[House Report 118-651]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
2nd Session } { 118-651
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PROVIDING FOR CONGRESSIONAL DISAPPROVAL UNDER CHAPTER 8 OF TITLE 5,
UNITED STATES CODE, OF THE RULE SUBMITTED BY THE BOARD OF GOVERNORS OF
THE FEDERAL RESERVE SYSTEM RELATING TO ``PRINCIPLES FOR CLIMATE-RELATED
FINANCIAL RISK MANAGEMENT FOR LARGE FINANCIAL INSTITUTIONS''
_______
September 9, 2024.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. McHenry, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.J. Res. 125]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the joint resolution (H.J. Res. 125) providing for
congressional disapproval under chapter 8 of title 5, United
States Code, of the rule submitted by the Board of Governors of
the Federal Reserve System relating to ``Principles for
Climate-Related Financial Risk Management for Large Financial
Institutions'', having considered the same, reports favorably
thereon without amendment and recommends that the joint
resolution do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Related Hearings................................................. 2
Committee Consideration.......................................... 2
Committee Votes.................................................. 2
Committee Oversight Findings..................................... 4
Performance Goals and Objectives................................. 4
Congressional Budget Office Estimates............................ 4
New Budget Authority, Entitlement Authority, and Tax Expenditures 5
Federal Mandates Statement....................................... 5
Advisory Committee Statement..................................... 5
Applicability to Legislative Branch.............................. 6
Earmark Identification........................................... 6
Duplication of Federal Programs.................................. 6
Section-by-Section Analysis of the Legislation................... 6
Minority Views................................................... 7
PURPOSE AND SUMMARY
Introduced on April 5, 2024, by Representative Scott
Fitzgerald, H.J. Res. 125, a resolution providing for
congressional disapproval under chapter 8 of title 5, United
States Code, of the rule submitted by the Board of Governors of
the Federal Reserve System relating to ``Principles for
Climate-Related Financial Risk Management for Large Financial
Institutions'' would rescind the Board of Governors of the
Federal Reserve System's rule relating to ``Principles for
Climate-Related Financial Risk Management for Large Financial
Institutions.''
BACKGROUND AND NEED FOR LEGISLATION
On October 30, 2023, the Federal banking agencies jointly
issued interagency guidance setting principles for large
financial institutions' climate-related financial risk
management. These ``principles'' are likely to be abused by
bank examiners to push banks to channel credit away from carbon
intensive sectors of the economy to so-called `green' sectors.
These types of credit allocation decisions are best left to the
markets and to Congress, not politically unaccountable
independent agencies.
RELATED HEARINGS
Pursuant to clause 3(c)(6) of rule XIII, the following
hearings were used to develop H.J. Res. 125: The Subcommittee
on Financial Institutions and Monetary Policy of the Committee
on Financial Services held a hearing on March 21, 2024, titled
``Importing Global Governance: Examining the Dangers of Ceding
Authority Over American Financial Regulation.''
COMMITTEE CONSIDERATION
The Committee on Financial Services met in open session on
April 17, 2024, and ordered H.J. Res. 125 to be reported
favorably to the House by a recorded vote of 28 ayes to 22 nays
(Record vote no. FC-141), a quorum being present.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the order to report legislation and amendments thereto. H.J.
Res. 125 was ordered reported favorably to the House by a
recorded vote of 28 ayes to 22 nays (Record vote no. FC-141), a
quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.J. Res. 125 is to
rescind the Board of Governors of the Federal Reserve System's
rule relating to ``Principles for Climate-Related Financial
Risk Management for Large Financial Institutions.''
CONGRESSIONAL BUDGET OFFICE ESTIMATES
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Summary of legislation: On April 17, 2024, the House
Committee on Financial Services ordered reported seven bills
and six joint resolutions.
This document provides estimates for three of those joint
resolutions: H.J. Res. 124, H.J. Res. 125, and H.J. Res. 126.
Each joint resolution would disapprove a rule published
jointly in October 2023 by the Office of the Comptroller of the
Currency (OCC), the Federal Reserve System, and the Federal
Deposit Insurance Corporation (FDIC).\1\ By invoking a
legislative process established in the Congressional Review
Act, each joint resolution would repeal the rule and prohibit
each agency from issuing the same or any similar rule in the
future.
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\1\Office of the Comptroller of the Currency, Board of Governors of
the Federal Reserve System, and Federal Deposit Insurance Corporation,
``Principles for Climate-Related Financial Risk Management for Large
Financial Institutions,'' Final Rule, 88 Fed. Reg. 74183 (October 30,
2023), https://tinyurl.com/m68rxv5c.
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The rule establishes principles for managing risks related
to climate change that would apply to financial institutions
with more than $100 billion in total consolidated assets. The
rule contains guidance related to those institutions'
management, policies and procedures, data, reporting, and
scenario analysis designed to help those institutions
understand and manage various kinds of risks related to climate
change.
Basis of estimate: CBO estimates that enacting any of the
three resolutions--H.J. Res. 124, H.J. Res. 125, or H.J. Res.
126--would reduce administrative costs for the affected
agencies by an insignificant amount. The OCC's and FDIC's
operating costs are classified as direct spending. The OCC
collects fees from financial institutions to offset its
operating costs, which are recorded as offsetting receipts
(that is, as reductions in direct spending). Costs incurred by
the Federal Reserve reduce remittances to the Treasury, which
are recorded in the budget as revenues.
