Lael Brainard, President Joe Biden’s nominee for the Federal Reserve’s No. 2 spot, said Thursday that the Federal Reserve would not pressure banks not to lend to fossile fuel companies or other sectors targeted by the environmental left.
The notion that the Fed should push a climate change agenda through its bank supervision powers has gained popularity in the Democratic Party, especially among politicians associated with the so-called Green New Deal.
Pressed on the issue by Republicans on Thursday, Brainard rejected the idea.
From the Associated Press:
Several Republican senators expressed concern that the Fed might increasingly take account of climate change in its policymaking and use its supervisory authority over banks to discourage them from lending to oil and gas companies. Brainard pushed back against such a likelihood.
“We would not want to tell banks what sectors to lend to, or not to lend to,” she said.
Sen. Steve Daines, a Republican from Montana, questioned whether the Fed has the “experience or expertise” to incorporate climate change into its regulation of banks. Last year, Brainard had suggested that the Fed should evaluate scenarios in which climate change could harm the financial system. An example would be widespread lending losses or insurance payouts resulting from weather disasters.
Brainard said the Fed did not engage in “environmental policy” but still has a duty to evaluate possible risks.
“We do have some sort of responsibility for understanding potential financial stability implications of a host of different kinds of things,” she said. “We don’t have any expertise in disease and pandemics. But certainly it turned out that the pandemic had enormous financial stability consequences.”
Brainard is expected to be confirmed by the Senate.