Banks face regulation crackdown after crisis
US financial regulators are testifying about the collapse of Silicon Valley Bank and Signature Bank.
Republican Senators insinuated repeatedly on Tuesday that recent US banking turmoil was caused by the Federal Reserve's emphasis on climate change.
In September, the Federal Reserve announced that six of the largest banks in America would be participating in a pilot program designed to see what impact climate change scenarios might have on their bottom line.
Some Republican legislators appeared to blame a lack in regulatory banking oversight on the Fed's emphasis on this program and climate change issues more generally during Tuesday's hearing.
In his opening remarks, Republican Senator Tim Scott (the ranking member of banking committee) called the Fed's emphasis on climate change as a waste.
"The Fed should concentrate on its mission, and not the climate area. He said that this was a waste in terms of attention, time and manpower. All of these things could have been used to supervise banks.
The Republican Senator Steve Daines from Montana claimed that President Joe Biden’s stimulus plan was responsible for the failure of Silicon Valley Bank because it failed to "prioritize clear and present risks such as inflationary environments, rising interest rates, and the impact they would have on bond values" and instead chose to "focus on climate change."
Daines also accused Federal Reserve Bank of San Francisco of giving priority to addressing climate changes over the risk presented by higher rates of interest.
Michael Barr, vice-chairman of the Fed for supervision, replied: "Senator I have been focusing on risks throughout the system. Both short-term and longer-term risks." Interest rate risk is an important issue for banking. Our supervisors are always doing it."
Daines stated in an interview with Montana Public Radio, 2014 that "the jury is still out" as to whether climate change really exists. Oil and gas companies have donated more than 600,000 dollars to his campaigns.
Fed Chair Jerome Powell said that the central banks would not be a "climate policymaker."
Powell stated in January that some analysts are asking if incorporating the perceived climate-related risks into bank supervision is wise and consistent with existing mandates. In my opinion, the Fed has narrow but important responsibilities in regards to climate-related financial risk. These responsibilities are closely linked to our responsibilities in bank supervision. The public expects that supervisors will require banks to understand and manage their material risks including climate change.