
will ground inflation expectations appropriately so that policy
itself does not encumber private economic decision making.
Further, long-run inclusive prosperity requires that the
Federal Reserve pay careful attention to the safety and
soundness of banks and the stability of the financial system.
Before closing, I wish to acknowledge the love and support
of friends and family, especially my sons, Nathan, who is
watching remotely, and Miles, who happens to be right here with
me. Also, I wish to mention my late parents, Wade Jefferson,
and Joan and Walter Coates, who worked so hard and gave so
much, so that this improbable day might even be possible.
Regardless of the outcome, they would have been so very proud
of these proceedings.
Thank you for the opportunity to appear before you today.
It is a real honor. I look forward to and welcome your
questions.
Chairman Brown. Thank you, Dr. Jefferson.
Governor Raskin, I will start with you. Many of us are
familiar with your work at Treasury on cybersecurity, applauded
by the financial industry to keep the Government agencies and
industry connected with up-to-date information on cyberthreats
to the financial sector. You know first-hand how important it
is to protect working Americans from risks in our financial
sector, financial system, and that is the job of the Vice Chair
for Supervision.
If confirmed, how would you approach evaluating all the
risks to our financial system?
Ms. Raskin. Well, Chairman Brown, thank you for that
question. Banking regulators are centrally concerned with the
management of risk in the banking system, which we know, over
the course of American history, has been subject to numerous
shocks and crises. So whatever the risk, whether we are talking
about the risks of cyberattacks, whether we are talking about
the risks that come from climate-related extreme weather
events, the job of the banking regulators is to make sure that
the banking system has appropriately accounted for these risks
and is prepared to mitigate them.
Now, the watch word here is resiliency, resiliency in the
face of potential risk. So I know there has been a lot of
speculation about this. I want everyone to understand three
basic principles that define my approach to the Federal
Reserve's regulatory and supervision of risk.
OK. So first, it is inappropriate for the Fed to make
credit decisions and allocations. Banks choose their borrowers,
not the Fed. It is inappropriate for the Fed to choose winners
and losers. Doing so is not the proper institutional role of
the Fed. That is a cardinal principle of Fed supervision.
Second, regulation is best achieved when it is
collaborative. My practice is to bring all interested parties
and experts to the table and to listen carefully before making
consequential regulatory decisions. This approach has been my
hallmark since my time as the Maryland Commissioner of
Financial Regulation and it has been the crux of my
effectiveness as a regulator.
Third, supervisory and regulatory actions must always stay
within the bounds of the law. They must stay within the bounds
of the Fed's authority as Congress has set forth. All actions
have to stay within the Fed's statutory mandates. I understand
Congress' strictures and authorities and have always acted
within them.
So in my 4 years as a Fed Governor, as my years as a
Maryland Commissioner of Financial Regulation, as my years as
Deputy Secretary of the Treasury, I have never deviated from
these three principles guiding our regulatory and supervisory
processes, and I cannot think, really, of a single moment when
anyone would accuse me of having deviated from them. Again, I
know them. I understand them. I understand the role. I
understand the law.
Chairman Brown. Thank you. Thank you, Governor.
Dr. Cook, you grew up in a small town in Georgia, not far
from where my mom grew up. You teach in the industrial Midwest,
not far from really where I live. You have served as an
economist in administrations, Democrat and Republican alike.
How has that shaped your view of monetary policy, and as you
answer that, tell us how the Fed can create conditions for
investment in good local jobs?
Ms. Cook. Thank you for that question, Senator. Growing up
in rural Georgia and being an economist in the industrial
Midwest have both shaped the way I think about the dual
mandate, maximum employment and stable prices. One of the most
shocking events of my career has been to teach macro in fall
2008, and sit in my office and look outside and see a long
line. Where is that long line from? I had no idea.
I asked a colleague, and the colleague told me that there
was a food pantry, and this long line that looked like it was
straight out of the Great Depression, straight out of the
Dorothea Lange portfolio, was our students. Their parents had
lost their jobs. They had lost their jobs. They should be
studying.
At that time I decided that all of the skills that I have,
the ones that I have acquired, the ones that I have acquired
through experience, through research, would be devoted to
addressing eliminating risk associated with financial and
economic crises.
So that is what shapes my view with respect to monetary
policy. Where does that experience come from? That experience
comes from sitting on the board of a CDFI. It comes from
sitting on the board of directors of the Federal Reserve Bank
of Chicago. It comes from interacting with firms and businesses
and everyday people throughout the Midwest.
So I am keenly aware of the challenges that everyday
Americans face, and I am keenly aware of the types of capital,
for example, that do not flow to those places easily. So my
work on the Federal Home Loan Bank of Indianapolis, has been
really important in trying to get capital to capital-scarce
places and to capital-scarce sectors. So that is what shapes my
views on monetary policy.
Chairman Brown. Thank you. Thank you, Dr. Cook.
Dr. Jefferson, we all know the pandemic's devastating
impact on our country, especially on low-income workers and
families who are already struggling. As a former Fed economist
who has written extensively on the economics of poverty and
inequality, discuss how the Fed can minimize the pandemic's
lasting impact on low-wage workers.
Mr. Jefferson. Thank you. Thank you for that question,
Senator. The way in which the Fed, within its authorities, can
best improve the recovery from the pandemic for low-wage
workers is to stick to its dual mandate, which is to keep a
focus on maximum employment and stable prices.
Because, Senator, what we learned from the long expansion
that we were enjoying before the pandemic is that over the long
run noninflationary growth is itself very inclusive. It allows
people from all parts of the wage distribution to participate
in our economy. So what the Fed can do is create the
macroeconomic conditions for long-run noninflationary growth.
Chairman Brown. Thank you.
Senator Toomey, you are recognized.
Senator Toomey. Thank you, Mr. Chairman. Let me start with
Professor Jefferson. Thanks for coming by my office and for our
discussion recently. During the course of our conversation you
said to me, I think this is pretty close to a verbatim quote,
that ``the Fed Board has no role in the allocation of
capital,'' period, end quote.
So just for the record here this morning, is that a fair
characterization of your view?
Mr. Jefferson. I stand by that quote, Senator.
Senator Toomey. OK. Thank you.
Ms. Raskin, I have heard what you have said this morning. I
saw your testimony. But from your repeated speeches, op-eds,
podcasts, all kinds of sources, right up to very recent times,
it seems very clear to me that you believe that climate change
is a very, very dire, imminent threat, that it will be
catastrophic, I think you have used the word ``existential,''
and that for those reasons it is necessary and appropriate for
financial regulators, including the Fed, to allocate capital
away from those companies that are contributing the most to the
carbon in the atmosphere. Isn't that true?
Ms. Raskin. Thank you, Senator Toomey. It is inappropriate
for the Fed to make credit decisions and allocations based on
choosing winners and losers. Banks choose their borrowers. The
Fed does not. It is inappropriate for the Fed to choose winners
and losers, and to do so is not the proper institutional role
of the Fed. That is, as I said, a cardinal principle of Fed
supervision.
Senator Toomey. OK. I hear you say this, but the problem is
the huge, documented weight where you have said something very,
very different. In the Financial Times, in January of 2021, you
wrote an op-ed. In that you said, and I quote, ``Next, the
financial supervisors will need to know how to act on this
information. Supervisory adjustments will have to take climate
disclosures into account, and the Fed will need to use climate
risk data to make decisions on asset purchases,'' end quote.
At UC Berkeley, at a forum speech that you gave in April of
2021, you said, and I quote, ``I have come to a singular
recognition and it is this: In order to maximize the speed and
safety of a move into a sustainable, durable, net-zero economy
and away from climate change disaster, we need to use the
financial regulatory apparatus to engage financial markets and
financial institution in effecting both direction and pace,''
end quote.
In June of 2020, the Ceres report came out, and you wrote,
and I quote, ``At the very least we must rebuild with an
economy where the values of sustainability are explicitly
embedded in market valuation. This transformation will come, in
part, from urging the leaders of 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,''
end quote.
How is that not advocating that regulators pressure the
financial institutions to allocate capital the way the
regulators want?
Ms. Raskin. Well, it is, of course, not the role of the Fed
to be directing credit allocation. They do not choose winners
and losers. The way supervision works is by looking at risk,
and by looking at risk wherever it may arise. You look at that
risk, and you have to do it in a very honest way, and ask
yourself whether there is any correlation between that risk and
the ability to hurt a financial institution.
Senator Toomey. Are you saying you no longer hold these
views that you stated about allocating capital as a result of
your perception of this risk?
Ms. Raskin. My views have been consistent, Senator. The Fed
should not pick winners and losers. They should not be exposing
taxpayers to undue risk.
Senator Toomey. Well, OK--I am sorry. There is no
reasonable reading of these articles and speeches that can come
to a conclusion other than that you want to be allocating
capital away from those industries that are generating large
amounts of CO2. I am sorry. I know you are saying something
different here this morning, but that is not what you have been
saying in writing for several years now.
Let me move over to Professor Cook. I have heard you talk
about the importance of getting inflation under control, but we
had a phone conversation a couple of days ago. In that
conversation I specifically asked you whether you agreed with
and supported the Fed's recent decision to gradually begin the
process of removing the ultra-easy money policy or whether you
thought they were acting prematurely. And what you said was,
well, somewhere in between.
So I am wondering if you can clarify that. Well, let me ask
a simple question. Do you now support the Fed's current path of
accelerating the tapering and moving on to a series of interest
rate increases over the course of this year?
Ms. Cook. Senator, thank you for that question. I am
certainly. When I think about these issues, I would like to
look at the data and evidence that would be at one's disposal,
if confirmed, to be able to make a decision about this. So I
did say it was somewhere in between before, and I agree with
the Fed's path right now, as we are speaking. But when we get
to a decision point I would look to the data, the evidence that
would be made available at that time.
Senator Toomey. OK. Well, there is a tremendous amount of
data that is out there. I mean, there are no secrets or mystery
about what the Fed's monetary policy is at any point in time.
There is no secret or mystery about economic data generally.
There are thousands of people across the country that are
constantly analyzing it.
It seems you have shifted from the in-between answer to now
saying you support what the Fed is doing. It is confusing to
me, and so could you give us some sense of how you view the
policies that are available to the Fed, how you think about
what we should be doing at this moment, have your thoughts on
the Phillips Curve changed given the developments in recent
years? Are you concerned about the change in what is happening
with the shape of the yield curve? Do you think exchange rates
are an important mechanism? How do we get inflation under
control?
Ms. Cook. Thank you for that question, Senator. I
understand that everyday Americans are suffering from high
inflation. This is something that I learned a lesson about more
recently, probably than most people--I have lived in countries
and advised countries--in a situation of hyperinflation. So I
am motivated by seeing the suffering of workers, of businesses
in just trying to plan their everyday lives and facing an
inflationary environment.
The way I would think about it would be, along with, if
confirmed, along with the deliberations. So you are right.
There are a lot of data available, a lot of data available. We
do not have access to all the data the Federal Reserve has but
we have a lot. And what we do not have access to is the
deliberations at the time that they are being made. And I work
collaboratively. I like to hear arguments as they are being
made.
And with respect to the shape of the Phillips Curve, what
we know in economics is that this is an open research question.
We know that there is a tradeoff between unemployment and
inflation, but we do not necessarily know what that
relationship is. And in times of uncertainty--and this is sort
of my specialty--and places of uncertainty in emerging markets
and developing countries, what we know is that we have to be
patient with the data. We have to ask about the data, whether
the data have changed, if they are reliable, still reliable,
and still valid.
So I would make sure that I pose questions of the data we
were receiving and engage with the deliberations with my
colleagues with an open mind, if confirmed.
Senator Toomey. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Toomey.
Senator Reed, from Rhode Island, is recognized.
Senator Reed. Thank you very much. Ms. Raskin, in your
opinion is the banking community more and more aware of the
impacts economically on climate change and taking steps to
alter their behavior?
Ms. Raskin. Well thank you, Senator Reed, for that
question. In conversations with bankers, you know, over the
course of my years, I open conversations with discussions of
risk. What are they seeing as emerging risks? What are they
concerned about?
I would say the number one issue that they talk to me about
has been in the realm of cybersecurity. When I ask bankers, you
know, what keeps you up at night it is usually the sense of
being under constant threat of cyberattacks. Why is it the
financial sector that seems to have a target on its back when
it comes to cyberattacks. That is where the money is, right?
So you would be really amazed to learn how much money banks
have spent actually trying to defend themselves against these
cyberattacks. They have set up war rooms where they are
constantly trying to fend off the constant threat of a
cyberattack. And why does it matter? It matters because it can
actually destabilize a financial institution.
In the early days of cyberattacks, you saw banks shut down
in very brief moments. As the cyberattacks have become more
voluminous and more varied in their methods and in their
vectors, you start to see now a pattern by which the
cyberintrusion has moved into the deep recesses of the bank's
plumbing, and this actually has presented great risk.
So cybersecurity. And this, by the way, has been one of the
hallmarks of the work I did at Treasury, where we attempted to
put together sort of a five-pronged approach to work with the
financial sector, help the financial sector defend itself
against cyberattacks. And we did this through various
approaches having to do with enhancing baseline protection,
information sharing, response and recovery, deterrence,
figuring out how to prioritize and coordinate. This was work
that also brought into play law enforcement and the national
security apparatus.
