The Fed and Climate Change

The New Republic’s Kate Aronoff explains “Why Joe Manchin Sank Sarah Bloom Raskin’s Nomination.”

On Friday, an energetic Joe Manchin spoke to a room full of oil and gas executives in Houston. The following Monday, after long declining to state his position publicly, he came out against Biden’s nomination of Sarah Bloom Raskin to become the top banking cop at the Federal Reserve, as vice chair of supervision. Like his Republican colleagues on the Senate Banking Committee—who boycotted a vote on all pending Fed nominations over Raskin’s professed willingness to incorporate the reality of the climate crisis into banking rules—Manchin cited “the critical importance of financing an all-of-the-above energy policy to meet our nation’s critical energy needs.” By Tuesday afternoon, Raskin had withdrawn her nomination.   

This is followed by several paragraphs noting that Manchin got rich in the energy business, continues to profit handsomely from those businesses (which are now controlled by his son, with his own shares in a blind trust), and is heavily backed by energy interests. But we knew that.

Fossil fuel executives’ worry about investors losing interest is one of the reasons they opposed the Sarah Bloom Raskin nomination. Climate-related financial regulations of the sort Raskin and a growing number of central bankers around the world have endorsed—including climate stress tests and disclosures on greenhouse gas emissions and transition risk—could add a layer of scrutiny for financial institutions looking to continue investing in coal, oil, and gas projects. “Our industries have already felt the impacts of such activism, as the decapitalization of oil and natural gas has meant that companies cannot adequately invest in new production to respond to the high price signals the market is sending,” 41 oil and gas trade associations wrote in an open letter opposing her nomination.  


Tempting as it is to understand fossil fuel interests as a small band of evil executives who wake up every day aspiring to destroy the planet, they control the lifeblood of the global economy—substances that supply 80 percent of the world’s energy. Their power stems from that, and it’s perfectly rational for them to spend generous amounts of money ensuring that nothing comes along to threaten it. As Jane Mayer reported recently in The New Yorker, that spending is what laid the groundwork for them to block Sarah Bloom Raskin’s Fed nomination. Ranking Senate Banking Committee Republican Pat Toomey, who led the charge against Raskin there, has taken over $1 million in contributions from the fossil fuel industry since coming to Washington. In his far shorter tenure on the Hill, Manchin has taken $1.2 million in campaign contributions from energy and natural resource PACs. A conservative dark-money group called the American Accountability Foundation, Mayer reports, took credit for the opposition campaign. 

Because American politicians essentially live in permanent campaign mode, they are very attuned to the demands of potential and actual donors. And directionality is next to impossible to discern: do donors back politicians who favor their positions or do politicians take positions that favor their donors? Probably a bit of both.

Regardless, a guy who got rich in the energy business going into politics and then being an advocate for that industry—especially in West Virginia, which very much depends on it—isn’t really that newsworthy. It’s what we’d expect.

What really piqued my interest is the backstory. I had only barely been aware of Raskin’s nomination until Manchin effectively killed it. But why on earth would the Federal Reserve Board be involved in regulating the types of investments banks could make on the basis of their impact on climate change? An Axios report notes that,

Her writings as an academic show that not only does she think the Fed should ensure that banks get prepared for the consequences of climate change, but also that banks and their regulators should play a positive role in a clean energy transition, shifting funding away from fossil fuels and toward clean energy.

Unless there’s some change in the law about which I’m unaware—and that might well be the case—that strikes me as wildly outside its remit.

To be clear: I believe the United States is well behind the rest of the developed world in seeking to address the problem. But it seems to me that the way to solve it is for the Congress to pass broad authorizing legislation, have the President sign it, and then have appropriate regulatory agencies—most obviously, the EPA and Commerce—issue refined guidelines for implementation. The Fed would seem to have enough on its plate at the moment keeping inflation in check and preventing another recession.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College. He's a former Army officer and Desert Storm veteran. Views expressed here are his own. Follow James on Twitter @DrJJoyner.


  1. Sleeping Dog says:

    Last week in the Financial Times there was a cri du coeur from the fossil fuel industry decrying the lack of interest by Wall St and the big banks to invest in the industry. And it’s no wonder why, over the last few years millions have been invested in fracking, oil sands and other attempts to get oil from played out wells, pretty much all leading to barrels of red ink and a trips to bankruptcy court. Wall St is about the future and the bet is that renewables and new technology will be providing increasing amounts of our energy with oil stagnating.

    It seems a reach that the Fed would get involved in climate change issues, but they do have a responsibility to assure that banks are properly pricing risk on the investments they make, so that a bank failure doesn’t fall back on the public. The oil industry doesn’t want any additional barriers to investment and likely really doesn’t anyone paying attention to what they’re doing.

  2. Jay L Gischer says:

    But it seems to me that the way to solve it is for the Congress to pass broad authorizing legislation, have the President sign it, and then have appropriate regulatory agencies—most obviously, the EPA and Commerce—issue refined guidelines for implementation.

    Yes, that does seem like the best way to solve it, and other problems. And isn’t that pretty much exactly what we did with the VRA? Remind me how that went? Oh yeah, and Obamacare.

  3. Just nutha ignint cracker says:

    @Jay L Gischer: Additionally, once Congress passes broad authorizing legislation, another conservative (or maybe even the same one, who knows?) will object that Congress shouldn’t be interfering with the work of the invisible hand of the market by picking winners and losers (and particularly NOT winners that I haven’t invested in). Let competition decide. It worked for buggy whips; it’ll work for this, too!

