UPDATE: Feb. 25, 2022: The Senate Banking Committee will meet March 2 — at which point the panel’s chair, Sen. Sherrod Brown, D-OH, said he would try to advance President Joe Biden’s five nominees for posts on the Federal Reserve Board of Governors.
“I am hopeful Republicans show up,” Brown told Bloomberg. “You go to the Senate, you do not have three choices — ‘yes, or no, or I will boycott.’ You either vote yes or no. That is what the public expects.”
A dozen Republican lawmakers refused to attend a Senate Banking Committee vote Tuesday, stalling the confirmation process for all five of President Joe Biden’s nominees for posts at the Federal Reserve over objections to one of them.
Republicans’ gripes against Sarah Bloom Raskin, Biden’s pick to serve as the central bank’s vice chair of supervision, are twofold. Some lawmakers may remain unconvinced that Raskin’s stance against including fossil-fuel companies in emergency COVID relief won’t bleed into decisions on capital allocation.
The larger sticking point may be Raskin’s responses to a line of questioning from Sen. Cynthia Lummis, R-WY, during Raskin’s nomination hearing this month.
Raskin repeatedly refused to say at the hearing whether she called the Kansas City Fed in August 2017 to lobby the central bank satellite to reconsider the fintech Reserve Trust’s application for a master account. Raskin had joined Reserve Trust’s board in May of that year. A month later, the Kansas City Fed denied the fintech’s application. But the company was granted a master account in 2018, allowing it to move money through the Fed’s payments system without needing a bank.
The Kansas City Fed, in a statement last week, said the reversal came because Reserve Trust “changed its business model” and regulators in Colorado, where the company is based, “reinterpreted the state’s law” in a way that helped Reserve Trust “[meet] the definition of a depository institution.”
The Colorado Division of Banking, however, objected Tuesday to the Kansas City Fed’s characterization of events.
"We consider the statement that the division 'reinterpreted' state law as a misrepresentation of our practice," Rebecca Laurie, a strategist for the Colorado Division of Banking, told CNBC in an email. "The analysis of the laws is consistent, while what can change outcomes to our analysis are the facts provided by the entity. … Further, the Division of Banking has not, nor has the authority, to change, modify or reinterpret any law without engaging in the rulemaking process.”
The Kansas City Fed declined to comment to CNBC.
However, Sen. Pat Toomey, R-PA, the banking panel ranking member credited with leading Tuesday’s GOP no-show, asserted in a letter Friday that Kansas City Fed President Esther George herself told him Raskin made the 2017 call directly to her.
"On the evening of February 2, 2022, you and your staff spoke with my staff," Toomey wrote to George in the letter, seen by CNBC. "On that you call, you revealed that Ms. Raskin had, in fact, personally called you about Reserve Trust's master account application after it had been denied.”
For her part, Raskin last week told lawmakers in a written submission that she did “not recall any communications I made to help Reserve Trust obtain a master account.”
“Important questions about Ms. Raskin’s use of the ‘revolving door’ remain unanswered largely because of her repeated disingenuousness with the Committee,” Toomey said in a statement Tuesday. “On 36 questions for the record, for example, Ms. Raskin claimed she either did ‘not recall’ or was ‘unaware’. Her repeated forgetfulness defies credulity.”
Toomey said he met last week with the panel’s chair, Sen. Sherrod Brown, D-OH, adding that Republicans would support moving forward with a vote on the nominees — except for Raskin.
However, Brown told The Wall Street Journal on Tuesday he would not let Republicans “cherry-pick [and] say, ‘Oh, we’ll vote yes or no on these three nominees, but we’re not going to even vote on these other two.’”
The second nominee Brown is referencing is likely Lisa Cook, whose academic background at least one panel Republican — Sen. Bill Hagerty of Tennessee — criticized because, he said, it "doesn’t seem related to the mission of the Federal Reserve.”
Brown said he would reschedule votes on the five Fed nominees but castigated committee Republicans for not attending.
“Instead of showing up to work, to do their job, Republicans have walked out on the American people,” Brown said in a statement. “I urge my Republican colleagues to return to the table, to vote their conscience.”
“Let them vote no if that's what they believe, but make them vote, and let the Senate fulfill its solemn duties,” he added, according to American Banker.
Another committee Democrat, Sen. Bob Menendez of New Jersey, warned Republicans they’re hampering the Fed’s ability to set monetary policy by not allowing the central bank to operate with a full board of governors.
"If our Republican colleagues were as concerned about inflation as they claim to be, and as certainly we are, then they would come to the markup and make sure that the Fed has the personnel to … rein in inflation,” Menendez told CNBC.
The Fed is set to meet March 15 to decide whether to raise interest rates, which may help on that front.
A spokesman for Lummis, however, offered a rebuttal on Twitter.
"If [Democrats] cared about inflation, a fight over Raskin would not be their top priority today - getting a vote on [Fed Chair Jerome] Powell, etc. would,” Darin Miller, the spokesman, wrote Tuesday.
The 12 Democrats who attended Tuesday’s scheduled vote indicated nonbinding support for four of the Fed nominees: Raskin, Cook, Lael Brainard and Philip Jefferson. Eleven showed support for Powell (all except Sen. Elizabeth Warren, D-MA, who had said in October she opposed his renomination).
Warren on Tuesday said by refusing to attend the vote, panel Republicans were disregarding the “olive branch” most Democrats had extended by agreeing on a Powell renomination, and “lighting that branch on fire,” the Financial Times reported.
Republicans are not the only ones to stall confirmation on nominees, however.
Brown in 2017 boycotted a Senate Banking Committee vote to consider Steven Mnuchin for treasury secretary, according to The Wall Street Journal.
Once nominations receive 12 or more votes in committee — provided enough Republicans attend for a quorum — they will move on to the full Senate.
For now, however, “Republicans are playing hardball because they can,” Ian Katz, the managing director at Capital Alpha Partners, told The New York Times on Tuesday.