So to do cybersecurity, to deal with this risk effectively
I think requires a multisector approach. And we also know we
have in our American system a somewhat fragmented set of
regulators, and one thing that was important from the financial
sector's perspective is to have one voice here. So one critical
piece of work in the area of cybersecurity was to make sure
that the regulators were speaking consistently so that the
financial sector was not getting confused here regarding who is
saying what.
After we were able to bring together the work of the
different agencies within the U.S. Federal Government, you
know, it occurred to us that, hey, cyberthreats really do not
have borders here. So we needed to move this work
internationally, and there was quite a bit of work amongst the
G7 countries to build defensiveness in their own financial
sectors. And this resulted in a very strong document called
``Fundamental Elements of Cybersecurity for the Financial
Sectors of the G7.'' So this was a prominent piece of
cybersecurity risk management that was adopted.
So cybersecurity, in short, that is the number one risk
that I hear about. I hear about other risks too, and I
certainly am hearing quite a bit of focus on the effects of
climate. Climate also is something that banks have been
raising, certainly in my conversations. But thank you for your
question.
Senator Reed. Thank you very much. My time is about to
expire so Dr. Cook and Dr. Jefferson, I was very impressed in
our meetings. I look forward to supporting you, and I will have
some questions for the record which I will forward to you.
Thank you very much. Thank you, Mr. Chairman.
Chairman Brown. Senator Scott, from South Carolina, is
recognized.
Senator Scott. Thank you, Mr. Chairman. I would like to
associate myself with Senator Toomey's comments about the
harmful views of Ms. Raskin. I think Senator Toomey asked a
very honest, simple question. Do you mean what you say today or
did you mean what you have been saying for years, is really the
basic question he is asking. Because it is indeed dangerous to
use one's power as a regulator to pick winners and losers, and
you have advocated for that.
And to discriminate against industries that you find
distasteful would be a harmful precedent for the Fed. Ms.
Raskin's public comments of politicizing the Fed and using this
extraordinary power in ways that would harm millions of
Americans is more than just a little concerning.
A worker's hard-earned dollars does not go as far in
today's economy as it used to. This inflation-fueled economy is
eroding the spending power of everyday Americans working
paycheck to paycheck. The Democrats' tax-and-spend approach to
fiscal policy has driven up prices to a 40-year high since
taking office just a little over a year ago.
Folks at home in South Carolina keep telling me that they
have too much month left at the end of the money. Why is that?
Well, gas is almost 50 percent higher. Utilities nearly 25
percent higher. Used cars nearly 40 percent higher. Food,
clothes, and shoes, higher, higher, higher.
Now I am concerned that this Administration and their
chosen regulatory nominees want to make life even more
difficult for those hard-working Americans working paycheck to
paycheck to bridge these inflation-driven income shortfalls. In
2020, the Federal Reserve Board published a study on the cost
of making a small-dollar loan. Ms. Bloom Raskin, are you
familiar with that economic research from the Fed?
Ms. Raskin. No, I am not but I would like to learn more.
Senator Scott. Yes, ma'am. Well, one of the findings of
that research was--and I found it to be particularly alarming--
was that the report found that APR rate caps, even at 36
percent, would effectively eliminate lenders' ability to extend
consumer loans under $3,000. I am not sure if you realize the
powerful impact on eliminating loans at $3,000, because that
means that those Americans living in marginalized communities
like the one I grew up in would have to turn to pawn shops or
to a market that does not exist, a market that is not
regulated, that is not safe, and certainly a market that would
not be reliable.
That same year, you broadly characterized a spectrum of
existing small-dollar consumer credit options as a serious
threat to low-income communities before endorsing legislation
to establish a 36 percent interest rate cap on all consumer
loans. You further justified your support of a Federal cap by
stating opposition to such a cap is based either on a
misunderstanding of the needs of low-income communities or an
out-and-out support of predatory lending.
Ms. Raskin, I am opposed to a national APR rate cap, even
at 36 percent, because it simply eliminates an entire market of
small-dollar loans for people who need access, and according to
the Fed's report--I hope you have an opportunity to study that
report--it suggests that if you cap it at 36 percent you fully
eliminate a market for people like the one I was, and my mother
working as a single parent 16 hours a day, looking for access
to loans, eliminating that market simply means that you lose
the opportunity to fix your tire if it blows, or you lose the
opportunity to deal with the transmission, as we had to back in
those days.
And so what I am talking about is a real concern, not a
philosophical one, about what we do for Americans who lose
access to the market because we decide for them what the market
should look like. And I think that is a dangerous place to be.
But your characterization that either you are someone who does
not understand low-income Americans or you are someone who
supports the predatory industry. And as that kid, I have got to
say, I am not sure which one you would call me. Am I the person
who simply does not understand the needs and challenges of low-
income Americans, or do you put me in the category of someone
who is just a cheerleader for predatory lenders?
Ms. Raskin. Thank you for that question, and you are, you
know, exactly right. Small-dollar loans, I think, are a very
important source of credit, really to all Americans but
particularly those that need access to credit in a timely way.
The report that you are talking about, I look forward to
looking at it and understanding its methodology and how it came
to the conclusions that it did. But you are exactly right and
put your finger on an important challenge, which, of course, is
the availability of safe credit for people when they need it.
I think that there is more that can be done in terms of
providing access to safe, affordable, small-dollar loans. I am
aware that there is work underway to be looking at this, and I
think from that perspective it is an important issue that you
have put your finger on.
Senator Scott. Thank you, ma'am. I am out of time. Let me
just simply say this, sir. Thank you for your response, and I
will say that we led the efforts to have an interagency
framework developed around small-dollar lending, and the Fed
participated in that process. And I do look forward to your
response after seeing the report. Thank you.
Chairman Brown. Thank you.
Senator Menendez, of New Jersey, is recognized.
Senator Menendez. Thank you, Mr. Chairman. Just to follow
up on this conversation, you know, I have made it my mission to
try to not figure out how high interest payments low-income
borrowers should be able to pay but actually how do we end the
payday lender, the check-cashing place, the pawn brokers, the
portal of entry for this universe of Americans into our
financial system. Because while we want them to get access to
the ability to have such a loan, I do not know why
specifically, because of the nature of the status of what their
income is, they have to be, you know, committed to such high
interest rates. It seems to me that we should be putting our
collective will and effort together to creating portals of
entry for them.
Having said that, let me congratulate all the nominations.
I am glad to see the Biden administration is finally taking
steps to bring greater diversity to the leadership of the Fed,
but there is a lot more work to be done. Latinos are this
country's largest minority. They make up nearly 20 percent of
the United States population and yet they have no--underline
no--representation in Fed leadership.
So my question to all of you, if you are confirmed will you
commit to working with my office to increase the Latino
representation at all levels of the Federal Reserve? A simply
yes or no would work.
Mr. Jefferson. Yes.
Ms. Cook. Yes.
Ms. Raskin. Yes.
Senator Menendez. If confirmed, you will have an important
role to play in the selection process for presidents and
members of the board of directors at the 12 Federal Reserve
banks. Would you commit to working to ensure that diverse
candidates are considered for these positions? Ms. Raskin.
Ms. Raskin. Yes I will, Senator.
Senator Menendez. OK.
Ms. Cook. Yes.
Mr. Jefferson. Yes.
Senator Menendez. Thank you. So Ms. Raskin, one of the
lessons of the 2007 global financial crisis was that excessive
incentive-based compensation plans encouraged Wall Street
executives to take ever greater risks that ultimately pushed
our economy into a devastating recessing. When we passed Dodd-
Frank, one of the provisions I was able to include, that
Congress ultimately passed, instructed the financial
regulators, including the Fed, to jointly issue rules to rein
in these practices.
But in the nearly 12 years since Dodd-Frank was enacted we
have seen the CEO-to-typical-pay ratio balloon to over 351-to-
1, as well as a number of scandals, including the London Whale,
Wells Fargo fake account scandal, Archegos, and all of which
seem to be tied to executive pay incentives.
What we have not seen, however, is a strong incentive-based
compensation rule finalized by our regulators. So if confirmed,
will you commit to working with the other financial regulators
to develop a strong, incentive-based compensation rule?
Ms. Raskin. Thank you, Senator, for that question, and that
was--you are correct--a requirement in the Dodd-Frank Act. It
was a requirement with a deadline, and as far as I know that
deadline has happened and still there is no rule. There is
guidance but there is no rule, and yes, the answer, in short,
is yes, I would work to implement the law.
Senator Menendez. Thank you. That is a correct observation.
It is well past the time that Congress intended.
Also finally in that regard, would you make it a priority
to finalize the rule by the end of this year, if you were
confirmed?
Ms. Raskin. Well, if confirmed and I were there I would
certainly look into the issue as to the reason for the delay. I
believe there are a number of agencies involved in this, so I
would certainly commit to look at this issue.
Senator Menendez. There are, but we need leadership to move
the process forward, so I look forward to you having that
leadership.
Dr. Jefferson, if confirmed, you will have some difficult
decisions to make in the coming months and years with regard to
monetary policy. Inflation is running above desired levels, but
if we do not critically examine why that is the case, the Fed's
response could be counterproductive. Maybe it could even harm
the recovery.
Do you agree that the inflation levels we are currently
seeing are mainly being driven by supply chain bottlenecks?
Mr. Jefferson. Thank you for that question, Senator. I
believe that the inflation we are experiencing now has multiple
components to it. Certainly the pandemic is a very important
impact with regards to the supply side. We know that the supply
chain effects caused bottlenecks, and for the given level of
demand, supply is not able to meet it, and that puts upward
pressure on prices.
Senator Menendez. And finally, how does the supply side
nature of the current inflation inform the Fed's response?
Mr. Jefferson. Well, Senator, the tools of monetary policy
really cannot address these developments that occur on the
supply side in terms of resolving them. But the mandate given
to the Fed by the Congress is very clear, that the Fed has to
be mindful of maximum employment, and equally it has to be
aware of price stability and undertaking policy to preserve
price stability.
So in this moment, Senator, the inflation rate is high
relative to the Fed's target, and so the directive is clear.
The Fed must take steps to bring inflation back in line with
its targets.
Senator Menendez. Thank you, Mr. Chairman. I have some
other questions for the record. I have not had a chance to meet
these nominees but I look forward to your responses.
Chairman Brown. Thank you, Senator Menendez.
Senator Kennedy, from Louisiana, is recognized.
Senator Kennedy. Thank you, Mr. Chairman. Dr. Jefferson and
Dr. Cook, I may not get to ask you many questions today because
I want to concentrate on Ms. Raskin's proposal to change the
mission of the Federal Reserve. But I have read about both of
you. It is clear to me we disagree on some things in terms of
our politics, but in America you can believe what you want.
That is why it is such a great country.
Dr. Jefferson, I believe you are at Davidson. You are a
professor there?
Mr. Jefferson. Yes.
Senator Kennedy. There is no better place in America to get
a liberal arts education.
Dr. Cook, you are a Truman scholar?
Ms. Cook. Yes.
Senator Kennedy. And you are a Marshall scholar. You were
at St. Hilda's?
Ms. Cook. Yes.
Senator Kennedy. OK. Have you ever met a Marshall scholar
that was a dummy?
Ms. Cook. No, Senator.
Senator Kennedy. Me neither. The only advice, for what it
is worth, that I have for each of you is, number one, please do
not change the mission of the Federal Reserve. Please do not
let it be politicized. And number two, do not get caught up in
the group think over there. Only dead fish go with the flow. Do
not get caught up in the group think.
Now, Ms. Raskin, in May of 2020, the world economy is
melting down because the Government shut it down. We are trying
to hold it together with baling wire, duct tape, spit, and
happy thoughts. And you say that is great, but we ought to let
oil and gas companies go broke. Did you really mean that?
Ms. Raskin. Well, thank you, Senator Kennedy----
Senator Kennedy. You are welcome.
Ms. Raskin. ----for that question. And the Federal Reserve
has particular mandates----
Senator Kennedy. I know about all that, but did you--I
mean, did you mean it? You said it. Here it is, big as Davos. I
read the op-ed. You said save everybody but the oil and gas
industry and let them go broke. Did you really mean that?
Ms. Raskin. So I have been clear on my views. The whole
point of the op-ed was that the Fed should not pick winners and
losers.
Senator Kennedy. Except for oil and gas. You said they
ought to be allowed to go broke.
Ms. Raskin. The Fed should not pick or favor any sector at
all.
Senator Kennedy. Then why did you say it?
Ms. Raskin. The Fed is not in the business of choosing
winners and losers.
Senator Kennedy. Then why did you recommend to them that
they let oil and gas go broke?
Ms. Raskin. I did not recommend----
Senator Kennedy. Yes, ma'am. I read the op-ed. There it is.
I am not going to quote it to you, but Senator Toomey pointed
it out. Did you mean it?
Ms. Raskin. Senator Kennedy, I want you to understand the
proper role of the Federal Reserve. The Federal Reserve should
not be choosing winners and losers.
Senator Kennedy. Yes, ma'am. So you disagree with the
editorial?
