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Biden Fed nominee downplays central bank role in climate change

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Michael Barr testifies before the Senate Banking Committee, telling lawmakers the Federal Reserve does not tell banks whether to lend to a particular industry./AFP
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May 20, 2022 - 07:47 AM

WASHINGTON — Joe Biden’s nominee for the role of the top Federal Reserve banking cop on Thursday downplayed the central bank’s influence over climate change policies, an issue that torpedoed the US president’s first choice for the role.

Michael Barr, a former Treasury official who worked on banking reform and the creation of the consumer protection agency in the wake of the 2008 global financial crisis, assured legislators he would not try to steer financing away from fossil fuel companies.

Senate Republicans blocked a vote on Sarah Bloom Raskin for the post of Fed vice chair for supervision, after she became a lightning rod for critics who said she was hostile to the oil industry.

She withdrew from consideration in March after a key Democratic senator said he would not support her.

In his nomination hearing before the Senate Banking Committee, Barr stressed the goals and limits of the Fed role.

“I think that the Federal Reserve is not able to allocate credit, should not be in the business of telling financial institutions to lend to a particular sector or not to lend to a particular sector,” he said.

The opposition to Bloom Raskin as well as Lisa Cook, who became the first Black woman to serve on the Fed board, delayed Biden’s efforts to fill the vacant seats at a time when monetary policymakers are waging war against inflation that has hit a 40-year high. The world’s largest economy is being buffeted by ongoing shocks from the Covid-19 pandemic and the war in Ukraine that have driven prices higher and threaten to worsen supply chain issues.

Tight labor markets have created a shortage of workers, causing employers to bid up wages, adding to the inflation pressures.

The Fed is raising borrowing rates aggressively to try to cool the economy — with the next big hike expected in June and another in July — while hoping to avoid tipping the economy into recession.

The Senate earlier this month confirmed Fed Chair Jerome Powell for a second term, and three other posts have also been filled, leaving the banking supervision position as the lone vacancy on the seven-seat board.

In his prepared remarks, Barr said he would be “strongly committed to bringing down inflation,” and “to ensure that the financial system is robust and resilient, that innovation flourishes with clear rules of the road, and that the financial system operates fairly.”

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