The climate battles to come- POLITICO

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When it comes to financial regulation, climate advocates may have lost a battle but certainly not the war.

Sarah Bloom Raskin’s failed nomination to be the Federal Reserve’s top bank watchdog was a setback for climate and regulatory advocacy groups, which see a bigger role for the Fed in ensuring that banks aren’t exacerbating risks to the planet and the financial system. They saw Raskin taking the central bank farther, and faster, than the current leadership.

Does that mean U.S. banks are resting easy now that Raskin has withdrawn?

If you’ve been paying attention to what the Fed and banks have been doing on climate (or you follow your MM host on Twitter!) you’ll know the answer is a resounding no.

U.S. regulators may be behind other countries in implementing climate-related rules for financial firms and other public companies, but they are already taking clear steps in that direction. And U.S. firms — facing greater risks from wildfires, flooding and other extreme weather, along with new rules aimed at curbing climate change – are trying to get ahead of it, and seeking more guidance from the government.

“Nothing has changed,” said Peter Dugas, executive director at Capco, a global consulting firm focused on the financial services industry. “Even though her nomination has been withdrawn, they [the White House] continue to have a whole-of-government strategy around climate.”

That is, the Fed’s vice chair for supervision may be the most important bank regulator, but it’s not the only regulator.

The Securities and Exchange Commission is set to unveil a highly anticipated proposal this morning that would require public companies to disclose their greenhouse gas emissions and exposure to climate risks.

As our colleagues at The Long Game reported, the rule would likely require companies to report emissions from their own operations and energy consumption, according to people who have spoken with SEC Chair Gary Gensler. Some companies could eventually have to report emissions generated from the goods and services within their supply chains.

Thousands of companies already voluntarily provide emissions data to CDP, a nonprofit repository of corporate climate reporting. And in the U.S., nearly 32 percent of companies even disclose their supply chain emissions to CDP.

The Office of the Comptroller of the Currency issued draft principles in December “designed to support the identification and management of climate-related financial risks” for big banks.

And Dugas said he expects that other federal agencies that have lending programs – from the Environmental Protection Agency, to the Small Business Administration, to the Energy and Agriculture departments — will start to modify those programs to take account of climate risks.

But back to the Fed. Some critics of Fed Chair Jerome Powell howled over his reappointment, arguing that he had done little to advance climate issues at the Fed. When Raskin encountered resistance over her climate views, some of the same people said her public statements didn’t go much beyond Powell’s.

The reality is somewhere in between.

In December 2020, the Fed became the first federal agency to join the Network for Greening the Financial System, an international group of central banks and financial regulators developing rules to address climate risks. The following month, it hired the New York Fed’s top bank supervisor to lead its new Supervision Climate Committee focused on climate-related risks to individual financial firms. It also created a Financial Stability Climate Committee, aimed at tracking risks to the broader financial system and the economy.

The Fed, as part of its bank supervision program, is also developing climate scenario analyses — similar to stress tests, but without the potential for new capital restrictions.

At his confirmation hearing in January, Powell said it’s very likely that the scenarios “will be a key tool going forward” and a top priority for the Fed and for him personally over the next few years. But he said it is not the Fed’s job, nor would it be appropriate for them, to tell banks which legal companies they can or can’t lend to.

“It is really to assist us and the financial institutions — who are doing these things themselves, very actively, the larger ones — to understand the risks,” he said of the climate scenarios earlier this month.

The last point is key: Banks weren’t especially anxious over Raskin’s nomination (something we’ve also covered here) because many of them are already taking steps to prepare for climate-related risks. Republicans, including Sen. Pat Toomey (R-Pa.), have argued that the banks are capable of assessing and managing the risks themselves, and said the Fed should stick to its primary mission — maintaining stable prices and maximum employment. Fed officials have made clear they see monitoring climate risks as part of their job to oversee banks’ safety and soundness.

Could Raskin alone have pushed the Fed and the industry to speed up the transition? Maybe.

Regulators are still moving ahead without her.

IT’S MONDAY — Welcome back! Get ready, it’s a big week for Fedspeak.

Have tips, takes, questions or ideas? Send them our way: [email protected], [email protected], or find us on Twitter @katedavidson or @aubreeeweaver.

TODAY — Atlanta Fed President Raphael Bostic speaks at the National Association for Business Economics conference at 8 a.m. … CEA Chair Cecilia Rouse speaks at NABE at 8:45 a.m. … CBO Director Phil Swagel speaks at NABE at 9:30 a.m. … Fed’s Powell speaks at NABE at 12 p.m. … Richmond Fed President Tom Barkin speaks to Women in Housing and Finance at 12 p.m.

This week — Treasury’s Nellie Liang speak at NABE Tuesday … Senate Banking hearing on shoring up supply chains Tuesday … San Francisco Fed President Mary Daly speaks at a virtual discussion hosted by the Hamilton Project Tuesday …

Powell speaks on a panel at the Bank for International Settlements virtual innovation summit Wednesday … Treasury nominee Jay Shambaugh speaks on a panel hosted by the Washington International Trade Association and George Washington University Wednesday …

Senate Banking hearing on strengthening oversight of the appraisal process Thursday … Political panel on regulating digital assets Thursday … Fed’s Chris Waller speaks on a virtual panel on central bank digital currencies Friday.