Ms. Raskin. The editorial was one that I wrote, and I wrote
it in the context of the Federal Reserve's emergency lending
facilities. This was a special program set up by the CARES Act,
by the Congress, that appropriated taxpayer money. This was an
issue quite unlike the issue of supervision and----
Senator Kennedy. And you said do not give the money to oil
and gas. Let them go broke, because in my opinion they are bad
for the environment, didn't you?
Ms. Raskin. I want you to understand the context for that
article. That article did not have to do with supervision and
regulation.
Senator Kennedy. Dr. Raskin, you said it. You ought to own
it, OK? You ought to own it.
Ms. Raskin. I am sorry?
Senator Kennedy. You said it. You ought to own what you
said. I would respect you more if you did.
Let me move on to this business of allocating capital, and
look, this is America. You can believe what you want, and I
mean that. But I do not agree with your mission to politicize
the Federal Reserve.
Ms. Raskin. I do not think the Federal Reserve should be
politicized either.
Senator Kennedy. Well then why did you say it? Why did you
say, in this June 2020, piece, quote, ``Federal regulatory
bodies should allocate capital''?
Ms. Raskin. It is not the role of the Federal Reserve in
supervisory or regulatory matters in its functioning as----
Senator Kennedy. Then why did you write it?
Ms. Raskin. It was written in a context, Senator, that had
to do with emergency lending. It did not have to do with the
context of supervision and regulation.
Senator Kennedy. I feel strongly about charter schools, OK,
if some President or some Chairman of the Federal Reserve said,
``Let's all get together and allocate capital away, and lean in
on all the banks so they do not fund charter schools.'' Do you
support that? I mean, you support driving oil and gas industry
into bankruptcy. Do you think that would be a proper role for
the Federal Reserve?
Ms. Raskin. No. Obviously not. The Federal Reserve is not
to get involved in allocating credit to any particular sector.
Senator Kennedy. So you changed your mind.
Ms. Raskin. I have made myself completely clear. The whole
point of the op-ed was that the Fed should not pick winners and
losers or expose taxpayers to undue risk.
Chairman Brown. Senator Kennedy, your time has expired.
Senator Kennedy. Well, now you went 3 minutes over, Mr.
Chairman.
Chairman Brown. I did, and so did Senator Toomey, but we
need this hearing done by 11.
Senator Kennedy. Well, can I ask one more?
Chairman Brown. No. You have already gone 2 minutes over.
Senator Warner, you are recognized, from Virginia.
Senator Warner. Well thank you, Mr. Chairman. I would say
to my friend from Louisiana I think your appropriate admonition
about only dead fish go with the flow, maybe that could be
applied to both sides on our partisan basis too.
Senator Kennedy. Well, I agree with that. I do not even
know what parties they are in.
Senator Warner. I understand. I appreciate that.
Ms. Raskin, it is good to see you. I do want to note, we
all know you have got progressive views but I have been
actually very surprised and pleasantly surprised by the number
of Virginia bankers who have had experience with you and
believe very much that you are a fair and balanced regulator.
And I hope that is reflected in the record as well. Former
heads of the Independent Community Bankers and others have come
forward on supporting you, and again, I think that bodes well
for you.
I am also a little surprised. My understanding of the Fed's
role and responsibility is also to look at systemic risk. And I
tell you, in my State, when we call, it, you know, Hampton
Roads, our tidal regions, Norfolk, Virginia Beach, and others,
they have huge, huge risks to those economies because of sea
level rise.
Now they do not call it climate change because that may not
be the politically appropriate terminology, but I sure as heck
know that the banks, financial institutions, political
leadership, Democrat and Republican, on both sides in Hampton
Roads view sea level rise as an incredibly, incredibly
significant systemic risk, and I believe that risk is amplified
around. I think my friend, the colleague from Louisiana, they
have that same challenge around New Orleans and elsewhere.
So I do think, as we think about both questions of full
employment, systemic risk, these issues are extraordinarily
relevant.
I also have to tell you that one of the things I was hoping
to raise with you, Senator Reed raised and you kind of took the
answer and ran with it, and that was cyber, because I find when
I talk to bankers, when I sit in my role as Intelligence
Committee Chair, cyber is an omnipresent risk, and we should
all be alert now. God willing we are not going to see military
action coming out of Russia with Ukraine, but should there be,
a component part of that will be cyber. And as we saw from the
Russian attack against Ukraine in NotPetya, you cannot limit a
cyberattack to a geographic area. There were literally tens of
billions of dollars of losses in America due to the NotPetya
attack in 2015.
So my hope would be that cyber will continue to be a focus,
and you have addressed it pretty well. But I want to know if
there was anything else. You have had experience in cyber. Was
there anything else? You had a pretty comprehensive answer. And
I do want to get one other question in for you and Ms. Cook, if
possible, but I want to give you another chance.
Ms. Raskin. Yes. I appreciate your underscoring what
certainly has been my experience in talking to the financial
sector regarding cybersecurity. The threats are actually
evolving at a very quick pace. This is a type of warfare, you
know, as you might imagine, and the defensiveness of the
financial sector I think is really at stake here. Obviously,
you know, it is not the role of the Fed, certainly, to stop
cyberattacks, but I do think it is important from a supervisory
and risk perspective to make sure that the financial sector
feels that it has the defensiveness.
Senator Warner. Would not a massive cyberattack that could
potentially bring down part of our financial system, while
there are reporting requirements in the financial system there
is not for the balance of the economy. We have got a bipartisan
bill that was going to get into the defense authorization that
would at least require some level of mandatory reporting. But a
catastrophic cyberattack against our financial sector, would
that not be a systemic risk?
Ms. Raskin. Yes, I think it could.
Senator Warner. I agree with you.
Let me move quickly, because again, I want to honor the
Chairman's request to get all the questions in, and I would
like you to address, and I know Dr. Jefferson and I talked a
little bit about this. But I would like to get at least you and
Dr. Cook on this, and I will come back to Dr. Jefferson in
subsequent questions.
CDFIs, MDIs, critically important role. I think you both
have experience with them. How do we make sure that the Fed can
do more to shore up that critical component of our financial
sector, because clearly lending to low- and moderate-income
individuals has got to be a role if we are going to have
financial stability, economic stability, and close to full
employment.
Either one of you, please. Dr. Cook, do you want to take
that?
Ms. Cook. Thank you for the question, Senator. I sit on the
board of a CDFI and I have learned a lot about it, and I think
the Federal Reserve is beginning to engage in discussions about
CRA reform. And I think part of that is shoring up the funding
for CDFIs. They are critical in terms of getting funding to
where capital does not go, whether we are talking about urban
areas or rural areas. But certainly this is important for
entrepreneurship, for the dual mandate, the carrying out of the
dual mandate, especially maximum employment. So thank you for
your support of CDFIs, Senator.
Senator Warner. And I think huge opportunities with CRA
reform. Thank you, Mr. Chairman.
Chairman Brown. Thanks, Senator Warner.
Senator Hagerty, of Tennessee, is recognized.
Senator Hagerty. Thank you, Mr. Chairman. First I would
like to direct my first questions to each of the nominees, and
congratulations to you on your nomination. First I would like
to ask each of you, have you currently or have you ever
embellished any part of your resume, your background, or your
publications.
I will start with you, Dr. Jefferson.
Mr. Jefferson. No, Senator.
Senator Hagerty. Ms. Bloom Raskin.
Ms. Raskin. No, sir.
Senator Hagerty. Dr. Cook.
Ms. Cook. No, sir.
Senator Hagerty. Dr. Cook, whether intentional or
unintentional, it appears that you made a number of omissions
in the paperwork that you submitted to this Committee, and you
have made several mischaracterizations of your background. But
even more concerning to me, with respect to your nomination, is
that your background, although very impressive--that you
covered with Senator Kennedy--does not seem related to the
mission of the Federal Reserve. As I look at your list of
publications and your speeches, it seems more like social
science than it does economics and monetary policy.
Can you describe for me in more detail what your economic
specialty is?
Ms. Cook. Senator, thank you so much for that question. I
certainly am proud of my academic background. I know that I
have been the target of anonymous and untrue attacks on my
academic record.
But I would like to tell you about my academic record, and
that is relevant. I have a Ph.D. in economics from the
University of California at Berkeley. I specialized in
macroeconomics and international economics.
Senator Hagerty. I am aware of that. I would like to get to
that in the questions for the record. There are a number of
issues about claiming that articles were peer reviewed when
they were not, the characterization of your academic
affiliations, but we will get to that in the questions for the
record.
My question for you now is if you would underscore what
your academic specialty is and how it is related to monetary
policy.
Ms. Cook. Sure. I would answer that in several ways. First,
I specialize in managing financial crises, and I have done that
in several instances. At the Treasury Department I was at the
financial crisis think tank and worked closely with John
Taylor, with Secretary Summers, and others in managing
financial crises. At CEA I was the person who was in charge of
managing the eurozone crisis at CEA, and I worked
collaboratively with NSC to do that.
So I have publications that are related to banking reform
and recognizing systemic risk. So I take the research that I do
and I turn it into something in the field, and that is what I
do at a land grant institution.
Senator Hagerty. Thank you. Well, monetary policy is a very
blunt and a very potent tool, and I would have expected someone
with deeper experience in the monetary policy realm. But I
appreciate you being here and thank you for your answer.
Ms. Raskin, I would like to turn to you. I want to talk to
you about the actions last December that took place at the
FDIC. There, CFPB Director Rohit Chopra and Interim Director
Martin Gruenberg took actions to basically eviscerate the
Chairman's role there at the FDIC before her term expired, and
it was deeply troubling to me and a number of Members of this
Committee. It broke historical precedent, it was a remarkable
undermining of the independence and the integrity of our
financial regulators, and I want to ensure that a situation
like this does not happen at the Fed.
In her nomination hearing in front of this Committee,
Governor Brainard committing, committed to deferring to the Fed
Chairman to set the agenda at the Federal Reserve Board. So Ms.
Raskin, if you are confirmed, do you commit to doing the same?
Ms. Raskin. Yes I do, Senator.
Senator Hagerty. Thank you. The last thing I want to see is
another coup d'etat like we saw at the FDIC, and this Committee
is here to backstop and ensure that that does not happen.
Ms. Raskin, another questions for you. Are higher gas
prices good or bad for America?
Ms. Raskin. Thank you, Senator. I have to say, higher gas
prices really do hit. In my neighborhood they are up to $3.33 a
gallon. You know, you go into a gas station now to fill your
tank and you say, you know, should I actually really fill it? I
mean, maybe you----
Senator Hagerty. We are running tight on time. Is that good
or is it bad for America?
Ms. Raskin. Well it certainly hurts your pocketbook.
Senator Hagerty. It absolutely does that. And I am very
concerned, given the level of inflation that we are
experiencing right now and the Fed's role with respect to
inflation, the policies that you have supported, as my
colleague, Senator Kennedy, discussed with you, I am very
concerned about weaponizing the Fed and using it to attack
industries like the oil and gas industry, particularly right
now when we see energy prices through the roof. This sort of
move would not only make inflation worse in America when it is
already running rampant, but it would also make us more
dependent on others, for them to supply oil and gas to us
because you want to choke off oil and gas here in America and
make us less secure as a Nation.
So it is very concerning to me, and again, I realize we are
out of time but I would like to underscore the fact that I
think it is highly inappropriate to begin to weaponize the
regulatory construct of the Federal Reserve in any manner that
might be pursuing issues outside the mandate of price stability
and full employment.
Thank you, Mr. Chairman.
Chairman Brown. Thank you. Senator Cortez Masto, from
Nevada, is recognized.
Senator Cortez Masto. Thank you. Let me ask, right off the
bat, thank you, first of all, all three of you for the
opportunity to meet with you and have a conversation with you.
But let me ask you this. The board that you are looking to be
nominated to, there are seven members. Can any single one
member weaponize the mission of the board? Yes or no.
I will start with Ms. Raskin.
Ms. Raskin. No.
Ms. Cook. No.
Mr. Jefferson. No.
Senator Cortez Masto. Thank you. That makes me feel much
better.
Dr. Cook, you have held many high-profile leadership posts.
Let me ask you about your previous leadership positions with
other regional Federal Reserve banks. I know you serve on the
Advisory Council for the Opportunity and Inclusive Growth
Institute, led by the Federal Reserve Bank of Minneapolis, and
you also are a board member for the Federal Home Loan Bank of
Indianapolis.
How have these positions prepared you to serve on the
Federal Reserve Bank?
Ms. Cook. Thank you for that question, Senator. I have come
to know the needs and opportunities associated with rural
communities through my service through the Federal Home Loan
Bank of Indianapolis. Certainly community banks are struggling.
There has been a secular decline in them over the last 30
years. But they provide absolutely critical capital to small
communities and places where capital does not show up.
My membership on the board of directors of CDFI, same
thing. CDFIs provide capital. They are pillars of their
communities, where capital does not typically flow. And what we
know about the United States is that entrepreneurship is a
tried-and-true path to the middle class, and both those
institutions, whether through affordable housing through the
Federal Home Loan Bank of Indianapolis or through supporting
entrepreneurs would help to support this American dream of
entrepreneurship.
So I have been grateful for those opportunities and they
would inform, if confirmed, my deliberations on the Federal
Reserve.
Senator Cortez Masto. Thank you. I appreciate that. I also
really appreciate the opportunity that I see before me. I think
that diversity is important for this particular board because
it is important that the members really mirror, represent the
rest of the country. How are we going to understand the needs
of so many individuals across the country if we do not have
that representation at all levels? So I appreciate all of you
appearing before me today.
