President Joe Biden’s nominee for the Federal Reserve’s top regulatory position will warn she intends to take a tough approach to policing Wall Street, arguing stability should “never be compromised in favour of short-term political goals” as it was during the 2008 crisis.
In prepared testimony released ahead her Senate confirmation hearing on Thursday, Sarah Bloom Raskin doubled down on her uncompromising stance despite a barrage of recent attacks from Republicans.
“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,” Raskin said.
“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 favour of short-term political agendas or special interest groups,” she added.
“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 cyber attacks; or from nature and cataclysmic weather-related events.”
If confirmed as vice-chair for supervision, Raskin, who once served as a Fed governor, would become the central bank’s top Wall Street watchdog responsible for setting the agenda on a wide range of issues from the post-global financial crisis regulatory apparatus to its approach to climate-related financial risks.
She will testify on Thursday alongside Lisa Cook, a professor of economics at Michigan State University, and Philip Jefferson, dean of faculty at Davidson College and a former research economist for the Fed’s board of governors.
Biden selected Cook and Jefferson to fill two vacant spots on the Fed’s board, meaning they — with Raskin — would be voting members on the policy-setting Federal Open Market Committee. Cook would be the first black woman to sit on the board, while Jefferson would be the fourth black man.
Raskin said reducing inflation should be a “top priority” for the Fed, a message echoed by Cook and Jefferson in their prepared remarks.
While the nominees are expected to lean towards a more gradual scaling back of the Fed’s policy support, their focus on inflation suggests they will fall in line with the consensus among top officials for a more aggressive turn towards tighter monetary policy.
“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,” Cook said. “That is why I am committed to keeping inflation expectations well anchored.”
All three candidates are expected to be confirmed, given support from Democratic moderates, including Joe Manchin, who hold sway in the upper chamber. But they will face tough questions from Republican senators about their policy views and academic backgrounds.
Raskin has attracted criticism for urging financial regulators to more proactively address climate change issues, including calls for larger banks with exposure to fossil fuel-intensive industries to hold more capital.
Pat Toomey, the top Republican on the Senate committee, has previously cautioned the Fed against “wandering outside of its lane” and weighing in on matters that have “nothing to do with” its dual mandate of price stability and maximum employment.
Raskin is set to address these criticisms head-on during the confirmation hearing and will acknowledge the supervisory position “does not involve directing banks to make loans only to specific sectors, or to avoid making loans to particular sectors”.
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