  4. Michael Cain says:

    Dumb question: If Manchin’s shares in a particular set of companies are in a blind trust, how does anyone except the trustee know whether he owns such shares or not?

  5. Michael Cain says:

    @Sleeping Dog:
    Word here is that the major investors in the local fracking companies have told them in no uncertain terms to sell oil at $100 and drill only to maintain supply, not to increase it. Use the revenue to pay down debt. I live a few miles from the rail yards where fracking sand for the region come in, then is loaded on trucks to go to the actual drilling sites. The flow of trucks has almost completely stopped. Clearly, none of those companies are fracking new wells.

  6. Sleeping Dog says:

    @Michael Cain:

    In a way, the fracking industry is like Uber, they get by on investors money and hype.

  7. Kathy says:

    @Michael Cain:

    There are none so not blind as those who pretend not to see.

  8. gVOR08 says:

    @Michael Cain: Yeah. Funny how blind trusts work. During the W admin there was a story about Dick Cheney telling his blind trust to sell a particular stock. The story was about insider trading. Nobody even questioned that he knew his blind trust owned the stock.

  9. Lounsbury says:

    @Sleeping Dog: As both a current financier of Renewable Energy investment (and related green / climate change investment) and as a former central bank advisor having sat on risk committees through the financial crisis, I think it is generically a bad idea to work this issue via Central Banks. There are other, better pressure points and regardless Commercial Banks (deposit taking insittutions regulated directly by the Central Banks) are largely stepping back from direct fossil fuel financing.

    This is the wrong tool.

    And regardless, if it were done, all that would happen for the money that wants to go there is to go via non-regulated non-banks (Hedge Funds, debt funds, etc).

  10. Sleeping Dog says:


    Not advocating that the Fed get involved with climate issues, simply pointing out that if there is an entry point for the Fed, however tenuous, for them to do so.

    Referring back to the Financial Times article, assuming it is accurate and since I’ve seen similar observations elsewhere, it likely is, big money, whether banks or investors are avoiding fossil fuels. The markets are doing what they do best, allocating assets to garner the best return with minimal risk.

  11. gVOR08 says:

    First, everyone seems to be looking at this as though it’s a choice between Raskin joining the Fed and making climate the number one priority or the Fed doing nothing about climate. I suspect that’s not a realistic appraisal.

    Second, yes we’d all prefer Congress do it’s job and deal realistically with climate. The success of that plan is before us. What’s plan B?

    I’ve got a pretty good set of tools including a wide variety of hammers. If I see a nail head sticking up where it’s a hazard and I can’t conveniently get to a suitable hammer, I’ll hit it with anything hard and heavy enough, including a rock.

  12. Michael Reynolds says:

    Yglesias has a long piece on climate and activism today.

    It’s difficult to excerpt at reasonable length, but one of the main conclusions is that elites are driving climate change activism, and that those elites often include big business because business generally takes a long view than your average schmoes.

  13. Lounsbury says:

    @Sleeping Dog: I understood, but as you follow-up, generally new general capital is not flowing at present to fossil fuels, as such even that tenuous angle really is not a good one. In fact if anything there may be a transitionally dangerous underinvestment in transitional bridging. Certainly if one is in RE the taps are open. I have just opened a several hundred million euro RE/green line and already its fully subscribed, and there is clamour for another.

    Semi-artifically strangling fossil fuel investment is thinking a decade out of date – I suppose better than the two to three decades out of date US conservatives thinking (if one can call it that) on RE but still out of date. RE technology for Utility Scale is racing again on cost and doesn’t need fossil fuels to be strangled on investment.

    Rather the problem now is not raising the cost of investment in fossils via sector discriminatory risk weightings or other typical Central Bank tools, rather it is the Greeny Left is economically innumerate and ignoring the emerging problem of unbalanced RE investment building up excessive levels of intermittancy (see e.g. the prices going negative at peak RE generation hours, this is not a good thing, it kills off IRRs and will strange or hobble ultimate investment). Already I face investment hurdles in grid max outs for intermittant production, so one can not put in more RE in some locales.

    Rather than focusing on Big Oil conspiracy mongering and hair-shirtism that the Green Left innumerately adores, there needs to be a massive focus on rather R&D and support to
    (1) accelerated storage technologies to drive down storage cost for Utility Scale RE to mitigate or solve intermitrancy challenges
    (2) massive grid upgrades to enable continent scale / wide geography load balancing and also balancing of intermittancy of wind and sun (also drive down exchange costs)
    (3) nuclear investment to kill off base problems for intermittancy (and as well provide non-carbon base for green hydrogen)
    (4) Permitting streamlining to accelrate new build for RE since NIMBYism is ridiculously retarding too many projects
    (5) Long-term/speculative R&D to advance efficiency

    Most of this is ideal for government led spending, R&D, Public-Private for grid and storage acceleration. Massive grid upgrades, doesnt need to be explicetely anti-Coal or fossil, it just needs to be scale and RE will eat coal and even natural gas for lunch.

    Instead of focusing on hairshirt, infrastructure spend, R&D spend, and grease permitting. It’s not 1995 nor 2005 nor even 2015. When I started in this about a decade ago, would have never thought to see the pricing I see now for RE by this time.