Let me ask you, Ms. Raskin, we worked so hard during this
last pandemic to appropriate the CARES bill, the American
Rescue Plan, the Infrastructure Investment and Jobs Act, and
they provided important relief to families while also looking
to do long-term investments in health and housing and
infrastructure.
I also know, coming from Nevada, that the last financial
crisis, it took us 7 years to come out of that financial
crisis. So my question for you is, what were the lessons that
we learned from that last financial crisis and how did they
help us as we look to this financial crisis to avoid that
extensive economic pain for Americans during this pandemic? If
you would reflect on that.
Ms. Raskin. Yes. Thank you for that really interesting
question, Senator. And, you know, I think the lessons are still
to be learned, because we have not completely emerged,
certainly, from the effects of the pandemic. But I think you
are right to point to differences in approaches both from the
perspective of monetary policy and fiscal policy that were
taken and the extent to which, different mix of policies had an
effect.
I mean, in one dimension I think what we saw was that the
financial sector seems to have done quite fine during what was
a massive blow that came from the pandemic. That was good to
see and suggests certainly something about the resilience that
the financial sector had going in and the mix of policies that
were available to respond.
So I think this is an evolving question, but it is one we
should always, as policymakers, and if I were confirmed I would
urge us to always be trying to think back. I mean, it is pretty
amazing that for many of us now there have been two crises in
our lifetimes. So there are things to learn, and I think that
trying to understand those learnings will certainly help as we
continue to build economic resiliency going forward.
Senator Cortez Masto. Thank you. I know I have gone over my
time. Dr. Jefferson, thank you again for meeting with me. I
will submit the remainder of my questions for the record.
Congratulations to all three of you.
Chairman Brown. Thank you. Senator Lummis, of Wyoming, is
recognized.
Senator Lummis. Thank you, Mr. Chairman, and welcome,
nominees. My questions are for Ms. Raskin. I would like to ask
you about Federal Reserve master account access. This is an
issue of great interest to Wyoming and my constituents. I asked
Chairman Powell about it. I asked Governor Brainard about it at
their nomination hearings. I have been stonewalled at the Fed.
And so I wrote an op-ed in the Wall Street Journal.
Master accounts are the way banks access the payment
system. Many nonbanks, including trust companies have applied
and failed to receive a Fed master account. To my knowledge,
there is one, and only one State-charted trust company that has
a Fed master account. It is a startup based in Colorado, formed
in 2016, called Reserve Trust.
Reserve Trust has repeatedly touted the value of the
company's Fed master account. Their homepage says, in 2021, one
of the company's investors underscored that Reserve Trust is
armed with a master account at the Federal Reserve and direct
access to the payment rails, the only company in the country
that has that, the only fintech company.
Now a Fed master account gives Reserve Trust an enormous
advantage over everybody else, since it appears they are the
only one who has it. And you are very familiar with Reserve
Trust because you joined their board in May 2017, just 4 months
after leaving Treasury. Right?
Ms. Raskin. Well, thank you for your question. I joined the
board of Reserve Trust in 2017----
Senator Cortez Masto. And your Treasury came after 4 years
as a Federal Reserve Governor. Right?
Ms. Raskin. Four years? Well, after I left as a Federal
Reserve Governor I went to Treasury as Deputy Secretary of
Treasury.
Senator Cortez Masto. Right. You went from the Federal
Reserve Governor to Treasury, and then to Reserve Trust's
board, and then Reserve Trust had its master account
application denied in June 2017. But 1 year later, the Fed
granted it a master account, in 2018.
It is a mystery to me how dozens of fintech companies have
tried unsuccessfully, and how Wyoming's SPDI charter has been
under review for well over a year, two-and-a-half years at the
Fed, consulting with them about how to make this qualify.
How did Reserve Trust get there so quickly? After Reserve
Trust had their application denied, did you communicate with
the Federal Reserve about Reserve Trust's application?
Ms. Raskin. So, Senator, I was on the board of Reserve
Trust, on the board of directors, from 2017 until 2019.
Senator Cortez Masto. And they got their master account in
2018. So did you call or communicate with the Federal Reserve
about Reserve Trust's application?
Ms. Raskin. Well, certainly if you are suggesting anything
improper I want to make very clear that I have, first of all,
had the honor to serve in various public capacities, and each
time I left I have been very mindful of the rules regarding
departure.
Senator Cortez Masto. Well, it is my understanding you did
call the Kansas City Fed in August of 2017 regarding Reserve
Trust's master account application. So I have significant
questions about your involvement in Reserve Trust efforts to
obtain a master account.
So Reserve Trust is denied. You go on their board. Then
they get a master account. Did you communicate with the Board
of Governors about Reserve Trust's application?
Ms. Raskin. So I can assure you that I have been very
focused----
Senator Cortez Masto. Well, who did you communicate with?
Ms. Raskin. First of all, I want to be very clear here. The
Federal Reserve has approved plenty of master accounts----
Senator Cortez Masto. But not in fintech. You resigned from
Reserve Trust in August of 2019. Correct?
Ms. Raskin. August 2019 I left the board of Reserve Trust.
Senator Cortez Masto. Correct. Now do you know Amias
Gerety?
Ms. Raskin. Yes, I do know Amias Gerety.
Senator Cortez Masto. OK. So while you were number two at
Treasury, Mr. Gerety was the Acting Assistant Secretary for
Financial Institutions, and he reported to you. Right?
Ms. Raskin. He did not report directly to me but yes, he
was at Treasury when I was there.
Senator Cortez Masto. And he is also a partner at QED
Investor, which is now the controlling owner of Reserve Trust.
So in 2020, QED Investor purchased the 195,000 Reserve Trust
shares you received when you joined the board in 2017, and they
purchased your shares for almost $1.5 million. Even in this
town that is a lot of money for being on a company's board of
directors for 2 years.
So let me recap. You leave Treasury, you serve on the board
of Reserve Trust for 2 years, their first application for a
master account is denied, but after the denial you call the
Federal Reserve, and Reserve Trust receives a Fed master
account, the only State-charted trust company in the country to
get one, and you walk away with $1.5 million.
Something does not smell right with the way this played
out. My State's companies, my constituents have been
stonewalled, have been slow-walked, and have not been able to
get approval, even though they have been working with the Fed
for 2.5 years on our very specific guidelines for getting
master accounts.
Now, Mr. Chairman, I do not know the details here, because
the Fed has not provided us with any documents we have asked
about Reserve Trust's master accounts. But I think this
requires additional scrutiny by the Committee, and I look
forward to receiving it.
Thank you, Mr. Chairman. I yield back.
Chairman Brown. Senator Warnock, from Georgia, is
recognized.
Senator Warnock. Thank you so much, Chairman Brown, and
congratulations to Ms. Raskin, Dr. Cook, and Dr. Jefferson, for
your nominations to leadership at the Federal Reserve Board.
Congratulations to all of you.
But I would like to take a moment to especially
congratulate Georgia's own Dr. Cook. As a child, Dr. Cook was
one of the first Black children to integrate her public school,
and has since spent a lifetime breaking racial and gender
barriers. Since graduating from Spelman College, in HBCU I know
a little bit about, across the street from my Morehouse
College, located in the heart of Atlanta, Dr. Lisa Cook, you
have committed decades of your life to pushing the field of
economics forward and sharing your knowledge with the world.
And based on your clear qualifications and readily apparent
expertise, it is clear--it is clear--that your nomination to
the Federal Reserve Board will continue our important work to
have an economy that works for all Americans.
And we cannot ignore that your historic nomination to the
Federal Reserve Board will serve as an inspiration for
generations of young Black women, who would like to study
economics and dedicate themselves to work in the highest levels
of public service. If we are to have an economy that works for
all Americans, the Federal Reserve Board needs to look more
like all Americans.
And so I am proud of your nomination, and Georgia is proud
of your nomination, and I look forward to voting for you both
in this Committee and on the Senate floor for your
confirmation.
Georgians are feeling the rise and the crunch of rising
costs on their everyday lives, and as Chairman Powell said
before this Committee during his own nomination hearing a few
weeks ago, some companies may be raising prices simply because
they can.
We are seeing this in corporate earnings. Follow the money.
The evidence is there. These costs are being borne most acutely
by everyday Georgians and small businesses, having an adverse
impact on our economy. For example, the average price for a
gallon of gas in Georgia has gone up by 4 percent in just the
past month. In Brunswick, that increase is almost 6 percent,
down in old Brunswick, Georgia, all while profits among the
largest oil and gas companies soar. So they are doing more than
passing on the costs.
Dr. Jefferson, when considering systemic risks to our
economy such as inflation and increasing costs, what
considerations do you give to corporations and wealthy
executives choosing profits over the stability of our economy?
Mr. Jefferson. Thank you, Senator, very much for your
question. And the concern that American families have with
inflation is real because they feel it in their pocketbooks,
impacts what they are able to do from a week-to-week basis. It
impacts their outlook for the future.
And so what the Fed can do is think about the full menu of
prices that American families have to contend with and conduct
monetary policy in such a way that, on average, those prices
are consistent with its target.
With respect to the issues of concentration that you are
indicating, there are other regulatory bodies that are more
geared and prepared and skilled at looking at the concentration
of industry. What the Congress has mandated that the Fed do is
think about inflation overall, and if I were confirmed, I would
keep the Fed's focus on that and trust that other agencies of
the regulatory structure would look closely at issues of
concentration.
Senator Warnock. So what kinds of tools might you use to
address this issue?
Mr. Jefferson. Well, Senator, the tools that are the Fed's
would not be able to meet the issues of industry concentration.
On that side of the economy, that is not something that Federal
Reserve instruments--I am thinking about concentration outside
of the financial sector--that is not something that Fed policy
can address directly.
Senator Warnock. Well, it is something I am concerned about
and it is why I asked the White House Supply Chain Disruptions
Task Force to investigate these practices by international
cargo carriers, for example, out in the port in Savannah where
we were dealing with this issue and we were able to loosen $8
million to help with the congestion there. But we are seeing
these rising prices.
Dr. Cook, how would you respond to these issues?
Ms. Cook. Thank you for that question because I have seen
those gas prices going up as I was vacationing in Georgia with
my family over the holidays. I think that this issue, as Dr.
Jefferson was saying, is largely outside the purview of the
Federal Reserve. However, I think that it deserves more study,
and we have, especially if there is any threat to financial
stability, for example, or relates to the Fed's supervisory
role, that would deserve more study.
Senator Warnock. Thank you so much. Dr. Raskin.
Chairman Brown. Senator Warnock, you----
Senator Warnock. I am out of time.
Chairman Brown. ----your time has expired. If you would,
because Members want to go to the 11 briefing.
Senator Warnock. Absolutely.
Chairman Brown. Senator Cramer, from North Dakota, is
remote from North Dakota, I believe. Senator Cramer.
Senator Cramer. Thank you, Mr. Chairman. Thank you for
accommodating this format. And thanks to all of our witnesses
and congratulations to all of you on being nominated.
I have been watching intently and taking some notes, and I
want to explore a little deep, Ms. Bloom Raskin, on the
context, your exchange with Senator Kennedy, where you were
trying to explain the context of your editorial, your op-ed
relating to risk and the oil and gas industry in particular,
the fossil fuel industry, in particular.
I went back and read that same piece after that exchange,
to familiarize myself both with the content and the context.
And you are right in that you were writing in response to the
expansion of the Main Street Lending Program that we worked
hard to get, because oil and gas industry, huge jobs industry
and huge national security industry in our country, was being
sort of set aside, ignored if you will, by the Main Street
Lending Program. And yet we were building bridges for all kinds
of other industries, not more important certainly than the oil
and gas industry.
So you are right that that was the context which you wrote
in your piece, but as I read the piece you did not confine your
advice or your opinions to simply the Main Street Lending
Program. There was no strategic ambiguity whatsoever in your
statements. And I am very concerned going forward, not just
because there is a single nominee that shares these views that
you share so vehemently and so rigorously, but rather that
there have been lots of them in lots of areas, lots of
agencies, and more than one or two with the Federal Reserve,
various positions in the Federal Reserve.
I am very concerned about that. I have appreciated your
reiterating the script that the Fed's job is not to pick
winners and losers, but once you are in a regulatory role it is
not just the regulations that matter but it is, as much as
anything, the regulators themselves. So I have great concerns
about your position and the increased power that you want to
give to the Federal Reserve as it relates to allocating capital
away from legal commerce.
You used an interesting word in describing the parameters
as you see them. You used the word ``resiliency.'' That is an
important word. It means something very important. But it also
reads a lot into our economy as it relates to energy. And so I
wanted to sort of flip the script a little bit on you and ask
if you think that it is a risk that banks ought to consider if
the market that they support has a less than reliable or
resilient supply of energy.
You know, if you are a Texas or other parts of the South or
the Southwest, Midwest, that has failed resiliency tests in
recent times, or the Northeast, or California, where they have
gone away from baseload electricity, for example, and replaced
it with more intermittent forms of electricity, that people
actually die when that electricity does not work during certain
times, or that manufacturing has to be curtailed during certain
times because they are very energy dependent, is that a risk
that you think that banks ought to consider and that the Fed
ought to keep an eye on?
