Republicans on the Senate Banking Committee accused the Biden administration on Monday of allowing the Federal Reserve System, which regulates the nation’s money supply, to pursue a “highly politicized social agenda” as the threat of inflation looms.
GOP lawmakers argue that President Biden and the White House are allowing individual Federal Reserve Banks to pursue “politically charged” research on divisive social topics, including climate change and racial justice. The goal is to skew the information used by banks and other financial institutions to influence them to act more liberally, they said.
“A lot of Republicans worry that the credibility of the Federal Reserve System is at stake,” said a staffer for the banking panel’s top Republican, Sen. Pat Toomey of Pennsylvania.
Mr. Toomey and his fellow Republicans note that the Federal Reserve Banks of Atlanta, San Francisco and Minneapolis have been the most active in pushing social justice causes.
The bank of Minneapolis, most notably, has taken steps to combat racial inequality since George Floyd’s death in police custody last year. The bank, led by Neel Kashkari, who led the Troubled Asset Relief Program under President Obama, has made a public “commitment to dismantling structural racism.”
Mr. Kashkari, a Republican who ran for governor of California in 2014 on a socially progressive platform, has initiated a symposium funded by the bank on the topic of “racism and the economy.” The events detail how the “ever-present legacy of racism” is responsible for the economic, housing and educational disparities between Black and White Americans.
“Some may welcome these events as useful or needed discussions, but it is perplexing as to why they would be undertaken by a regional Federal Reserve Bank,” Mr. Toomey wrote in a letter to Mr. Kashkari, provided to The Washington Times. “This subject matter is fraught with ideological assumptions and interpretations, and the work and analysis of the Minneapolis Fed seems heavily laden with political and value judgments.”
Similarly, the Federal Reserve Bank of San Francisco has undertaken extensive research on the financial risks of climate change. The bank has published numerous reports and held various seminars on the topic, often hosting avowedly political figures as financial experts.
Those efforts, according to Mr. Toomey, are part of a pressure campaign to push private financial institutions to reorient their actions in a more progressive direction.
Nowhere has this been more evident than on the topic of climate change, where a bevy of recent actions has signaled to banks that loans to businesses contributing to greenhouse gas emissions should not be tolerated.
“The real objective here is to punish politically disfavored industries,” Mr. Toomey said. “By straying beyond their mandates into the climate arena, financial regulators will pressure banks not to serve politically disfavored industries such as fossil fuel companies.”
Although the Federal Reserve Banks began acting long before Mr. Biden entered office, Republican lawmakers say the White House is doing little to dissuade such conduct.
“Some of these initiatives predate President Biden, but certainly there is now an environment where this type of ‘wokeness’ unrelated to the Federal Reserve’s traditional activity is welcomed and encouraged,” said a staffer for the banking committee.
The Federal Reserve’s continued focus on climate change and racial justice come as the country begins to see the early signs of inflation, as prices begin to increase for consumers and companies alike.
Inflation fears have begun to mount as unemployment numbers have failed to rebound after soaring in 2020 because of the coronavirus pandemic. Simultaneously, as job numbers remain low, prices for even everyday goods are rising at higher-than-expected levels.
A recent survey by the Morning Consult found that more than one-third of adults believe they are now spending more on groceries than they did at the start of the year.
Complicating matters is that the federal government has undertaken a massive spending spree in recent months. Most of the money has been used on coronavirus relief efforts.
The Biden administration appears unlikely to stop spending soon. Mr. Biden has proposed more than $4 trillion on physical and human infrastructure projects this year alone.
Economists such as Clinton administration Treasury Secretary Larry Summers argue “inflationary pressures of a kind we have not seen in a generation” could occur if the White House succeeds.
Given the concerns, Republican lawmakers argue the Federal Reserve should be focusing on preventing inflation rather than dabbling in “woke” causes.