The Sarah Bloom Raskin nomination to the Federal Reserve
I recently completed reading Jamie Raskin’s astonishing new book, Unthinkable: Trauma, Truth, and the Trials of American Democracy. By coincidence, Rep. Raskin’s wife, Sarah Bloom Raskin, was under consideration before the Senate to serve as President Biden’s choice to serve as Vice Chair of the Federal Reserve’s Board of Governors. I quickly Goggled her and was incredibly impressed by her diversified career in finance — former Deputy Secretary of the Treasury, member of the Board of Governors of the Federal Reserve System and currently a professor of law at Duke University. I thought she sounded like the perfect candidate to serve as the Federal Reserve’s vice chair for supervision (the Fed’s top banking regulator).
At this point it is important for me to digress and extol the virtues of Jamie Raskin’s book and the heartfelt feelings I had about Congressman Raskin after reading it. I was totally taken with the extraordinary courage he showed in serving as the lead manager of President Trump’s first impeachment, while grappling with the tragic death of his 25-year-old son Tommy, who lost his battle against depression by committing suicide on December 31, 2020. I was totally taken with Raskin’s ability to eloquently describe his grief, his love and his dedication to justice, equality and democracy.
I believe that the 2024 election will be the most crucial election in our nation’s history. It is imperative that it not be cast as just another election that pits “conservatives” vs. liberalism or “socialism” vs. “capitalism.” It should be framed as a choice between “democracy” vs. “authoritarianism” and “rule of law” vs. “rule of man.”
After reading Unthinkable, I felt that Raskin would be the best Democratic to make the case for preserving and protecting our constitutional system of government.
I came away thinking that Raskin has a unique ability to connect and work with people who think very differently than him politically, always politely, with respect, without resorting to low blows. I was poised to write a column as to why he should be the Democrat’s choice for President in 2024, when the Sarah Bloom Raskin story broke. Suffice to say some of the details that have come to light regarding the actions taken by Sarah Raskin trouble me. Am I being unrealistic or were her actions no big deal?
Her nomination failed and most of the media reported that the reason her nomination failed was because Republicans in the Senate, along with West Virginia Senator Joe Manchin, felt that Raskin would use the Fed’s regulatory authority to discourage banks from lending to oil and gas companies. They pointedout that she had made comments over the years that the Fed and other federal regulators needed to be conscious of the risk posed by climate change. More specifically, in a September 2021 opinion piece she wrote that “U.S. regulators can — and should — be looking at their existing powers and considering how they might be brought to bear on efforts to mitigate climate risks.”
In a Wall Street Journal editorial after her nomination was torpedoed, wrote that the message is that the Senate is sending “a warning to the Fed that a majority of the Senate doesn’t believe the central bank should use its power to allocate capital for political purposes.” I’m not exactly sure where I stand on the issue of whether the central bank should or should not use financial regulations to combat climate change.
However, another issue that surfaced during her hearing before the Senate Banking Committee, concerns me. The New York Times reported that “Opponents to Ms Raskin’s confirmation targeted more than just her climate views. They also took issue with work she did in the private sector — and the way she answered questions about that work. Republicans had specifically cited concerns about Ms. Raskin’s time on the board of directors of a financial technology firm. The company, Reserve Trust , secured a coveted account with the Fed — giving it access to services that it now advertises — after Raskin reportedly called a central bank official to intervene on its behalf… she made about $1.5 from the stock she earned for her Reserve Trust work.”
Sarah Raskin was intensely questioned by Ranking Republican Committee member Pat Toomey (R-Pa.) regarding how much her involvement helped Reserve Trust become the only non-bank fintech firm to receive a Fed-master account that allows the firm to earn interest from deposits parked at the Fed and eases their ability to transfer large sums of money because they have direct access to Federal Reserve clearing, payment, and settlement services. Other non-bank financial institutions without the master account have to partner with banks insured by the Federal Deposit Insurance Corp. to access the Fed’s services.
During Tooney’s questioning, Raskin indicated that she did not know why Reserve Trust wanted a master account. She initially tried to avoid answering questions about whether she called the Kansas Fed and ultimately she said she did not remember if she had.
In the end, it appears that a call was made, but the Federal Reserve Bank of Kansas City issued a statement indicating that nothing out of the ordinary was done. They said they “did not deviate from its review process in evaluating this request from Reserve Trust, a payment technology company where Raskin was a board member.” They added that “it is routine for them to communicate on an ongoing basis with requesting organization, its management (including directors), public officials and any relevant federal or state regulatory counterparts.” They further indicated that the reason the request was granted was because Reserve Trust “changed its business model”
I guess we will never know exactly what Sarah Bloom Raskin said to the Kansas Fed and whether the call unduly influenced their decision. What I do know is that I don’t like the revolving door that exists between regulators and financial firms.
Democrats consistently denounce it, but readily accept positions in the private sector that pay extremely well, following their service in government, regardless of whether it opens them up to charges of potential conflicts of interest. Given their hypocrisy, it should not be surprising that a financial service firm would think there’s absolutely nothing wrong with hiring a former Fed governor to make their case before the Kansas City Fed. After all, it’s all legal and that what everyone does. I guess I am really unrealistic. I thought the Raskins might be different.