Ms. Raskin. So thank you, and thank you for attempting here
to understand context. And I do want to underscore that the
Federal Reserve, as far as I know, is not looking to expand its
powers. The Federal Reserve has mandates, very clear mandates,
that Congress has provided, and the Federal Reserve, I hope,
and certainly if I were confirmed, needs to always act within
those parameters. It is absolutely critical to independence. It
is critical because it is the law. And it is necessary to not
get into positions of regulatory overreach or regulatory
matters that are way beyond the purview.
And what is way beyond the purview? Well, one thing that is
way beyond the purview is that it is banks, bankers, who are
making the decision about who to lend to. That is not a Fed
decision, and it never should be. I do not have any evidence to
suggest that it is or that it would be, but it is not a
regulator and supervisory function for a regulator to take over
the basic business decision that the bank is making.
And why is that? Because banks exist--first of all, they
are private entities, right, and they are in the best position
to know what kind of loans should be made. They are in the best
position to know what kinds of terms need to be structured
around any kind of credit extension. That is their expertise,
and that is an expertise that I would argue needs to be
maintained.
So I certainly appreciate the cardinal principle that the
Federal Reserve does not exist to be favoring any particular
sectors, and the regulatory approach should not be in any way
choosing certain sectors over others.
Senator Cramer. I know I am well over, Mr. Chairman. Thank
you for indulging me. I will provide some more comments on the
record.
Chairman Brown. Thank you, Senator Cramer.
Senator Tester, of Montana, is recognized.
Senator Tester. Yeah. Thank you, Mr. Chairman and Ranking
Member Toomey. I appreciate it. And Governor Bloom Raskin and
Drs. Cook and Jefferson, thank you for being here.
Look, I think it is critically important that the Fed gets
all the information that they can when they are dealing with
risk to our financial system, and I think that it is rather
obvious that climate change has to be part of the information
that you gather. And why I say that is because I have been 44
years plus on our farm. It has been in the family for over 110
years, and things have changed. And the proof of that is that,
I believe it was in 2020, 40 percent of the farmers' income
came from the Federal Government, because of consolidation in
the industry and climate change. Last year we spent $140
billion of hard-earned taxpayer dollars on climate change
issues.
Banks are important. As somebody involved in agriculture,
we need to have access to dollars. That is where it is at, is
in the banks. We do not want these banks to go under, and I
know that there are many on this Committee that say, ``Give me
one example.'' I can tell you one of the reasons they have not
gone under is because we have put out $140 billion last year
and we have got crop insurance. Without those, those banks
would be in serious trouble.
But the truth is this. There has been a lot of discussion
around what the Fed should be doing or should not be doing.
This is question for you, Governor Raskin. In your role as the
Federal Reserve or any other Federal or financial regulator, in
your opinion do you believe that we should be discouraging
banks, or you should be discouraging banks in the Federal
Reserve or any other Federal regulator from lending to carbon-
based fuels like coal, oil, or gas?
Ms. Raskin. No, I do not.
Senator Tester. Drs. Cook and Jefferson, do you agree with
that opinion?
Ms. Cook. I agree.
Mr. Jefferson. I agree.
Senator Tester. OK. When Chairman Powell and Governor
Brainard were before this Committee I asked them about the
Fed's independence, as I did each one of you when we met on
Zoom a few days ago. I think it is absolutely--absolutely--
critically important that the Fed remains independent. I saw
former President Trump try to influence the Fed and take
actions for his own political gain, not for the well-being of
this economy, and I am grateful that Chairman Powell--and that
is one of the reasons I supported him in the position as
Chair--and the Board's commitment to maintain that Fed
independence under intense pressure. And I might add, political
pressure from the right or the left is inappropriate on the
Fed.
So I want to know, because you guys answered this question
correct and I thank you--you believe the Fed should be
independent--could you tell me why it would be a mistake to
allow politics to influence our Nation's monetary policy? And
be as brief as you can. I will start with you, Governor Raskin.
Ms. Raskin. Well thank you, Senator Tester. The Fed's
independence is absolutely sacrosanct. You are exactly right
that it cannot be compromised in any way from political forces
on any side. The supervision and regulation of the Fed, as well
as the conduct of monetary policy has to be beyond reproach,
and that is critical to our functioning as an economy and as a
society. So I cannot state more emphatically the importance of
independence.
Senator Tester. Dr. Cook.
Ms. Cook. Senator, I have advised in a number of emerging
markets and developing countries where the central bank was not
independent, and everyday citizens of those countries suffered
tremendously as a result, typically with respect to
hyperinflation or at least high inflation environments. And I
would say that I would be committed to Federal Reserve
independence, and I would make sure that everyday Americans did
not suffer what I saw abroad.
Senator Tester. Dr. Jefferson.
Mr. Jefferson. Senator, one of the assets on the Fed's
balance sheet is the trust of the American people, and that has
built up over time because of the Fed's adherence to the
mandates given to it by the Congress. So that cornerstone of
independence underlies all that the Fed could hope to achieve
for the well-being of the American people.
Senator Tester. Thank you all for your testimony. Thank
you, Mr. Chairman.
Chairman Brown. Thank you, Senator Tester.
Senator Moran, of Kansas, is recognized.
Senator Moran. Mr. Chairman, thank you, and thank you to
our nominees for being with us today. I congratulate you on the
position you are in today.
I have been very interested in the responses I have head
both on television and in the Committee room, to Senator Tester
and Senator Cramer in particular. I come here troubled. You
seem to all say, particularly you, Ms. Raskin, the thing I want
to hear: I want a Federal Reserve that is not going to pick
winners and losers. You commit to that. You indicated in
response to the question that you should not be regulating in a
way that discourages banks from making independent decisions
about whether or not they should loan to energy and oil and gas
companies. That is the right answer from my perspective.
What troubles me is that we all, in our politics, in our
views, we want a result, and we seem less interested in the
process by which we get that result. The Federal Reserve is not
the entity to make the decision about whether this country
moves forward or in a different direction with oil and gas,
with energy production.
It is certainly the free-market system but it is perhaps
Congress, Congress or the President. It is not an Executive
order. It is not a decision by the Federal Reserve. The
decisions we make here, in too many instances, Republicans will
set aside the process to get the result, the Democrats set
aside the process to get the result, and it is not always about
the result because the process is what makes us a free Nation.
So I need greater assurance than what you are attempting to
give me that you will not use the Fed to diminish the role of
the energy sector, or any other private sector. I do not look
at this any differently than if you came here to tell me you
were going to use the Fed to promote an industry. You are
neutral in what is a legal business in this country, and in my
view you have no opportunity, none, to try to discourage the
oil and gas industry from existing or prospering, just like you
have no authority to decide that when we want solar energy or
wind energy and we are going to promote it by regulations of
our financial institutions.
I am troubled by what Chairman Powell said in response to
the Chairman in his questioning, that the Chairman is going to
defer to you, Ms. Raskin, on this topic. And you said, in
response to the question of the Senator from Nevada, you
responded that it takes all of you to make a decision. No one
can do it.
And so I am troubled by any of the nominees who have the
belief that there is a path by which you can regulate a legally
authorized, existing business. That is an issue for the
political process. And we talk about transition. You all talk
about transition. You know, the transition is societal shifts.
It is gambles. It is predictions. It is not economics for the
Fed to be engaged in trying to figure out the societal changes
of our Nation. What am I missing?
Ms. Raskin. Well, thank you. The record for me is the
record that I have had as a bank commissioner in the State of
Maryland, already as a Fed Governor, and as Deputy Secretary of
the Treasury, and I cannot state more emphatically than I
already have that it is not the role of the Federal Reserve to
get engaged in favoring one sector.
Senator Moran. So Ms. Raskin, if it is not the role----
Ms. Raskin. Yeah.
Senator Moran. ----then are you saying you cannot do it and
will not do it?
Ms. Raskin. I am saying I view it as outside the bounds of
the law. The Federal Reserve was set up by Congress, and with
particular mandates, and as a lawyer I live within those
mandates.
Senator Moran. So let me ask you, as a lawyer, is there a
path that you see, in any fashion, in which, if it is your view
that the oil and gas industry, fossil fuels, need to be
diminished in the role of this Nation, in our economy, is there
any path for you to accomplish that as a member of the Federal
Reserve?
Ms. Raskin. I certainly have not explored that and would
imagine there is no such path.
Senator Moran. I wish you could say that more firmly, that
there is not a path and there is nothing you can pursue.
Ms. Raskin. Do you have an idea for me? I mean, I am not
sure I see any attempt in any supervisory context or within the
existing mandates of the Federal Reserve that have been set up
by Congress to do anything that would favor a specific
industry. That is not how regulation and supervision is done.
Senator Moran. You are telling me I have nothing to worry
about.
Ms. Raskin. I would be curious as to whether you are
thinking of something in particular, but I certainly do not
see----
Senator Moran. No trick question. I just wanting to know if
you have any plan, any path, any desire----
Ms. Raskin. No. None.
Senator Moran. And if you had the desire, you cannot
accomplish it.
Ms. Raskin. Correct. I have no desire, and if I had the
desire I could not accomplish it.
Senator Moran. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Moran.
Senator Warren, from Massachusetts, is recognized.
Senator Warren. Thank you, Mr. Chairman, and
congratulations to all three of our nominees. It is good to see
you here today.
So 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 would 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 threats to the
financial stability correctly describe your views as well?
Professor Bloom Raskin, let's start with you.
Ms. Raskin. Yes. That statement sounds correct to me.
Senator Warren. Thank you. Dr. Cook.
Ms. Cook. Yes.
Senator Warren. Dr. Jefferson.
Mr. 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?
Ms. Raskin. Yes, it does.
Senator Warren. And Dr. Cook.
Ms. Cook. Yes, it does, Senator.
Senator Warren. And Dr. Jefferson.
Mr. Jefferson. Yes.
Senator Warren. OK. 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.
Ms. Raskin. Yes.
Senator Warren. Dr. Cook.
Ms. Cook. Yes.
Senator Warren. Dr. Jefferson.
Mr. Jefferson. Yes.
Senator Warren. All right. I am going to 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 the risks they are
taking, including the risks that may be inherent in their
business models regarding climate change over time.''
Once again, going down the line, do you agree, Professor
Bloom Raskin?
Ms. Raskin. Yes.
Senator Warren. Dr. Cook.
Ms. Cook. Yes.
Senator Warren. Dr. Jefferson.
Mr. Jefferson. Yes.
Senator Warren. Thank you. I will 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 did not
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 is going on here? Why are
the Republicans so stirred up by a mainstream position? Why is
it OK when Jerome Powell says that climate issues are part of
the Fed's mandate but it is not OK when Professor Bloom Raskin
and other nominees say the same thing? Why is the Chamber of
Commerce funding a multimillion-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 is not 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 are 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 have 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. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Warren.
Senator Tillis from his office is recognized, from North
Carolina.
Senator Tillis. Thank you, Mr. Chairman, and
congratulations to all of the nominees before us today. You
know, if you are confirmed you are going to have to vote on how
things are supervised and regulated. This part of your job goes
outside of the view of the public, sometimes by necessity, but
some of it needs to be transparent.
In one case, the Fed has issued or used an asset cap to
restrict growth of a bank and its ability to compete. So I want
to ask this of each of the nominees. In the instance the asset
cap has been used, it has been for a number of years now, since
the financial crisis, and it was a drastic penalty that I
believe we now need to question whether or not it should be in
place or whether we should provide clarity or a roadmap for
growth going forward.
So maybe starting with Mr. Jefferson and then Ms. Cook and
then Ms. Raskin, I have got three questions for you. Number
one, what are the conditions that you think would be reasonable
to lift the asset cap? Another one, when will it be used again?
And the third one, does a bank need to be perfect to get it
lifted?
Mr. Jefferson. Senator, thank you very much for your
question. It sounds like it is very specific and in an area
where I do not have expertise. And so what I would like to say
in response to your specific questions is that if I were
confirmed I would look forward to learning more about this
particular set of issues, and I would welcome the opportunity
to invest my time to work with you and your staff to become
better educated about it.
Senator Tillis. OK. Just first off I should have thanked
you for the time that we spent on the phone. I enjoyed the
conversation. And you and I do not live too far apart, down in
North Carolina. But we did talk about the need for a healthy
ecosystem, and I think that these caps at the top end of the
ecosystem, over time, might be damaging to the overall health
and hygiene of the entire ecosystem, which includes small
banks.
Ms. Cook.
Ms. Cook. Thank you for your question, Senator. The way I
would look at it would be to assess the risk to the system and
make sure that the financial system remains resilient. That is
within the purview of the Federal Reserve's role and bank
supervision.
Senator Tillis. So would you--with that response I have got
limited time. I am sorry to interrupt. I do not like doing
that. But does that mean that we could look at rules of the
road and get rid of this arbitrary cap, and that that is
something that you would be open to discussing?
Ms. Cook. It is something that, because, like Professor
Jefferson, I am not as familiar with this particular issue, I
would look forward to studying it with an open mind and having
deliberations with my colleagues, if confirmed, with an open
mind.
Senator Tillis. Thank you. Ms. Raskin.
