The Fed and Social Engineering

President Joe Biden (D) wants our Federal Reserve System to engage in economic social engineering, so he’s nominating as the Fed’s banking supervisor the climate activist Sarah Bloom Raskin. Among her lately remarks concerning credit allocation and climate change was her last-spring op-ed in The New York Times. She led off that piece with this:

Climate change poses the next big threat. Ignoring it, particularly to the benefit of fossil fuel interests, is a risk we can’t afford.

She had this, too, in the same piece:

The Fed is singularly poised to seed strategic investments in future economic stability.

And this:

The decision to bring oil and gas into the Fed’s investment portfolio not only misdirects limited recovery resources but also sends a false price signal to investors about where capital needs to be allocated[.]

Raskin had this in her September 2020 Project Syndicate op-ed, reprinted by Duke Law:

US regulators need to be encouraged to think more imaginatively about how they can engage with local transition efforts. For example, how might financial policies from diverse agencies be stitched together to produce outcomes that enable firms to hit their net-zero targets? How can financial policy be used to help accelerate a transition that redeploys workers for new jobs, or to assist households that are being asked to change their spending habits? And how can regulatory changes relating to disclosure, access to credit, and pricing of risk support a rapid and just green transition?
In short…[f]inancial regulators must reimagine their own role so that they can play their part in the broader reimagining of the economy.

That’s not the Federal Reserve’s role, though. The Fed’s statutorily required goals are to maximize employment, stabilize prices, and moderate long-term interest rates. There’s nothing in there about climate change, or “guiding” lending to this or that government-favored group of Americans and away from that or this government-disfavored group of Americans, or any other sort of social engineering.

One more thing. Aside from Raskin’s own altered-state understanding of the Fed, a larger problem regards the present administration’s overall attitude. That Biden-Harris actually nominated Raskin says volumes about his own view of law and his own willingness to disregard it in order to increase his administration’s power.

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