The CBO staff contacts for this estimate are Julia Aman
(for the Office of the Comptroller of the Currency and the
Federal Deposit Insurance Corporation) and Nathaniel Frentz
(for the Federal Reserve). The estimate was reviewed by H.
Samuel Papenfuss, Deputy Director of Budget Analysis.
Phillip L. Swagel,
Director, Congressional Budget Office.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives, the Committee adopts as its own the
estimate of new budget authority, entitlement authority, or tax
expenditures or revenues contained in the cost estimate
prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of
1973.
FEDERAL MANDATES STATEMENT
Pursuant to section 423 of the Unfunded Mandates Reform
Act, the Committee adopts as its own the estimate of the
Federal mandates prepared by the Director of the Congressional
Budget Office.
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
EARMARK IDENTIFICATION
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
This Joint Resolution disapproves the rule submitted by the
Board of Governors of the Federal Reserve System relating to
``Principles for Climate-Related Financial Risk Management for
Large Financial Institutions'' and asserts that such rule shall
have no force or effect.
MINORITY VIEWS
We oppose H.J. Res. 125, as it is a Congressional Review
Act resolution that would rescind the Board of Governors of the
Federal Reserve System's (Fed) portion of interagency guidance
for large banks to better manage climate-related risks issued
by the Fed, Federal Deposit Insurance Corporation (FDIC), and
the Office of the Comptroller of the Currency's (OCC) on
October 24, 2023.\1\
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\1\Federal Reserve, Joint Press Release: Agencies issue principles
for climate-related financial risk management for large financial
institutions (Oct. 24, 2023).
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The climate crisis is worsening, with record-breaking heat,
floods, storms, droughts, and wildfires hitting communities
across the nation. In 2023, the U.S. experienced 28 separate
weather and climate disasters that each cost at least $1
billion.\2\ Proponents of this bill deny these very real
threats faced by Americans, even though many companies
throughout the U.S., including large banks, already recognize
the existence of climate-related financial risk. This is one of
the three resolutions House Republicans are advancing that
would eliminate sensible guidance containing steps large banks
can take to ensure they have updated risk management systems
that account for climate-related risks. Financial institutions
are likely to be affected by both physical and transition risks
linked to climate change. These interagency principles are
designed to support existing efforts by large financial
institutions with strengthening climate-related risk
management.
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\2\NOAA, 2023: A historic year of U.S. billion-dollar weather and
climate disasters (Jan. 8, 2024).
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Specifically, the interagency guidance provides the largest
banks with more than $100 billion in assets with a high-level
framework for the safe and sound management of climate-related
financial risk exposures. The interagency principles cover six
areas: governance; policies, procedures, and limits; strategic
planning; risk management; data, risk measurement, and
reporting; and scenario analysis. It describes how large banks
can address specific prudential risk areas, including credit,
liquidity, other financial risks, operational, legal and
compliance, and other non-financial risks; monitor and their
ability to identify, measure, monitor, and control these risks
can be a detriment to the institution's safety and soundness.
We would highlight that the principles contained in the
guidance neither prohibit nor discourage large banks from
providing banking services to customers of any specific class
or type, as permitted by law or regulation.
The banking regulators interagency guidance is one step
financial regulators are taking to better monitor and mitigate
financial threats related to climate risk. President Biden
issued Executive Order (EO) 14030 in May 2021 on climate-
related financial risk.\3\ One section of EO 14030 directed the
Treasury Secretary to work through the Financial Stability
Oversight Council (FSOC) to assess and develop plans to
mitigate systemic risks posed by climate-related financial
risk. In October 2021, FSOC issued a report identifying climate
change as an emerging and increasing threat to U.S. financial
stability.\4\ The report identified four areas where it
encourages FSOC members to act: building capacity and
expertise, filling climate-related data and methodological
gaps, enhancing climate-related disclosures, and assessing (in
order to then mitigate) climate-related risks.\5\ This
interagency guidance is responsive to FSOC's report,
identifying ways the U.S. financial system should better
monitor and mitigate climate-related financial risks. Since
this bill is a CRA resolution that would rescind the October
guidance, it would also prevent the Fed from issuing similar
guidance in the future without further action by Congress. This
would make it harder for regulators to promote the safety and
soundness of banks, as well as financial stability.
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\3\White House, Executive Order on Climate-Related Financial Risk
(May 20, 2021).
\4\Treasury, FSOC Report on Climate-Related Financial Risk (Oct.
2021).
\5\Ibid.
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Numerous groups also oppose this bill, including Americans
for Financial Reform, Ceres, Earthjustice, Environmental
Defense Fund, Public Citizen, Sierra Club, and Unlocking
America's Future.
For these reasons, we oppose H.J. Res. 125.
Sincerely,
Maxine Waters,
Ranking Member.
Nydia M. Velazquez,
Brad Sherman,
Gregory W. Meeks,
David Scott,
Stephen F. Lynch,
Al Green,
Emanuel Cleaver II,
Jim Himes,
Bill Foster,
Joyce Beatty,
Juan Vargas,
Sean Casten,
Ayanna Pressley,
Rashida Tlaib,
Sylvia R. Garcia,
Nikema Williams,
Members of Congress.
[all]