Ms. Raskin. So, Senator Tillis, you point to a very
important feature of regulation which is clarity, and I think
that if there are ways to improve a regulation, by making it
more clear I think is a huge plus, it is a huge service, and
yes, I would commit to look at any rule or regulation that
requires more clarity.
Senator Tillis. Thank you. Professor Cook, you previously
stated you agree with the statement ``the Black unemployment
rate is a better indicator of the health of the overall economy
than a lot more standard metrics that many people use today.''
Do you still stand by that statement?
Ms. Cook. Senator, when I think about the unemployment rate
in general it is not just one unemployment rate. There are many
different unemployment rates. There are unemployment rates
for----
Senator Tillis. I am sorry. I am glad you have gone in that
direction. I am about to run out of time, so what specific
standard metrics do you believe should be discarded in favor of
this or other metrics?
Ms. Cook. Oh, I do not believe any should be discarded. I
think we should, if confirmed, use as many different metrics as
possible. The data are imperfect, so we should look at as many
different indicators, from many different sources, from
businesses, from consumers, from everyone in the economy. So I
do not believe in primacy of one indicator over another.
Senator Tillis. Thank you. My time has expired, and we will
submit other questions for the record.
Thank you, Mr. Chair.
Chairman Brown. Thank you, Senator Tillis.
Senator Smith, from Minnesota, is recognized.
Senator Smith. Thank you, Mr. Chair and Ranking Member
Toomey, and welcome to our three highly qualified and
experienced nominees, and congratulations, and thank you for
your willingness to serve on the Fed Board, especially and
particularly in this moment. And I look forward to supporting
all three of your nominations.
You know, the three nominees here today are highly
qualified and dedicated public servants. Your experience and
expertise and perspectives are much needed on the Federal
Reserve, as our Nation navigates some really complicated
economic times.
And I want to say that I appreciated the excellent
conversations I have had with all three of you, and have found
you to be informed and reasonable and qualified and fully
committed, I might say also, to following carefully the
mandates and the authorities and the independent role of the
Fed.
Professor Bloom Raskin, I really appreciated our
conversation and your commitment to the value of community
banks and small banks. I shared the story of my grandmother, I
think, who was the president of a small community bank, and
your deep understanding of the value of small banks in a fair
and resilient and stable financial system.
And I must say you have been absolutely clear, both in
public and in our private conversations, that you emphatically
believe that the Fed has no role in picking winners and losers
in our economy, including in the oil and gas sector. And maybe
this is why, as Chair Brown noted, you have been confirmed with
bipartisan support before.
Dr. Cook, your experience and perspective on how all
sectors of the U.S. economy need to work for everyone, and the
role and the responsibilities of the Fed I think are
authoritative, and I really appreciated the chance to speak
with you. And Dr. Jefferson, your extensive work on poverty and
inequality will be invaluable as the Fed pursues its dual
mandate of maximum employment and stable prices.
And I also just want to note, as several have, that we all
know that the Fed has traditionally been very short of diverse
voices, and it is important, it is vitally important, that the
Fed include diverse perspectives so that decisions that it
makes are going to consider not just whether Wall Street is
thriving but whether Main Street and small businesses and
families everywhere in our country are getting ahead. I
appreciate that I believe you will be, all three of you, in the
perspective, in the position to bring that perspective forward.
I just want to home in a little bit on a few things, Dr.
Cook and Dr. Jefferson, to understand how your research and
experience will inform your work on the Fed, in just the little
bit of time I have. Dr. Jefferson, much of your academic
research has focused on the labor market, which fits so well,
and income inequality and poverty, which all of us on this
Committee, I believe, are concerned about. How will your
research inform your work on the Fed, do you think?
Mr. Jefferson. Thank you so much for that question,
Senator. And one thing that I think is important for us to do
is look at the history of expansions here in the United States.
And one thing that we see when we look at our history is that
long, noninflationary expansions are highly inclusive. That is,
the longer the expansion, the wider they tend to be, and the
more people are brought into employment and prosperity across
social and economic groups.
So if I were confirmed, I would very much want to advocate
for policies on the part of the Fed that would lead to long
expansions that are noninflationary.
Senator Smith. You are observing also that fairness in our
economy is good for our competitiveness. It is good for our
productivity. It is good for opportunity, and it gets exactly
to--I mean, Paul Wellstone was not, as far as I know, an
economist, but when he said we all do better when we all do
better I think he was hitting exactly on what you were talking
about from an economic perspective.
Dr. Cook, I appreciated, in your testimony, you said, ``My
approach to complex problems is to be guided by facts and data
and analysis and to work collaboratively.'' You say, ``I will
do my work based on the facts and not politics,'' and you
pointed to Paul Volcker as a person who you admired for his
unwavering commitment to a nonpolitical and independent Fed.
Could you just say a bit, in the 10 seconds I have left, on how
you will bring your experience to bear on the Fed?
Ms. Cook. I will just say, in a word, that my experiences
abroad have really opened my eyes and informed me about the
dual mandate of the Federal Reserve, both full employment and
stable prices. Because not all central banks have that dual
mandate. They typically focused on stable prices. And my
research also has informed this view through the avenue of
innovation, which undergirds economic growth. And what I find
is that broadening participation, through STEM, for example, in
the innovation economy certainly helps us all, not just those
individuals who participate. So that is what I would bring to
the deliberations on the Fed, if confirmed.
Senator Smith. Thank you so much, Mr. Chair.
Chairman Brown. Thank you, Senator Smith.
Senator Van Hollen is recognized, from Maryland, for 5
minutes.
Senator Van Hollen. Thank you, Mr. Chairman, Ranking Member
Toomey, and welcome all of you. And Dr. Cook, Dr. Jefferson,
Governor Bloom Raskin, congratulations on your nominations. I
think all of you would serve the country very well, and our
economy well, on the Federal Reserve, and I look forward to
supporting your nominations.
Mr. Chairman, I think you indicated I get just a little bit
of leeway in sort of introducing again----
Chairman Brown. You do, for sure.
Senator Van Hollen. ----Governor Raskin as a Marylander,
and I want to thank her for her leadership and focus for a
moment about her leadership as Maryland's Commissioner for
Financial Regulation during a very difficult time for our State
and our country. That was the 2007-2010 period.
And during that time she earned the respect of Maryland
financial institutions, our community banks, and I have heard
from a host of Maryland's community banks about your
preparation for the job that you have been nominated for and
how well they believe you will serve our country in that
capacity.
We also have the statement from Camden Fine, who served as
the head of the Independent Community Bankers Association,
ICBA, during the time that Governor Raskin was the chief bank
regulator in the State of Maryland. And I am quoting Camden
Fine saying, ``She is outstanding and she understands the role
of the Fed Governors. She is a tough regulator--do not get me
wrong--but she is very fair.''
It seems that that is exactly the kind of person that we
would want in this position, and that sentiment has been
endorsed by others who have worked with Governor Raskin. The
Conference of State Bank Supervisors noted that she understands
first-hand how decisions made in Congress and within the
Beltway have significant implications for the financial
industry, local communities, and consumers.
And 24 State and local treasurers and comptrollers said,
``Sarah Bloom Raskin is a life-long public servant with an
exceptional track record as a champion for consumer protection,
prudent regulation, and financial risk mitigation.''
And I have been listening to the testimony, Mr. Chairman,
and I think Governor Bloom's answers reflect that she clearly
understands that her role is to focus on risk, across the
board. And we would be doing a great disservice to our country
if we asked her to ignore any particular risks in the system or
to overly focus on any particular set of risks. She wants to
look at all the risks, which is what she did as the Maryland
chief bank regulators.
And Governor Raskin, if you could just take a moment to
talk about how that experience, during that very difficult
time--we had a meltdown in the subprime mortgage industry in
the United States which created catastrophic economic
consequences for American families--can you talk about how your
experience there informs your view of your current job?
Ms. Raskin. Certainly, and Senator Van Hollen, thank you
for you remarks and your question, of course.
So the role of the Commissioner of Financial Regulation in
the State of Maryland, in the years that I served, which were
the years of the successive waves of foreclosures, the
weakening of some nonbank entities, and a general sense of
hopelessness, which many of you may remember from the days of
the financial crisis, really required an approach that was very
collaborative. It was an approach that, for me, became, I
think, the hallmark of how you go about regulation and
supervision, which is to do it very collaboratively.
Supervision and regulation cannot be done with one voice
alone. You need the voices of many, and the many include not
just experts who understand the theory of regulation and
supervision, but the people who experience it, who live it day
to day. The bankers in Maryland were my indispensable partners
in moving through those hard months, and it was the bankers
there that strengthened my sense, not just in the value of
collaboration and in the value of working together to achieve
good ends, but the importance of community banks.
And I just want to say--and I just cannot say it enough--
community banks are one of the finest features that we have in
our financial sector. They provide safe and sound financial
intermediation. They understand the community, the economies
that they lend into, in a way that keeps them very sensitive
and very attuned to what communities need.
So I learned a lot from those experiences as the
commissioner during those years, and many of those approaches
became, for me, a way of thinking about how you move forward.
Senator Van Hollen. Thank you, Governor Raskin. I just, to
my fellow Committee members, I can attest to Sarah Bloom
Raskin's very good judgment, good temperament, and somebody who
looks at all the facts before making a decision. And I really
encourage all the Members of the Committee to support her
nomination, and I also, as I said, support the other two
nominees who have been presented to the Committee as well.
Thank you all very much. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Van Hollen.
I believe Senator Ossoff is remote, in his office, but I am
not sure.
No, he is not.
Senator Toomey, and then I will close.
Senator Toomey. Thank you, Mr. Chairman. Let me just
briefly wrap up my thoughts on this. First of all, I think
Professor Jefferson confirmed what I have learned thus far. I
think he is eminently qualified, knowledgeable, has the
temperament and the experience to be a constructive
contributor, and I look forward to supporting his confirmation.
With regard to Professor Cook, I am very disappointed that
yet again today I have been unable to elicit any kind of clear
response as to how she views the challenges that we face
specifically with regard to the inflation that we have, what
kind of tools she would be willing to use, her thoughts on the
changes in our economy. There are just no clear answers, and
that is disturbing.
With respect to Ms. Raskin, I have to say this is one of
the most remarkable cases of confirmation conversion I have
ever seen, although she does not acknowledge the contradiction
of what she has said today compared to the things that she has
been saying and writing for years.
Let me be very, very clear about where this is all heading.
If Ms. Raskin is confirmed, there is going to be an effort at
the Fed to start with a climate scenario analysis--that is what
it is called--and you can be sure that that had better show all
kinds of risks. And then the Fed will respond to that analysis.
I do not know exactly how. Maybe it will be increased capital
weightings. Maybe it will be exposure limits. But the idea will
be to allocate capital away from the heavily carbon-emitting
parts of our economy.
How do I know that? Because Ms. Raskin has told us this,
repeatedly, in writing, in videos. We just found a new campaign
video she made, criticizing the Fed for including energy bonds
when they were buying corporate debt. In her message it was
clear that she would have preferred that they exclude that one
category. That itself is another example of her advocacy for an
allocation of credit.
But rather than responding to that we just kept hearing
this scripted mantra that the Fed should not pick winners and
losers. But, of course, what she has advocated for in speech
after speech and other venues is that the Fed should do exactly
that.
So, Mr. Chairman, it is hard to believe the strength of the
conviction that the Fed should not do that which she has
advocated the Fed to do for a very long time.
And with that I will ask unanimous consent to enter into
the record letters of opposition in concern to Ms. Raskin's
nomination from more than 60 union, energy, business,
manufacturing, taxpayer advocates, and women's organizations,
24 State treasurers and auditors, and Senator John Barrasso. I
also ask unanimous consent to enter into the record letters of
opposition to Professor Cook's nomination from 11 taxpayer
advocates and women's organizations.
Chairman Brown. Without objection, so ordered.
Thank you, Senator Toomey. That compares to my sterling
comparison to the 1,000 letters and calls of support from such
a wide cross-section of so many people, including, as Senator
Van Hollen says, the Maryland community bankers.
There has been a lot of hyperventilating about today's
nominees that is based on hyperbole and misrepresentation
rather than their actual records and experience. I will note a
couple of things.
Senator Bloom Raskin has a long and distinguished record of
public service, making consequential decisions about our
economy. She brings a steady hand. She brings a clear-eyed
focus--we saw that--to serving the American taxpayer. That is
why this body has confirmed her unanimously--unanimously--
twice, including this Committee and the Finance Committee.
Her approach and character have not changed one iota since
she was last time nominated to serve our country. Nowhere in
her record can you find her making policy decisions that fit
the character we have heard today, of someone who is extreme.
She has served on the Fed as a Governor before, and as a
Governor she never advocated for the Fed to allocate private
capital. If that is not evidence and proof, what could be?
As we heard today, in her own words, Ms. Bloom Raskin is
not in the business of telling banks whom to lend to. She did
not do it before, and she said that is not how she views this
job. To pretend otherwise is nothing more than a political
tactic.
What said in the New York Times editorial--and I have read
it a number of times--has nothing to do with allocation of
private capital. The mainstream view is that regulators need to
consider how all risks could affect banks. Senator Tester's
discussion about $140 billion in climate costs just last year
alone speaks to that. It is one of those risks.
