Senators Admonish Fed Chairman for Veering Into Politics With ‘Climate Stress Tests’ for Banks

A group of GOP senators is accusing the chairman of the Federal Reserve, Jerome Powell, of allowing the central bank to stray from its statutory mandate and pursue environmental policymaking and research in the name of combating the climate change that many liberal Democrats believe threatens the planet.In a letter to Mr. Powell Wednesday signed by nine senators — Dan Sullivan of Alaska, Joni Ernst of Iowa, and Ted Budd of North Carolina among them — the group said it is “growing increasingly frustrated” by the central bank’s environmental advocacy while inflation remains stubbornly high and the banking sector is in turmoil.“The independence of the central bank is a hallmark of our financial system and is crucial to protecting it from partisans with short-term interests, however, this independence has been greatly undermined by the Fed’s persistence on entering into the political arena — especially on the issue of climate change,” the letter states. “The legitimacy of the institution is on the line, and we again urge you to do everything in your power to ensure that the Fed operates solely within its statutory authority.”In public comments, Mr. Powell has said he is committed to keeping the Fed focused on employment and inflation and to avoid veering into social and political issues that are primarily the domain of Congress. He has said the central bank is not a “climate policymaker,” and that it must “resist the temptation to broaden our scope to address other important social issues of the day.”That sentiment was reinforced by a governor of the Federal Reserve, Christopher Waller, who told a conference at Madrid last week that while climate change is an issue, there is no need for the central bank to focus on how banks are preparing for any effects of the phenomenon. “I don’t see a need for special treatment for climate-related risks in our financial stability monitoring and policies,” Mr. Waller said. “Based on what I’ve seen so far, I believe that placing an outsized focus on climate-related risks is not needed, and the Federal Reserve should focus on more near-term and material risks in keeping with our mandate.”Mr. Waller’s comments raised eyebrows among Democrats and their allies in climate activism circles, many of whom believe climate change is an existential threat to America and the world that requires enormous taxpayer-financed investments in clean energy and other expensive mitigation measures.Nevertheless, the senators note in their letter to Mr. Powell, the central bank announced in January a pilot program to collect information from banks and other players in the financial sector about their “climate-risk management practices.”The program was immediately dubbed a “climate stress test” for banks, and requires them to report on the risks posed by moving to net-zero greenhouse gas emissions. Most observers believe that reaching net-zero emissions would require the complete elimination of the use of coal, natural gas, and the other fossil fuels that currently power the global economy.“The Fed is actively signaling that bank activities that do not further the goals of net zero by 2050 are inherently risky and disfavored,” the senators’ letter states. “This drives capital away from traditional energy development at a critical time for our economic and national security, while empowering America’s adversaries.”By law, the Fed’s mandate is to promote maximum employment and keep inflation in check by controlling interest rates. Anything beyond that so-called dual mandate puts it at odds with lawmakers in Congress. “The legitimacy of the institution is on the line, and we again urge you to do everything in your power to ensure that the Fed operates solely within its statutory authority,” the letter says.

Senators Admonish Fed Chairman for Veering Into Politics With ‘Climate Stress Tests’ for Banks

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