Republican senators call on Fed to rein in ‘climate activism’
Zachary Halaschak
Republican senators are cautioning the Federal Reserve to curb initiatives related to climate change amid high inflation and tumult in the banking sector.
The group of nine lawmakers, led by Sen. Dan Sullivan (R-AK), sent a letter to Fed Chairman Jerome Powell on Wednesday expressing frustration with the Fed’s engagement in environmental policymaking and research, which they contend are “far outside” the central bank’s statutory mandate.
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“We urge you to rein in the Fed’s regional banks and its economists who are seemingly ignoring your leadership. The Fed’s credibility hangs in the balance, and without a course correction, history will find you either complicit or ineffective as Chairman,” the senators said.
The lawmakers noted that the Fed recently announced a pilot climate risk analysis exercise. The pilot will use scenario analysis to examine the resiliency of financial institutions under different hypothetical climate scenarios, and six of the country’s largest banks will participate.
In the letter, the senators contend that despite “clever pilot program marketing,” the initiative amounts to a “climate stress test.” The Fed itself has said that its climate scenario analysis is distinctly separate from bank stress tests.
“The Fed is actively signaling that bank activities that do not further the goals of net zero by 2050 are inherently risky and disfavored,” the letter read. “This drives capital away from traditional energy development at a critical time for our economic and national security, while empowering America’s adversaries.”
The lawmakers said that the move is just a result of “climate activism” by the central bank, which they contend has been growing in recent years. They said regional Fed banks often host climate events and convene conferences related to climate change and that they instead should be sticking to monitoring more tangible problems in the banking system, particularly against the backdrop of recent failures.
The Fed’s online archive contains hundreds of studies, policy papers, and documents related to climate change that the senators say have “shoddy research at best, and blatant propaganda at worst.”
“All of this work is being done and man hours are being spent on climate change by an institution that has no statutory authority to do so, and without any scientific expertise,” the letter read. “There is no shortage of work to be done on issues directly within your statutory authority as evidenced by the Fed’s recent whiff on inflationary policy and inept oversight leading to the SVB crisis.”
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The letter comes amid a broader GOP pushback against government and financial sector involvement in environmental, social, and governance initiatives, also known as ESG.
The lawmakers pointed out that during his confirmation process and tenure as the Fed’s chairman, Powell, a Republican, resolutely emphasized the importance of the Fed staying within the confines of its statutory mandate — which is pushing for maximum employment and keeping inflation at a healthy level.