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Friday, March 1, 2024

Commentary: Fed’s mandate doesn’t include climate change

The Federal Reserve's recent announcement that it will join the Network for Greening the Financial System, a consortium of central banks intent on using financial regulation to combat climate change, should raise concern for those observing a troubling trend in the politicization of financial supervision.

European regulators have begun injecting ill-defined climate metrics into their supervision of regulated firms and U.S. lawmakers on the far left are urging our financial regulators to join them.

Radical climate activists and their enablers on Capitol Hill are incapable of passing the Green New Deal through the legislative process because the American people know it would crush jobs, increase the cost of food and fuel, and have lasting negative impacts on American competitiveness and economic exceptionalism.

As a result, they want to use financial regulation as a backdoor to achieve their ill-conceived objectives. This effort is less about predicting financial stress from climate change and more about causing financial stress for industries that climate extremists hate.

Question of authority

The greatest risk to financial stability is not an insufficient focus on climate change.

It is an extreme policy agenda that would weaponize financial regulation to discriminate against fossil energy — the most affordable, reliable source of energy that has powered the American economy and American energy independence.

Senate Democrats, in a recent partisan report, openly call for regulators to discourage financial firms from extending credit to industries that "amplify climate risk," such as coal, oil or natural gas.

Lost on the authors of this report is the fact that managing climate risk is outside the primary authority of financial regulators and that such actions would increase the costs for Americans to heat their homes, fuel their vehicles or feed their families — all amidst a once in a century health and economic crisis.

Earlier this month, I led a letter with 46 of my House Republican colleagues to Federal Reserve Chairman Jerome Powell and Vice Chair for Supervision Randal Quarles, urging the Fed to proceed cautiously when deciding whether to incorporate climate change scenarios into supervisory stress tests.

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