[Congressional Record Volume 168, Number 27 (Thursday, February 10, 2022)]
[Senate]
[Pages S636-S638]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                            Monetary Policy

  The reason I rise today, Mr. President, is to discuss an issue that 
really should be of serious concern to every Member of this body, and 
it goes to the heart of the very nature of accountability in a 
democratic republic such as ours.
  There is an awful lot in our culture, in our country, that has been 
politicized and polarized--we all know that--even sports, certainly 
news, maybe even music, and definitely our government. We have seen 
that manifested in many way, including a recent debate over the 
filibuster. But there are some things that Congress has tried hard to 
keep from being at least overly politicized in our government, and one 
of those is monetary policy.
  I think it is exceptionally important that we try the best we can, to 
the maximum extent we can, to not let politics infuse our monetary 
policy because that is going down a very bad and dangerous road. 
Unfortunately, I would suggest that we have started to see that 
encroachment. We started to see politics at the historically 
independent Federal Reserve.
  In the past month, the Banking Committee has held nomination hearings 
for five of President Biden's nominees for the Fed: Jerome Powell for 
Chairman of the Fed, Lael Brainard for Vice Chair of the Fed, Sarah 
Bloom Raskin for Vice Chair for Supervision at the Fed, and Lisa Cook 
and Philip Jefferson for Fed Governors.
  What I think about this slate of nominees, so to speak--and I have 
different views on the different candidates, but one thing is clear: 
This moment where we are going to decide whether or not to confirm 
these nominees is not just about the qualifications of the individuals; 
it is really a referendum on the role that the Fed is going to play in 
our country and whether it is going to remain an independent entity.
  Let me explain what I mean. I know there are folks on the left, 
including within the Biden administration--certainly some within the 
Biden administration--who are openly advocating that the Fed use its 
enormous supervisory powers over financial institutions to resolve some 
very complex but essentially political issues, like what we should do 
about global warming; even social justice; even, in some cases, 
education policy.
  Let me be clear. These are very important issues. These are big 
challenges for our country. But they are entirely unrelated to the 
Fed's limited statutory mandates and expertise, for that matter.
  Addressing these challenging issues of climate and social justice and 
education policy--all of them necessarily involve making tradeoffs and 
some tough decisions. In a democratic society, those tradeoffs must be 
made by elected representatives, the people who actually report to the 
American people. That is us. It is a legislative body. These big, tough 
policy decisions should not be made by unelected and unaccountable 
central bankers.
  The question is not about the importance of these issues. It is not 
about the specific policies. It is about who should decide--who should 
decide--how we proceed on these.
  Just take the case of global warming. We could decide to limit 
domestic oil and gas production. If we do that, energy prices will 
rise. Americans will pay more at the pump to accomplish the intended 
goal of decreasing emissions. Well, how much of that is appropriate? To 
what degree should we pursue that policy? If we move aggressively to 
limit energy production but other countries don't, then scientists tell 
us that global warming won't change in any significant way. Well, 
should we do it anyway? And how much of a change in the projected 
temperature of the planet should we insist on for any given amount of 
economic pain that we inflict on the American people?
  Look, I am not here to debate the answer to those questions. Those 
are tough questions, it seems to me. It is not about whether you think 
those are important questions. I think they are very 
important questions. My point is that they are difficult choices, and 
they have to be made by the accountable representatives of the American 
people through a transparent and deliberative legislative process. That 
is how we ought to make big decisions in this country.

  My concern about the Fed is it is wandering away from its mandate, it 
is overreaching, and there are some who are advocating that it use its 
enormous powers to make some of these decisions that the American 
people should be making through their elected representatives.
  By the way, this is not just a hypothetical; I have a number of 
examples. I will just share one example where the Fed is clearly 
exceeding its mandate, engaging in political advocacy--the Minneapolis 
Fed.
  The Minneapolis Fed--the leader, the President of the Minneapolis 
Fed--with apparently the full support of the board of the Minneapolis 
Fed, is actively lobbying to change Minnesota's Constitution and 
specifically to change it with respect to K-12 education policy. Does 
anybody think that how we pursue primary and secondary education is the 
role of the Fed to decide? I can assure you, it is not.
  By way of warning, if this kind of political activism by what is 
supposed to be an independent central bank--if this is tolerated, then 
the potential for abuse is endless. Again, you don't have to take my 
word for it. I would argue that three of President Biden's five 
nominees--Ms. Brainard, Ms. Raskin, and Professor Cook--have made a 
number of concerning statements that tell us exactly what they think 
the Fed should do outside of their mandated areas.
  Let's start with Governor Brainard. Now, to her credit, she has 
chosen her words much more carefully than, say, Ms. Raskin has, but Ms. 
Brainard has nonetheless urged the Fed to take an activist role on 
global warming.
  According to the New York Times, she has ``endorsed the use of 
supervisory guidance--the Fed's recommendations to banks--to encourage

