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When the Federal Reserve voted in 2011 on the drafting of a new law banning banks from making counterfeit money, Sarah Bloom Raskin was the only opposition member of staff at a major US bank.
The so-called Volcker rule, he he concludes, was not strong enough as it stood, its barriers “incomplete” and open to “extreme cruelty”.
Demonstrating his opposition, Raskin, then the Fed’s governor, helped to secure a more ambitious statement and became known as a leader in legal proceedings.
If confirmed as the vice-president, Raskin is expected to take bold action on a number of thorn in the side, from creating a weak spot in the post-economic crisis to lead the Fed to reflect on climate change. dangerous.
“His actions tell you that he is a wonderful man,” said Andrew Levin, who worked with Raskin for 12 years at the Fed, in his protest. “She did not give up and continue on with him. He had complete confidence in his professionalism which he was ready to challenge – and it is not always easy. ”
The idea of President Joe Biden in choosing Raskin, A 60-year-old Democrat who teaches at Duke University, fills the vacancy left by Randal Quarles, whose four-year term ended in October. Announcing his decision, he also recruited Lisa Cook, a professor of economics and international relations at Michigan State University, and Philip Jefferson, a professor of economics at Davidson College, to fill the two remaining vacancies on the Fed board of directors.
Elected by then-President Donald Trump in 2017, Quarles’ departure was long-awaited following Biden’s victory in the 2020 presidential election, sparking frustration among many economists that it took too long to announce another.
Having already done so with the Senate and faced many Senate cases, Raskin, who served as Deputy Secretary-General of the US Treasury during the Obama administration, will not be able to face the uncontested opposition in Congress, ensuring that the reforms take place.
“His intimate knowledge of [regulatory] The toolset will enhance its operational capabilities from day one, “says Kathryn Judge, a professor at Columbia University with a degree in economics. , so they are ready to go and make the difference in their lives. ”
Raskin is expected to take a stronger approach than he did when it came to managing and looking for ways to strengthen the laws that govern the largest and most important financial institutions.
“It is a very difficult job. “You are facing a crisis and at the same time the political crisis of both sides is huge,” said Betsy Duke, a former Fed ambassador who works with Raskin. “Sarah is a man who can fight political parties.”
His administration, Quarles, a Republican who previously served as Treasury chief under George W Bush, led a number of ways to weaken some of the laws that Raskin was responsible for helping him carry out his first job in the Fed.
In addition to reforming the Volcker law and reducing trade restrictions imposed on major banks, Quarles also took the lead in reimbursing some of its financial needs and changing the way financial institutions are tested to see how they can solve problems, among others. to “change” the rules.
The changes came in handy with almost all Fed officials except for Lael Brainard, who nominated Biden a second, who opposed most of them.
“The seeds of the financial crisis are sown over the years,” said Jeremy Kress, a former attorney general for banking and policy at the Fed. “We do not know the exact cost of the Fed’s withdrawal in the coming years,” [and] is about to announce the victory based on how banks did during the Covid era. “
Raskin’s appointment, he said, was difficult, given the “power” he had in helping to establish the original laws enacted by the Dodd-Frank Act in 2010.
“He does not know what needs to be done to get back on the Dodd-Frank foundation, and he does know some of the basic weaknesses of the law and how to strengthen them,” said Kress, who is now a professor at. at the University of Michigan.
Changing the levels of stress testing should be one of the key issues for Raskin, many leading experts and progressive Democrats have said. Under Quarles, the test came to fruition and the Fed was no longer able to publicly denigrate banks based on an assessment of their strengths. The changes made the test easier to test, critics said.
Republican lawmakers seem to be very careful with Raskin’s past encouragement for the financiers to increase quickly tackling the problem of climate change.
He has been very helpful light on the types of companies that the Fed wants to help with its emergency measures and has asked big banks with oil and gas companies and other industries that use more oil to make more money.
Pat Toomey, a Pennsylvania Republican senator, has argued that his policy of “borrowing” from fuel companies, which he warned in a statement on Thursday, “will not only threaten the Fed’s independence.
Brainard was forced At his confirmation meeting Thursday on his thoughts on regulatory restrictions on banks that lend to oil and gas companies. He also said it was not the Fed’s job to order loans, but he did show support for the central bank to ensure that climate risk is monitored and controlled.
Glenn Hubbard, dean emeritus of Columbia Business School and former chairman of the US Council of Economic Advisers during George W Bush’s presidency, said the process “worked well” and warned the Fed to enter “debt-sharing business”.
Moving the Fed in this direction would require a lot of controversy. Powell expressed skepticism about whether the central bank should monitor climate change issues.
However, he said that “acceptance”The deputy chairman is setting up a plan.
Raskin will also be responsible for recording how the Fed manages digital assets such as stablecoins and for participating in discussions on how the digital dollar offered by the central bank can work.
These issues will probably not be in full swing as long as the central bank struggles with rising inflation and inflation.
The Fed at the end of last year adopted a very aggressive approach to reducing its spending accommodation. More interest rates are expected next year, with the Fed as well origin reducing the size of its dimensions.
“Raskin and his colleagues will be at a point where there are questions about how money remains healthy and strong as the Fed needs to move faster to change its monetary policy,” Levin said, writing about Treasury market trends. violations of the rules and some of the “pipes” that have appeared in the past.
“This is going to be a very difficult year for the Fed,” he said. “In the future there will be storm water.”
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