Why U.S. Chamber of Commerce is concerned about Biden’s banking nominees

WASHINGTON — The U.S. Chamber of Commerce is taking on an increasingly visible role in the confirmation process for the Biden administration’s financial regulatory nominees, another indication of the ripple effects banking policy is having across the broader business community.

One of the nation’s oldest and most prominent advocates for the business sector, the Chamber has historically maintained a solid distance from Senate confirmations, particularly when bank regulatory nominees are involved.

But that appears to be changing under the Biden administration. In September, the Chamber blasted Cornell University law professor Saule Omarova, the White House’s pick to lead the Office of the Comptroller of the Currency who later withdrew after significant industry pushback. And this week, the Chamber sounded yet another alarm in a letter to the Senate Banking Committee, this time over Sarah Bloom Raskin, who was nominated earlier this month to be the Federal Reserve’s vice chair for supervision.

“This position enforces and helps develop the regulations that are the bedrock of competitive financial markets,” wrote Tom Quaadman, executive vice president of the Chamber’s Center for Capital Markets Competitiveness. “Some of Ms. Raskin’s past actions and statements have raised concerns among the U.S. business community and merit the committee’s scrutiny.”

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Quaadman’s letter stops short of an outright condemnation of Raskin’s candidacy. But it poses more than a dozen questions for U.S. senators to ask the former Treasury official across “several important issues,” including the central bank's response to the COVID-19 pandemic, the future of climate-sensitive bank regulation, and the Fed’s broader regulatory independence.

Raskin, along with Fed nominees Lisa Cook and Philip Jefferson, will testify before the Banking Committee on Thursday. The hearing is expected to be contentious and may focus in large part on Raskin. Sen. Pat Toomey of Pennsylvania, the committee's top Republican, has made clear he has deep reservations with her past writings on the role of climate in bank regulations and financial policy in particular.

But the Chamber’s recent dip into confirmation politics is far more unusual than party-line GOP opposition, especially for an organization that has sought to rebuild relationships with Democratic lawmakers in recent years.

Analysts say the Chamber's behavior is emblematic of the financial system’s expanding role in the broader economy over the past couple of decades.

“It reflects the importance of financial regulation in a financialized economy,” said Karen Petrou, managing partner at Federal Financial Analytics.

The structure of the financial system has also changed considerably in recent years, and a more concentrated banking and markets landscape means that the policy choices made by the nation’s bank regulators could have more immediate implications for the economy.

“If a bank regulator takes a position on climate risk [at one time], that would have been germane only to banks, and there was enough diversity in the institutions and in the markets that it would not have been structurally significant,” Petrou said. “Now, it is.”

Other analysts say that the U.S. Chamber is also likely responding to specific policy preferences of the Biden administration and its nominees that appear to be more ambitious and progressive.

“I think it’s really recognizable that the Democratic Party, when it comes to banking, is more progressive than previously,” said Todd Phillips, director of financial regulation at the Center for American Progress. “Even among folks who have spent time in the industry, there’s a recognition that progressive values on banking are ascendant.”

The Chamber’s wariness may not be unwarranted, especially if Biden’s bank regulators pursue any policies that limit any particular industry’s access to credit. Raskin penned an editorial for The New York Times in May 2020 urging the Fed not to change the rules of its Main Street Lending Program to allow oil, gas and coal companies to access government funds.

“I think that the Fed and other banking regulators are weighing in on issues that could materially affect the Chamber’s membership,” Phillips said. “That could be bank loans, that could be the Federal Reserve's liquidity facilities — all of these things are beginning to touch on issues beyond traditional bank regulation.”

Carter Dougherty, a spokesman for Americans for Financial Reform, said the Chamber's letter about Raskin was simply an attempt to limit her ability to craft ambitious policy if she is eventually confirmed.

"The big banks want regulators who will go easy on them like Trump appointees did, and that's why a no-nonsense type like Sarah Bloom Raskin scares them," Dougherty said. "They’re trying to hide behind things that have become politically charged while attempting to extract promises from nominees that will limit their ability to act when in office.

In questions posed by the Chamber for Raskin ahead of Thursday’s Senate hearing, Quaadman asked whether it was “the role of the Federal Reserve to direct capital away from certain industries that are politically disfavored or direct capital towards industries that are politically favored.”

The letter to the Banking Committee also urged lawmakers to “secure a commitment from Ms. Raskin to maintain the political independence of the Board and stay committed to its statutory mission,” pointing to a recent power struggle at the Federal Deposit Insurance Corp.

“The Federal Reserve is designed to adhere to its statutory mandate and remain independent from political influence,” Quaadman wrote. “After the recent push by board members at the Federal Deposit Insurance Corporation to usurp the Chair’s authority, we have serious concerns about similar politicization at the Federal Reserve.”