WASHINGTON — Progressive Democrats on the House Financial Services Committee urged top financial policymakers Wednesday to be more aggressive in combating risks from climate change.
The Biden administration and Federal Reserve have already taken heat from Republicans for recommendations and research on mitigating the impact of global warming on financial institutions. But at a hearing with Treasury Secretary Janet Yellen and Fed Chair Jerome Powell, some lawmakers suggested the recent moves are not enough.
Rep. Rashida Tlaib, D-Mich., questioned Powell over whether the Fed will join
"Acting Comptroller of the Currency Michael Hsu has announced that the OCC plans to issue supervisory guidance on climate risk by the end of the year. Does the Fed intend to join this guidance?" Tlaib said.
Powell responded that while the Fed was "in discussions with the OCC" and the agencies would prefer to issue uniform policies, the central bank would likely decline.
"I don’t think we’ll actually be in a position to join this specific [OCC] guidance at this time, but we’ll get there,” Powell said.
Tlaib similarly asked whether the Fed will follow the OCC's lead in conducting climate risk assessments during 2022 examinations of large banks, to which Powell responded: "We're already deep into dialogue, and again, particularly with the largest financial institutions, that's really where a lot of the work is going on right now."
"On behalf of my residents, I hope dialogue turns into guidance and accountability," Tlaib said.
Meanwhile, Rep. Alexandria Ocasio-Cortez, D-N.Y., said
To date, regulators have focused somewhat narrowly on assessing how severe weather events and changing consumer behavior resulting from a warming planet could roil financial markets. But progressives such as Ocasio-Cortez have advocated a more direct approach of using the financial system to reduce the carbon footprint.
She suggested the report could have discussed ways financial companies can help nations prevent the planet from heating up by more than than 1.5 degrees Celsius in the coming years — a key threshold identified by scientists.
“I was disappointed to see that the report, which is intended to serve as a blueprint for federal regulators, makes no mention of any timelines or policies needed to stay within that 1.5 degrees Celsius target,” Ocasio-Cortez said.
Yellen defended the report by emphasizing that the FSOC’s mission was “to identify threats to financial stability of the United States, and to coordinate across regulatory agencies to make sure that they're addressed.” She also pointed to the “very substantial policies” contained within the Build Back Better Act — a legislative package she advocated for throughout Wednesday’s hearing — to address climate change.
Some Republicans, meanwhile, were keenly focused on whether the policies under consideration from the Biden administration would impact the ability of fossil fuel firms and other energy companies to receive financial services.
“When the [congressional] majority can't pass a bill to outlaw certain forms of energy, and they can't pass a bill to tax it to death, the route they're going to take is to use regulatory policy to strangle the capital available to those industries,” said Rep. Frank Lucas, R-Okla. “Is it the intention of the regulators to create standards such that banks cannot support any particular energy industry that may ask for capital, that may justify a loan?”
In response, Yellen pointed to the FSOC’s statutory responsibility to focus on financial stability and the Federal Reserve’s focus on banks’ safety and soundness. “That means making sure they hold adequate capital,” she said.