‘LIKE GRABBING SMOKE’: CRYPTO COLLECTIBLES CONFOUND INVESTORS — Our Sam Sutton: “After exploding into the mainstream last year, NFTs are creating a new class of headaches for accountants seeking clarity on how crypto transactions should be reported to the IRS.

“The market for non-fungible tokens – unique digital assets that are often traded like collectibles – soared to more than $44 billion in 2021 as art houses and sports leagues capitalized on the latest craze in crypto. But while surging demand for NFTs has unlocked new revenue sources for online creators and startups, it has also forced consumers to grapple with a tax code that doesn’t formally address how such tokens can be used to denote digital ownership.”

DEMOCRATS FRET BIDEN’S INACTION ON STUDENT DEBT WILL BURN IN MIDTERMS — Our Christopher Cadelago and Laura Barrón-López: “President Joe Biden’s indecision on student loan debt could dampen turnout with a key constituency ahead of the midterms: younger voters. While White House officials have indicated he may extend the freeze on student loan payments for the fourth time, Biden’s lack of certainty ahead of another looming deadline is causing heartburn across the president’s party.”

CFPB EXPANDS AUTHORITY TO POLICE DISCRIMINATION — Our Katy O’Donnell: ”The CFPB has updated its examination guidelines in a bid to crack down on discrimination in cases where fair lending laws do not apply. The agency announced it would classify discriminatory conduct as ‘unfair’ under its authority to police ‘unfair, deceptive, or abusive acts or practices.’ It released an updated UDAAP exam manual noting how discrimination meets the criteria for unfairness.”

“When a person is denied access to a bank account because of their religion or race, this is unambiguously unfair,” CFPB Director Rohit Chopra said in a statement. “We will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”

WELLS FARGO SUED BY BLACK BORROWER FOR REFINANCE ‘REDLINING’ — Bloomberg’s Joel Rosenblatt: “Wells Fargo & Co. was sued for discriminating against Black homeowners by relying on a modernized version of ‘redlining’ that allegedly denied them lower interest rates through refinancing and forced them to pay more for loans. The lawsuit, filed Friday in federal court in San Francisco as a proposed class action, argues that the practices in many cases pushed Black homeowners into foreclosure.”

UNLIKE TRUMP, BIDEN HAS STOCK MARKET FURTHER DOWN HIS PRIORITY LIST — Bloomberg’s Michael P. Regan and Vildana Hajric: “Even investors with a lot at stake tend to agree: The stock market shouldn’t be a president’s top priority, especially when issues like war, blistering inflation and a pandemic are in play. Still, for practical purposes, there’s no getting around the disparity between the styles of Joe Biden and Donald Trump when it comes to the intersection of markets and politics.

“On Twitter, the favored forum for politicians to boast about accomplishments, Trump posted about stocks dozens of times, treating a rising Dow as an alternative approval rating of his administration. Biden has yet to tweet about the market at all, despite a string of records in his first year in office.”

ICYMI: STOCKS NOTCHED THEIR BEST WEEK SINCE NOVEMBER 2020 — NYT’s William P. Davis: “Oil prices slid and the Federal Reserve offered investors clarity on its plan to tame inflation, triggering a rally that pushed stocks to their best week in more than a year.”

MARKET GYRATIONS EASE WITH TRADERS RECALIBRATING RUSSIA RISK — Bloomberg’s Payne Lubbers: “Traders are beginning to re-evaluate the impact of the Russia-Ukraine war on their strategies as the conflict grinds into a fourth week. All eyes were on the dollar as markets reopened at 2 p.m. in New York (5 a.m. Monday in Sydney), when the greenback held little changed against its major counterparts after the first weekly loss in a month, even as the U.S. Federal Reserve hiked rates. Japan’s yen was also steady after hitting a six-year low.”

RUSSIA’S PUSH FOR SELF-SUFFICIENT ECONOMY FAILS BEFORE WESTERN SANCTIONS — WSJ’s Georgi Kantchev and Alexander Osipovich: “Russia spent years trying to wean itself off imported goods to fortify its economy against Western sanctions. Now, the impact of sanctions imposed after Russia’s invasion of Ukraine has made it clear that Moscow’s efforts didn’t work. Russia’s continued dependence on imports means it is facing a painful economic readjustment.

“Parts of Russia’s auto industry are shutting down for lack of foreign parts. The country’s flagship homemade passenger jet gets its engine and other key parts from overseas suppliers. Foreign pet food and medication have disappeared from store shelves.”

LAWMAKERS TRADED AS WAR LOOMED — As geopolitical tensions rose, members of Congress and their families traded an estimated $7.7 million in sectors directly impacted by the crisis in Ukraine, CNBC’s Ylan Mui, Nick Wells and Karen James Sloan reported. A CNBC analysis found more than a dozen trades in energy and utility stocks, as well as cybersecurity and defense stocks, by members of Congress or their spouses prior to Russia’s invasion.

Gig workers who drive for ride-hailing and delivery companies like Uber, Lyft and DoorDash have been hit hard by rising gas prices, because their ability to earn money is tied directly to driving hundreds of miles each week. — NYT’s Kellen Browning

Covid-19 kept many older Americans on the sidelines of the recovery in consumer spending … But their spending is picking up as the Omicron wave recedes, and analysts say that could help fuel economic growth in the months ahead. — WSJ’s Harriet Torry

Milk prices are soaring around the world on the expectation that a tight market will be hit by further disruption to fertiliser and feed supplies and inflationary pressures following Russia’s invasion of Ukraine. — FT’s James Fernyhough

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