Look at President Trump's Vice Chair for Supervision, the
only person that has actually held this job prior to, I hope, a
month from now when Governor Raskin is confirmed. Look at
Randal Quarles. He developed the strategy for regulators around
the world to understand and monitor climate risk while Chair of
the Financial Stability Board. Ms. Bloom Raskin will simply
continue the work begun by Chair Powell.
The attacks on Dr. Cook are abhorrent. They were ginned up
on the far-right blogosphere to discredit a highly respected
economist with substantial monetary policy experience. She has
a Ph.D. in economics. Plenty of other Board Governors never had
that, including prominent ones today.
I am disappointed my Republican colleagues repeat these
ugly and baseless lies and spreading fake news. A wide range of
organizations, as I have said, have written to the Committee in
support of her nomination.
Instead of these attacks I hope we can bring the focus back
to American workers, putting American workers at the center of
our economic policy, something the Fed, frankly, has not done
through much of its history, workers finally starting to gain
some power and higher wages and real job options in our
economy. They are worried these wage gains are not going to
mean much if prices continue to go up.
All three of you clearly--Dr. Jefferson, Dr. Cook, Governor
Raskin--have talked about the importance of combating
inflation, putting it at the top. These costs have been going
up for decades, like childcare and prescription drugs and
housing. Balancing that dual mandate is always a tough job, and
as we emerge from the pandemic that is unprecedented in our
lifetimes there has never been more uncertainty in the economy,
making these jobs even tougher.
It makes it all more important that we have seven fully
confirmed, seated, members of the Federal Reserve, thoughtful,
experienced nominees. You could not sit here today and not be
impressed by the thoughtfulness and the experience and the
gravitas and the serious-mindedness of these nominees. We need
a full Fed Board. Hopefully my colleagues will join me in
supporting the President's nominees.
Thank you again to the three of you. I look forward to
supporting all three nominations and leading this effort on the
Senate floor.
I would like to enter into the record letters of support
from 1,000 organizations and individuals, without objection.
For Senators who wish to submit questions, these questions
are due on Saturday, February 5th, at noon. To the nominees, we
would like to have your responses by Wednesday, February 9th,
at noon. Those are real dates, February 5th, February 9th. We
want to do this vote on February 15th, so we need your
cooperation.
The Committee is adjourned. Thank you.
[Whereupon, at 11:30 a.m., the hearing was adjourned.]
[Prepared statements, biographical sketches of nominees,
responses to written questions, and additional material
supplied for the record follow:]
PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
In the first year of the Biden-Harris administration, we've seen
tremendous economic progress:
Record job creation. Rising wages. The fastest economic growth in
almost 40 years.
Last year, for the first time in two decades, our economy grew
faster than China's. Think of that--our economy is growing faster than
China's, for the first time in 20 years.
Because of the action we took with the American Rescue plan and
because of this President's commitment to American workers, we are
making historic economic progress--exceeding expectations.
We are now at a pivotal moment in our recovery.
The Omicron variant has caused COVID cases to increase in the last
eight weeks, further straining our supply chains. These pandemic-
related problems are causing higher prices that eat away at Americans'
paychecks.
The Black unemployment rate is more than twice that of White
workers. Women are slowly reentering the paid labor force, after too
many were forced to leave at the height of the pandemic.
As Fed Chair Powell said, ``getting past the pandemic is the single
most important thing we can do.''
Chair Powell is right.
The actions we take over the next several months will determine
whether we have a truly robust recovery--with lower prices and higher
wages and plentiful job opportunities, for everyone.
Whether we have that kind of truly robust recovery, or whether our
economy falters, and Americans are denied the opportunity to emerge
from this pandemic stronger than before.
And that brings us together today.
We must have a fully functioning Federal Reserve Board--with all
seven members--ready to meet these challenges. Ready to ensure our
economy continues to prosper.
It's been almost a decade since we've had all seven board members.
That's what makes this so urgent.
Governor Bloom Raskin, Dr. Cook, and Dr. Jefferson are the proven
leaders we need at this critical moment.
These three experienced public servants understand the importance
of empowering workers through full employment, and the need to combat
inflation so paychecks go farther.
They are dedicated to Fed independence. They will uphold the Fed's
dual mandate--a mandate to ensure that all Americans have plentiful job
opportunities at good wages, and to ensure that wage gains aren't
eroded away by exorbitant prices.
And they know that when we keep our financial system safe, and when
we support working families and Main Street businesses by putting
workers at the center of economy, then our entire economy grows.
Sarah Bloom Raskin is the President's nominee to serve as the
Federal Reserve's Vice Chair for Supervision. She was the Maryland
State Bank Commissioner, a Federal Reserve Governor, and Deputy
Treasury Secretary--the number two position at Treasury.
No one is better equipped than Ms. Raskin to protect Americans from
risks that could bring down financial markets and institutions and
wreck people's savings--from cybersecurity threats to climate financial
risk.
Throughout her distinguished career, Sarah Bloom Raskin has worked
with the smallest community banks and the largest multinational
financial institutions. She's worked with consumers, community groups,
and businesses small and large to keep our financial system safe.
Unfortunately, we've seen a coordinated effort by some to paint her
as some sort of radical.
That characterization requires a suspension of common sense. Look
at her work--including on the Board of Directors at Vanguard, which
prides itself on its low fees and making the market accessible to all
Americans.
And remember, she has received the support of every Republican on
this Committee, and every Republican on the Finance Committee. In fact,
the entire Senate twice confirmed her unanimously.
Think about that--Sarah Bloom Raskin has been nominated to key
economic posts twice before. And both times, every single senator--
Republicans and Democrats--supported her nomination.
As Deputy Secretary of Treasury, Ms. Bloom Raskin led the Obama
administration's effort on cybersecurity resilience for the financial
sector, a critical issue that requires vigilance to protect our economy
and national security.
She understands that we need to think about all the financial risks
our economy faces--including the possible economic impact of severe
weather and climate change.
As we heard from Chair Powell, this is a priority for the Fed.
Looking at all the risks posed to our financial system is not a
partisan issue--just ask Chair Powell. It's not some radical idea--just
ask Citi and Morgan Stanley.
We saw in 2008 what happens to people's job opportunities and to
their lifesavings--their home, their retirement accounts, their college
saving--when we ignore big risks. Sarah Bloom Raskin will work to make
sure our country doesn't make the same mistake again.
Dr. Lisa Cook and Dr. Philip Jefferson are the President's nominees
to serve as governors of the Federal Reserve Board. They are highly
respected and experienced economists with sterling credentials. They
understand how monetary policy can contribute to our economic growth
and strengthen our economy for everyone.
Dr. Cook currently serves as professor of economics and
international relations at Michigan State University. She brings a
wealth of research and international experience on monetary policy,
banking, and financial crises. That includes serving on the Council of
Economic Advisers during the Eurozone crisis and past work with several
Federal Reserve Banks.
She has done groundbreaking research on how disparities in our
economy inhibit technological innovation and limit our overall economic
growth. She knows the important role that workers and local communities
play in our overall economic growth--from the rural South to the
industrial Midwest.
Dr. Cook has also led the American Economics Association Summer
Training Program, which builds the pipeline for diverse young
economists to ascend to institutions like the Fed.
To give you a sense of her impact, a mayor from my home State,
Mayor Babcock of Oak Harbor, wrote to me about her. He got to know Dr.
Cook at one of those training programs, and he wrote, quote, ``I know
her to be kind, qualified, and to understand the struggles and
opportunities faced by Midwest communities like mine, where we are
burying the term `Rust Belt' in pursuit of a bright future.''
``Burying the term `Rust Belt.' ''
We need a whole lot more people in institutions like the Fed who
understand how ignorant that term is, and who understand that economic
growth only matters if it reaches places like Oak Harbor, Ohio. Dr.
Lisa Cook will be that public servant.
Dr. Jefferson is the Vice President for Academic Affairs, Dean of
Faculty, and Paul B. Freeland Professor of Economics at Davidson
College. He began his career as a Fed economist, and served as chair of
the Economics Department at Swarthmore College.
Dr. Jefferson literally wrote the book on poverty and economics.
His research on poverty will bring a perspective to the Fed that we
need as we emerge from the coronavirus crisis.
Listen to what the Washington Post Editorial Board wrote. Sometimes
the board leans conservative--think privatization of Medicare, the Iraq
War, trade deals that outsource jobs--and sometimes they lean more
progressive. But I think we all agree, hardly a bastion of radical left
wing thought.
Listen to what they wrote:
President Biden's latest nominees to the Federal Reserve, quote,
``are ready to help lead the Fed and bolster its credibility. The
Senate should move quickly to put them in place.''
For the first time in almost a decade, we will have a full Board of
Governors at the Federal Reserve, and one that reflects the country.
We'll have public servants who will not only steer us back on to the
road to normalcy, but who reach for a stronger economy than before.
The American people deserve a Fed that works for them.
Our country codified the Fed's dual mandate of price stability and
full employment with the 1978 Full Employment and Balanced Growth Act--
better known as the Humphrey Hawkins Act, and borne out of the civil
rights movement. The law makes it clear that, quote, ``Increasing job
opportunities and full employment would greatly contribute to the
elimination of discrimination based upon sex, age, race, color,
religion, national origin, handicap, or other improper factors.''
That is part of the Fed's job.
President Biden's Fed nominees will ensure workers--all workers--
and their families reap the benefits of the economic growth they
create. And these nominees will fight for all the communities that have
been left on their own, from women and Black and Brown workers, to
rural towns, to all the places too long derided as the ``Rust Belt.''
I look forward to supporting Governor Bloom Raskin and Dr. Cook and
Dr. Jefferson--along with Chair Powell and Governor Brainard--and
encourage all of my colleagues to do so as well.
______
PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
Thank you, Mr. Chairman.
Ms. Raskin, Professor Cook, and Professor Jefferson, welcome.
We're here today to consider three Fed nominees. But today's
hearing is not just about vetting them. It's a referendum on the Fed's
independence.
There are people on the left, including in the Biden
administration, advocating that the Fed use its supervisory powers to
resolve complex political issues, like what to do about global warming,
social justice, and even education policy. These are important issues,
but they're wholly unrelated to the Fed's limited statutory mandates
and expertise.
Addressing those kind of issues requires political decisions
involving tradeoffs. In a democratic society, those tradeoffs must be
made by elected representatives, who are accountable to the American
people, not unelected central bankers. The question is not about the
merits of specific policies, but rather who should decide if they
should be put into place.
Let's take global warming. If we limit domestic oil and gas
production, energy prices will rise. Americans will pay more at the
pump to accomplish the stated goal of decreasing emissions. How much
more is appropriate?
If we move aggressively to limit energy production but other
countries don't, global warming won't significantly slow. Should we do
it anyway? How much reduction in global warming should we seek?
Let me be clear: this isn't about whether one believes addressing
global warming is important, or any one person's answer to these
questions. The point is these are difficult choices, which must be made
by accountable representatives through a transparent and deliberative
legislative process.
My concern about Fed overreach is not hypothetical. The Fed is
already exceeding its mandates and engaging in political advocacy. For
example, the Minneapolis Fed is actively lobbying to change Minnesota's
constitution--on the issue of K-12 education policy.
Does anyone truly think such activity is within the Fed's mandate?
If activism by a supposedly independent central bank is accepted, the
potential for abuse--by both parties--is limitless.
Don't accept my word about the politicization of the Fed. Ms.
Raskin and Prof. Cook's many past statements tell us exactly what they
think the Fed should do.
Let's start with Ms. Raskin. She's repeatedly, publicly, and
forcefully advocated for using financial regulation--including the
Fed--to allocate capital and debank energy companies. While other like-
minded regulators have been careful to say their goal is simply to
assess risk, Ms. Raskin has said the quiet part out loud.
In a 2020 report from a progressive organization, Ms. Raskin urged
financial regulators to adopt policies that will ``allocate capital''
away from energy companies. In a 2021 speech at the ``Green Swan''
conference, she proposed ``portfolio limits or concentration limits''
on banks' lending to energy companies. And, in May 2020, at the height
of the pandemic, she specifically called in a New York Times op-ed for
excluding a single industry--the fossil energy sector, which she called
a ``dying industry''--from the Fed's emergency lending facilities.
Ms. Raskin's proposals would have devastating consequences not just
for energy workers, but also consumers, who'd pay much more for energy.
On what basis could she justify this idea that the Fed exercise these
extraordinary powers? Ms. Raskin sees two categories of climate-related
financial risks: physical and transition.
Now the actual data shows that ``physical risks''--that is, severe
weather events--don't threaten financial stability. Economic damage
from weather-related events as a percentage of GDP has actually trended
down over the past 30 years, and we still haven't found a single bank
failure caused by any weather event, thus proving banks are perfectly
capable of managing physical risk.
We're also told that banks need regulation that quantifies
``transition risk'' from changing consumer preferences. Bankers know
how to manage changing consumer preferences better than regulators do.
The real risk here is political, as Fed Chair Powell acknowledged last
month.
Unelected officials like Ms. Raskin want to misuse bank regulation
to impose environmental policies that Congress has refused to enact.
Ms. Raskin has repeatedly and specifically advocated that the Fed
allocate capital away from the fossil fuel industry as a way to combat
climate change. She says the quiet part out loud.