[[Page S637]]

financial institutions to curb their exposures.'' That is exactly what 
I am talking about--using the powers of the Fed to pressure financial 
institutions to decide who gets credit and who doesn't.
  I am particularly concerned that she has specifically advocated for 
the Fed to shape environmental policy through the so-called climate 
scenario analysis. Now, Miss Brainard and others suggest that they just 
want to understand the systemic risk that arises from global warming. 
First of all, the Fed doesn't have any expertise in environmental 
policy.
  The fact is, there is no reason to think that global warming actually 
poses systemic risk to the financial system. It doesn't. As I have 
stated repeatedly, we haven't found a single bank, a single financial 
institution anywhere in America that has failed in modern times due to 
any weather event. We get hit with very severe weather events every 
single year, year in and year out, but never has a financial 
institution--not a single one, much less the entire system.
  Now, Ms. Raskin--Sarah Bloom Raskin--who is the nominee to actually 
be in charge of the supervision of Fed-regulated banks, has gone even 
further than Ms. Brainard in advocating for financial regulators to 
take this activist role with respect to global warming. She has 
repeatedly, publicly, and forcefully advocated for using financial 
regulation in general--and the Fed in particular--to allocate capital 
and debank energy companies.
  Now, again, Ms. Brainard and Ms. Raskin will say that this is just 
about assessing risk; but in reality, Ms. Raskin has also 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' loans to energy companies.
  It is not because the banks can't withstand a credit loss if that 
should occur. Actually, the American banking system is more heavily 
capitalized than it has ever been. That is not what it is about. It is 
about her view about climate change.
  In May of 2020, at the height of the pandemic, she wrote an op-ed in 
the New York Times specifically calling for excluding a single sector, 
the fossil energy sector, which she called a ``dying industry,'' from 
the Fed's emergency lending facilities. Now, the Fed--you could argue 
about whether the Fed should have ever stood up these facilities, but 
at least the Fed, at the time, had the good sense to say: If we go in 
and buy corporate bonds, we are going to do it through a vehicle where 
we do not discriminate at all among the many, many sectors of our 
economy because it is not our job as the Fed to decide which ones get 
favorable treatment and which ones don't. That is up to markets to 
decide.
  That is not Ms. Raskin's view. She was very clear. She criticized the 
Fed precisely because they did not intentionally exclude the fossil 
energy sector.
  This is a bad idea on many, many levels. One of which is, by the way, 
central committees that try to allocate capital in economies usually do 
a really bad job. And that is one of the reasons why our economy has 
outperformed the rest of the world. We tend not to do that, and many 
other countries tend to do that.
  I can give you an example of where this can go. She wrote at the 
time, back in 2020, that ``Even in the short term''--in the short 
term--``fossil fuels are a terrible investment.''
  Well, whatever you might think about the long term, the jury is back 
in on the short term. Investment in fossil fuels was absolutely 
terrific. That is just the data, right? The S&P 500, over the last 12 
months, is up 21 percent. Oil and gas indices are up 65, 70 percent.
  That is the kind of mistake that too much hubris in government can 
lead to. And Ms. Raskin's proposals would not be just devastating for 
energy workers but also consumers, who would end up inevitably having 
to pay much more for energy.
  Again, what is the basis on which she defends exercising these 
extraordinary powers? Well, it certainly is her belief that climate 
risk is so imminent, so threatening, and so devastating that it just 
requires this.
  And let me be clear: The folks--Ms. Raskin and Ms. Brainard--they 
divide this into two categories--climate risk, that is. There is the 
physical risk, and then there is what they call transition risk. Now, 
the data is very clear about the physical risk, right, like an adverse 
event from severe weather events. They don't pose a threat to our 
financial system. Think about the things that we have withstood in the 
last few years: Hurricane Sandy, forest fires, and devastating events. 
Name one financial institution in America that failed as a result. 
There isn't one. Not even close. They weren't even harmed, much less 
our entire financial system. So even Chairman Powell agreed that there 
is no physical risk to financial institutions.
  So the one that they rely on is, well, but there is transition risk. 
Transition risk. Well, transition risk is really about changing 
customer preference. And that happens all the time. Customers' 
preferences change.
  I would suggest that bankers know how to manage changes in their 
customers' preferences better than central bankers do or regulators do. 
That is not that different from the risk they run every day. They lend 
money to companies that have a permanent risk that consumer preferences 
will change in ways that could be adverse for the company to which they 
lend. It is a fundamental part of their business to understand the risk 
they take of that sort.
  So what is a transition risk, really? What transition risk really is: 
It is a political risk. And Chairman Powell pretty much acknowledged 
that too. The real nature of the transition risk is unelected officials 
like Ms. Raskin exercising the power she thinks the Fed should 
exercise, which is to step in and make it prohibitively expensive, for 
instance, for banks to provide credit to the energy sector or put caps 
on how much exposure they can have to this. That is the risk.

