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Illustration: Sarah Grillo/Axios

President Biden's plan to tap Sarah Bloom Raskin as top banking regulator at the Federal Reserve could intensify the central bank's already growing focus on climate change.

Catch up fast: The news broke Thursday night that Biden will nominate Raskin, a Duke University law professor, for the powerful role of vice chair for supervision.

She was a Fed governor from 2010 to 2014 before joining the Treasury Department during the Obama administration.

Why it matters: Raskin has been outspoken on the need for financial regulators to prevent climate change from becoming a systemic risk to the banking system.

And she has also backed a climate role for financial regulators that goes beyond analysis and planning efforts.

  • In September she wrote an op-ed saying financial regulatory agencies should be helping firms to anticipate and address climate risks, but also play an active role in spurring emissions cuts.
  • "[Regulators] need to ask themselves how their existing instruments can be used to incentivize a rapid, orderly, and just transition away from high-emission and biodiversity-destroying investments," she wrote for Project Syndicate.
  • Raskin participates in the "Regenerative Crisis Committee," a panel of financial and legal experts aimed at "Identifying fiscal, monetary, and financial regulatory policies that are likely to enable the United States to achieve net carbon neutrality before 2050."

The intrigue: It's too soon to know what kind of specific policies Raskin might seek if she moves from the private sector to become the Fed's top Wall Street cop and whether she could win support on a consensus-based Fed board for them.

  • Some environmental groups have proposed ideas like "portfolio limits" on the level of polluting assets, such as oil and gas companies, banks can invest in. They also say the Fed should increase the capital banks must hold for their fossil portfolios.

What we're watching: Capitol Hill. Sen. Pat Toomey, the top Republican on the Senate Banking Committee, has "serious concerns" about Raskin, arguing she has taken stances that could weaken economic growth, Bloomberg reported.

If all Republicans opposed her, she would need the votes of every Democrat, including Joe Manchin (D-W.Va.), whose state is a major coal and gas producer. His spokesperson did not provide comment.

Senate appearances this week by nominees for top Federal Reserve jobs gave new hints at their climate plans and showed the scale of GOP resistance to the Fed's work on the topic.

  • On Thursday, Lael Brainard, the nominee for vice chair, appeared before the Senate Banking Committee. Fed chair Jerome Powell, who President Biden has tapped for a second term, testified Tuesday.

Powell and Brainard didn't signal support for new fossil lending restrictions, even as they pledged deeper climate analysis.

  • "We would not tell banks which sectors to lend to or which sectors to not lend to, but we do want to make sure that they are measuring, monitoring and managing their material risks," Brainard said.
  • Both Powell and Brainard discussed plans to gauge financial system risks and conduct "scenario analysis" of large banks' resilience.

The other side: Many Republicans attacked the Fed's growing climate efforts, which they consider mission creep.

  • Committee ranking member Toomey fears analysis of banks' exposure to climate risks is a precursor to unnecessary new restrictions.
  • "The whole purpose is to test whether banks are prepared to address perceived risks associated with climate change, and then if the Fed determines they are not, to promulgate new regulatory requirements," he said yesterday.

Andrew Freedman contributed reporting.

Go deeper

What Biden's Fed nominations mean for policy

Sarah Bloom Raskin at a 2013 hearing. Photo: Andrew Harrer/Getty Images

Now that President Biden's long-awaited nominations for vacant seats on the Federal Reserve Board of Governors have dropped, the big question is how Sarah Bloom Raskin, Lisa Cook, and Philip Jefferson, if confirmed, might shift policy.

  • The answer: Don't expect any big changes to the central bank's policy direction overnight — but do expect it to prioritize a healthy labor market more in the years ahead.

Why it matters: The Fed's actions shape the economy in ways that outlast the presidents who appoint them — and the Biden-appointed Fed looks to be a more explicitly pro-worker central bank than we've seen in modern times.

The big picture: With inflation running hot, the Fed is in the midst of a pivot to more hawkish monetary policy — possibly including raising interest rates in March.

  • Raskin, Cook, and Jefferson are unlikely to stand in the way of that pivot, and not just because the slow-moving Senate confirmation process means it will likely be well underway before they are confirmed for their new jobs.
  • The Fed is a consensus-driven institution, and the consensus has swung decisively in a hawkish direction in the last three months. Even normally-dovish officials like San Francisco Fed President Mary Daly and Chicago Fed president Charles Evans on board with the policy shift.

But over time, the new additions to the Board of Governors — who have a permanent vote on monetary policy, unlike regional Fed presidents who rotate — have emphasized the importance of running a hot labor market in order to achieve gains for workers and greater racial equality.

  • That implies the three new governors would resist continuing to push interest rates higher once inflation moderates.

What they're saying: "Inflation is so high and political pressures on the Fed are so strong (including from Democrats), that we doubt they will push hard against the will of the committee," wrote Roberto Perli and Benson Durham of Cornerstone Macro, in a client note.

  • But, they add, "Because all of them have expressed views in favor of broader expansion of the labor market, … we can expect them to resist substantial tightening in the future."

Regulatory policy is a different matter. If confirmed as vice chair for supervision — and Republican Senators will try to stop that from happening — Raskin would have more explicit power over a wide range of regulatory policy, and look to rein in the deregulatory impulses of her predecessor, Trump appointee Randal Quarles.

The bottom line: As the Biden Fed takes shape, it will include more voices focused on workers than in modern memory. But the course of policy depends on whether inflation trends allow them to act on those instincts.

Rising mortgage rates could slow house price surge

Chart: Axios Visuals

Mortgage rates have jumped to their highest level since early 2020.

Why it matters: The rising cost of home loans could slow the booming American market for residential real estate.

The most startling facts in 2021 climate report

An unsettling part of the human condition today is that the year you were born will most likely be the coolest year of your life, globally speaking.

By the numbers: Newly released climate data from NOAA, NASA and Berkeley Earth show that the planet has had an unbroken streak of 45 years of warmer than average temperatures.