Now turning to Prof. Cook. The Administration cites her role as a
director of the Chicago Fed as a main qualification--a position she
held for only 2 weeks before being nominated.
She has a Ph.D., but no academic work in monetary economics. And
the few times she's said anything about monetary policy, its cause for
major concern.
Despite unemployment below 4 percent and inflation above 7 percent,
in our conversation on Tuesday Prof. Cook refused to endorse the Fed's
pulling back its easy money policy. But, keeping monetary policy loose
is accelerating inflation that is rising faster than wage growth. High
inflation is a tax that makes everyone poorer--but especially low-
income workers.
Also important is Prof. Cook's extreme left-wing political
advocacy. She has supported race-based reparations, promoted
conspiracies about Georgia voter laws, and sought to cancel those who
disagree with her views, such as publicly calling for the firing of an
economist who dared to tweet that he opposed defunding the Chicago
police.
And after we highlighted these tweets for the public's attention,
yesterday, Prof. Cook blocked the Banking Committee Republican Twitter
account. Apparently Prof. Cook realizes how inflammatory her partisan
tweets are.
The Fed is already suffering from a credibility problem because of
its involvement in politics and departure from its statutorily
proscribed role. I'm concerned that Prof. Cook will further politicize
an institution that must remain apolitical.
Prof. Jefferson, thank you for coming to my office on Tuesday. I
appreciated our discussion and your decades of work on macroeconomic
issues central to the Fed's important work. Based on Prof. Jefferson's
academic credentials, written work, and our conversation, I believe
Prof. Jefferson is well-suited to the position for which he has been
nominated.
My Democratic colleagues--you've spent the past several months
talking about how passionately dedicated you are to democratic
principles and values. Certainly one of those principles is that the
unelected governors of America's central bank shouldn't be responsible
for dealing with difficult issues like global warming, social justice,
and education policy.
This isn't about the importance of those issues. It's about keeping
the Fed apolitical and independent and ensuring that elected,
accountable representatives make difficult decisions. And if that
doesn't convince you, remember that one day the shoe will be on the
other foot.
______
PREPARED STATEMENT OF SARAH BLOOM RASKIN
To Be Vice Chairman for Supervision and a Member of the Board of
Governors of the Federal Reserve System
February 3, 2022
Thank you, Chairman Brown, Ranking Member Toomey, and Members of
the Committee for the opportunity to appear before you today. Thanks
also to your exemplary staff, who provide essential support, something
I know from serving this Committee as Banking Counsel.
With me today is our daughter, Hannah Grace Raskin. Hannah is a
real live banker, and we have animated conversations about banker-like
topics such as what goes into the numerator for the Allowances for Loan
Loss Reserves and what gets subtracted out of Net Interest Margins. Our
other daughter, Tabitha, teaches middle school algebra; she would have
been here but for the fact that today is the review day before the exam
for slope and intercept equations. Our son Tommy, whom we lost in 2020,
is with me always. He came into the world when I worked for this
Committee. I remember where I was standing in these very offices in
1995 when he started kicking as I went into labor, and I remember
returning to these halls to show my friends here my sparkling little
boy. Boundless gratitude too to my beloved husband, Jamie, who provides
bedrock strength and love to our family.
As a child growing up in Illinois, my family made a weekly Saturday
morning pilgrimage to the Bank of Homewood, where my mother would
withdraw money for the week. From this experience, the importance of
banks to the economic well-being of a community was never lost on me.
As my brother and I eyed donuts in the lobby, my mom would direct us to
get in line for the right bank teller: ``This line,'' she would say,
``We want Shirley.'' We would get weekly updates on Shirley's children,
their Little League games, bowling scores, and family camping trips.
In 2007, I was honored to become Maryland's State bank
commissioner, which enabled me to demonstrate my lifelong appreciation
for community banking. Later, I was confirmed by the Senate to be a
Governor on the Federal Reserve Board from 2010 to 2014 and Deputy
Treasury Secretary from 2014 to 2017. I also worked in the private
sector as a banking lawyer and general counsel. I am proud of my work
at the Federal and State levels to champion the interests of consumers
and community banks, while ensuring the resilience of our financial
system, particularly in the areas of cybersecurity and appropriately
tailored rules. These experiences helped me understand the importance
of bank supervision to the ability of our financial system to work for
all Americans.
I also learned from the subprime mortgage crisis, which cost us
tens of millions of jobs and homes, and trillions of dollars lost to
our families, businesses, and communities in equity and savings. Like
the crises before it, the subprime mortgage crisis showed how weak
regulatory oversight and unattended problems can reverberate, rattle,
and ravage our entire economy. I learned that--to be effective for all
Americans--bank supervisors must make sure that the safety of banks and
the resilience of our financial system are never compromised in favor
of short-term political agendas or special interest groups. They must
stay attentive to risks no matter where they come from: inside or
outside the financial sector; well-identified asset bubbles or
speculation; a set of threat actors that launch cyberattacks; or from
nature and cataclysmic weather-related events.
As created by Congress, the role of Vice Chair of Supervision
requires consultation with other Governors of the Federal Reserve, the
Fed's expert staff, the banks themselves, and other experts about the
extent to which financial institutions are identifying, analyzing and
managing their risks. The role does not involve directing banks to make
loans only to specific sectors, or to avoid making loans to particular
sectors. And the role exists within the laws passed by Congress that
govern the Federal Reserve and its responsibilities.
I understand that anyone confirmed to this position must act not
only with as much knowledge as possible but also with humility.
Knowledge, especially about the future, can be imperfect.
Finally, I also want to recognize the toll inflation exacts on
working people who are concerned about how far their paychecks will go
for essentials like food, housing, and transportation. It is an
important task of the Federal Reserve to reduce inflation and one that
must be a top priority while we continue to sustain our economic
recovery.
If confirmed, I look forward to meeting the considerable challenges
and opportunities before us: the indispensable work of defending and
safeguarding the financial sector, the Federal Reserve's dual mandate,
and the economic future of all Americans.
Thank you. I welcome your questions.
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PREPARED STATEMENT OF LISA DENELL COOK
To Be a Member of the Board of Governors of the Federal Reserve System
February 3, 2022
Chairman Brown, Ranking Member Toomey, and other Members of the
Committee, thank you very much for the opportunity to appear before you
today.
I am humbled and honored to have been nominated by President Biden
to be a member of the Board of Governors of the Federal Reserve System.
I earned my Ph.D. at Berkeley, served on the President's Council of
Economic Advisers, and have spent decades teaching, studying, and
researching economic growth and monetary policies. The depth and
breadth of my experience in both the public and private sectors qualify
me to serve as a Federal Reserve Governor, and, should I be confirmed,
I would be honored to work with my colleagues to help navigate this
critical moment for our Nation's economy and the global economy.
In terms of priorities, I agree with Chair Powell that our most
important task is tackling inflation. High inflation is a grave threat
to a long, sustained expansion, which we know raises the standard of
living for all Americans and leads to broad-based, shared prosperity.
That is why I am committed to keeping inflation expectations well
anchored.
My approach to complex problems is to be guided by facts, data, and
analysis and to work collaboratively. I have served in the
Administrations of Presidents from both parties, and when I make
decisions, I do so based on the facts and not politics. In this
respect, I will follow the example of Paul Volcker, whom I greatly
admire for his unwavering dedication to a nonpolitical and independent
Federal Reserve.
My convictions were shaped by my upbringing in Milledgeville,
Georgia. It was the desegregating South, and both sides of my family
were promoting nonviolent change alongside our family friend, the Rev.
Dr. Martin Luther King, Jr. While my sisters, Pamela and Melanie, and I
were integrating our schools and pools, my parents were integrating
their places of work. My mother, Professor Mary Murray Cook, and my
aunt, Professor Loretta Murray Braxton, integrated their universities
and STEM (science, technology, engineering, and mathematics)
departments by race and by gender, preparing students for a
desegregating South that promised greater opportunity for all. My
cousin Floyd McKissick, Sr., spoke at the March on Washington and
integrated the University of North Carolina law school. My uncle, Dr.
Samuel DuBois Cook, studied with Dr. King at Morehouse College, was the
first African-American tenured professor at a southern university, and
later was president of Dillard University. I want to thank Senators
Warren, Kennedy, and Tillis, as well as the many other senators, who
honored my uncle in a Senate resolution upon his death in 2017.
The sense of discipline, hope, and mission instilled in me by my
family has taken me from Spelman College to Oxford, the Hoover
Institution, and Harvard, but I have never forgotten where I came from
and the dedicated teachers who supported me. I chose to seek my current
tenured position as a macroeconomist in the industrial Midwest in this
same spirit of being close to how our economic decisions affect working
families. Living in a manufacturing hub during the financial crisis has
underscored the effect that deep recessions have on everyday lives. And
that is one reason I have dedicated much of my career to preventing the
next financial crisis. A strong and resilient financial system supports
American families, businesses, and our economy.
My research on economic growth has been informed by my interactions
with families, businesses, policymakers, and financial institutions. I
have extensive experience working for many types of banks, including
serving on the board of a community development financial institution,
or CDFI, in Grand Rapids. I am particularly proud that community banks
were among those that elected me to serve on the board of the Federal
Home Loan Bank of Indianapolis. I have also worked closely with the
Federal Reserve over the course of my career, conducting research at
Reserve Banks before and after receiving my doctorate, attending policy
conferences, and serving on advisory panels and as a director of the
Federal Reserve Bank of Chicago.
There is still much to learn to make sure the Fed does its job even
better. Our economy is constantly evolving. Learning to do better will
require humility, perseverance, and diverse perspectives.
Again, it is an honor to be considered for this position, and I
look forward to working with Members of this Committee. If confirmed, I
will faithfully support the congressionally mandated goals of stable
prices and maximum employment, which Congress has entrusted to the
Federal Reserve.
Thank you. I look forward to your questions.
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PREPARED STATEMENT OF PHILIP NATHAN JEFFERSON
To Be a Member of the Board of Governors of the Federal Reserve System
February 3, 2022
Chairman Brown, Ranking Member Toomey, and Members of the
Committee, thank you for the opportunity to appear before you today. I
am honored to have been nominated by President Biden to serve as a
member of the Board of Governors of the Federal Reserve System.
If confirmed, I would draw upon my background and skillset to
contribute positively to the well-being of the American people by
helping the Federal Reserve to adhere to the dual mandate set for it by
Congress: promotion of maximum employment and stable prices.
As some of you may know, I was born and raised here in Washington,
DC, in the Northeast section, just blocks away from Robert F. Kennedy
stadium. The neighborhood is called Kingman Park, and in my youth, it
was a place where the line between a future of success or struggle was
thin. The Capitol is a mere 25 blocks from the row house where I grew
up.
My first job after graduation from college was here in Washington
as a research assistant for the Board of Governors. Since that time, I
have been fortunate to pursue a career that spanned a valuable
combination of experiences both within and outside academia. I have
served as a professor of economics, department chair, college dean,
college vice president, president and director of various professional
organizations focused on economics, a college trustee, a borough
council member, and have held additional professional roles within the
Federal Reserve System.
In the leadership positions I have held, the essential qualities
for success have included a spirit of collaboration, the capacity to
compromise, and the ability to achieve consensus. Further, I am a Ph.D.
economist with an unusual combination of specializations:
macroeconomics and monetary economics, poverty and economic inequality,
and applied econometrics. If confirmed, these specializations would
enable me to analyze from multiple perspectives the complex issues that
come before the Board.
Today, the economy is facing two major challenges: the COVID-19
pandemic and inflation. The pandemic has disrupted the supply side of
the economy and changed the composition of aggregate demand. The spike
in inflation we are seeing today threatens to heighten expectations of
future inflation. The Federal Reserve must remain attentive to this
risk and ensure that inflation declines to levels consistent with its
goals.
The mandates set by Congress for the Federal Reserve have served
the American people well. As we know from experience, the pursuit of
maximum employment and stable prices fosters an economic environment
characterized by a dynamic labor market, entrepreneurship, private
saving and investment, and sustainable growth in consumption and
production over the longer run. Importantly, the dual mandate provides
a critical foundation for monetary policy amid our current challenges
and those that lie ahead. The tools of monetary policy can be deployed
with clear goals in mind. Adherence to these goals will ground
inflation expectations appropriately so that policy itself does not
encumber private economic decision making. Further, long-run inclusive
prosperity requires that the Federal Reserve pay careful attention to
the safety and soundness of banks and the stability of the financial
system.
Before closing, I wish to acknowledge the love and support of
friends and family, especially my sons Nathan and Miles. Also, I wish
to mention my late parents, Wade Jefferson, and Joan and Walter Coates,
who worked so hard and gave so much, so that this improbable day could
even be possible. Regardless of the outcome, they would have been so
very proud of these proceedings.
Thank you for the opportunity to appear before you today. It is a
real honor. I look forward to and welcome your questions.
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RESPONSES TO WRITTEN QUESTIONS FROM
SARAH BLOOM RASKIN
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RESPONSES TO WRITTEN QUESTIONS FROM
LISA DENELL COOK
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RESPONSES TO WRITTEN QUESTIONS FROM
PHILIP NATHAN JEFFERSON
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Additional Material Supplied for the Record
LETTERS SUBMITTED IN SUPPORT OF NOMINEES
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LETTERS SUBMITTED IN OPPOSITION TO NOMINEES
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