  And I don't know how you do a scenario analysis when the scenario you 
have to analyze is one in which there are political moves to constrain 
your business. As I said, Ms. Raskin says the quiet part out loud.
  Now let me turn to Professor Cook. Now, the administration cites her 
role as a director of the Chicago Fed as one of the main qualifications 
for her elevation to Federal Reserve Board of Governors. She is a 
director of the Chicago Fed. She was put in that position 2 weeks 
before she was nominated to be a Fed Board Governor.
  She has a Ph.D., but she has done no academic work in monetary 
economics. And the few times that she has spoken about monetary policy, 
it has been a cause for considerable concern.
  So we have got unemployment at or maybe below 4 percent, inflation 
above 7 percent, and Professor Cook refused to endorse the Fed's recent 
decision to at least begin to withdraw the easy money policy that they 
have been pursuing.
  Let's keep in mind, today the Fed is still buying bonds. The Fed is 
still throwing gasoline on the inflation fire. They are throwing a 
little less gasoline than they did before, and they do intend to phase 
it out completely by March. So we have got inflation roaring along; we 
are pretty close to full employment; and she couldn't bring herself to 
suggest that, yeah, at least we should accelerate the pace at which we 
withdraw the easy money we have been pouring into the economy.
  I don't know how Professor Cook could come to that conclusion. I 
mean, the fact is, inflation is way, way--it is multiples of what the 
Fed target is. It is at a 40-year high. And while wages have been 
growing, they are not growing as fast as inflation. So people's take-
home pay goes up, but the cost of the things they need to buy goes up 
by more. That unambiguously leaves workers further and further behind.
  I am also concerned that most of what Professor Cook has focused on 
in her writing and speaking and, certainly, tweeting is very extreme 
political advocacy. So, for instance, she is a big supporter of race-
based reparations. She has promoted conspiracies about the Georgia 
voter laws. She has sought to cancel those who disagree with her views. 
In fact, she publicly called for the firing of an economist who dared 
to

[[Page S638]]

tweet that he opposed the idea of defunding the Chicago Police.
  And after Banking Committee Republican staff highlighted some of 
these tweets and others and brought it to the public's attention, 
Professor Cook blocked the Banking Committee Republican Twitter 
account. Maybe she realizes just how inflammatory her partisan tweets 
have been.
  But, look, I mean, the Fed is already, in my view, suffering from a 
bit of a credibility problem because it has wandered outside of its 
lane. It has sought to influence policy beyond its mandate. And I am 
concerned that Professor Cook will further politicize an institution 
that absolutely should remain apolitical.
  So, Mr. President, I will conclude with this. Let's think about what 
is the danger here if we went ahead and confirmed all of these 
nominees. We would be confirming partisans to the Fed Board, 
contributing to its movement in a partisan direction, and ratifying the 
idea that the Fed ought to engage in what, in my view, certainly should 
be the domain of accountable elected representatives. They have told us 
this.
  It would be in global warming. It might very well be in issues of 
social justice. It might even be education policy, as we are seeing 
today. And this is not the role of the Fed. This is not appropriate. 
And it probably doesn't end there.
  If this is ratified and if the Fed starts to go down this road, well, 
someday Republicans will be in control, Republicans will populate the 
Board of Governors of the Fed. And will those appointees decide, well, 
maybe the Congress doesn't spend enough money on defense, so maybe we 
should allocate some financial resources to defense companies? Or maybe 
Congress doesn't spend enough money building a border wall. Maybe we 
ought to find a way to subsidize companies engaged in that. Or maybe 
there is not enough offshore oil development, and we should do that.
  Look, that would be a terrible idea. That would be a terrible idea. I 
might support those policies. I would adamantly oppose the Fed having 
the authority to decide anything about those policies.
  I know my Democratic colleagues have spent the last several months 
talking about how passionately dedicated they are to democratic values 
and democratic principles. Look, I think there is a lot of sincerity on 
the part of my Democratic colleagues. But certainly one of those 
democratic principles has to be that unelected Governors of America's 
central bank can't exercise responsibility that belongs with the 
American people and their elected representatives.

  So I think the vote on these nominees isn't just about the individual 
nominees. It is about whether we are going to keep the Fed apolitical 
and independent and ensure that elected accountable representatives 
make the difficult decisions for our country. If that doesn't convince 
my colleagues, then I would urge them to remember that in this line of 
work one thing is always true, and that is that, eventually, the shoe 
is on the other foot.
  I yield the floor.
  The PRESIDING OFFICER (Mr. King). The Senator from Oklahoma.