Toomey questions geographic, industry diversity of Biden’s Fed picks

The top Republican on the Senate Banking panel questioned the geographic and professional backgrounds of President Biden’s Federal Reserve picks amid a brewing conflict over diversity at the central bank and its role in dealing with climate change.

Pennsylvania Sen. Pat Toomey said he’s “particularly concerned” about the lack of industry representation, especially from the energy sector, citing vice chair of supervision nominee Sarah Bloom Raskin’s advocacy for the Fed to act on climate risks.

“While a lack of expertise at the Federal Reserve Board in any particular industry is inevitable, the demonstrated hostility of one nominee, Sarah Bloom Raskin, towards a sector that supports employment for millions of Americans, is unacceptable,” the Pennsylvania Republican wrote.

Biden has been under pressure from progressive Democrats to increase diversity at the Fed and other government institutions. In addition to Raskin, who would be the first woman to be vice chair of supervision, Biden’s four other picks for the Fed include Lisa Cook, who would be the first Black woman on the board of governors. His other nominees are Philip Jefferson and Governor Lael Brainard for vice chair as well as Chair Jerome Powell for a second term at the head of the Fed.

Toomey takes the diversity argument in another direction, writing in his letter that he wants to “express my concerns with the significant lack of diversity in geography and professional experience in your recent slate of nominees.”

He said that a majority of Biden’s picks would hail from the Fed’s Fifth District, based in Richmond, with three residing in the Washington, D.C., area and a majority from academia rather than industry.

He cited the Federal Reserve Act, which directs the president to select “not more than one” pick from each Federal Reserve district and to “have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country.”

However it’s not uncommon for Federal Reserve board members to represent areas other than where they reside. Powell represents the Philadelphia Fed’s district, although he was born in Washington and has lived in Maryland for many years. Randal Quarles, who resigned from the Fed board in December, represented the Kansas City district, though he mainly grew up in Utah, which is in the San Francisco Fed district.

A White House official pointed to a 1977 legal opinion by the Office of Legal Counsel that the legal requirement was not a strict residency requirement. The official, who spoke on condition of anonymity, said that Raskin will represent Boston, where she was born and went to school, while Jefferson will represent New York, where he went to school, taught and worked at the New York Fed. Cook will represent Atlanta, where she was born and her family has a history of civil rights activism.

The official called the nominees eminently qualified economists, some of whom have already worked for the Fed or are on the board already.

The larger fight is over the potential for new Fed regulations forcing banks to take into account climate risks — something Toomey and other Republicans say is both outside the Fed’s purview and could harm the economy.

Toomey cited a Raskin column in The New York Times in May 2020 headlined “Why Is the Fed Spending So Much Money on a Dying Industry?” in which she argued the Federal Reserve should exclude fossil fuel companies from emergency pandemic-related lending. Toomey also charged her with advocating that the Federal Reserve pressure banks to choke off credit to such companies.

He asked Biden for an explanation of how he complied with the requirement for “due regard to a fair representation” of the various commercial interests and geographic areas of the country.