Testifying before the Senate Banking Committee today, Michael Barr—President Biden’s nominee to serve as Federal Reserve vice chairman for supervision—said that the “Fed’s authorities are quite limited [and] narrow” with regard to accelerating the transition to a lower carbon economy. “I think the Federal Reserve is not able to allocate credit, [and] should not be in the business of telling financial institutions to lend to a particular sector or not to lend to a particular sector,” Barr told Ranking Member Pat Toomey (R-Pa.).
When asked about climate-related scenario analysis, Barr added that “the only purpose of the Fed’s scenario analysis or other measures should be to understand risks that climate might pose to the financial system and to work with financial institutions on measures to manage those risks.”
Barr also offered his assessment that “capital and liquidity in the [financial] system today is quite strong,” and offered support for “tiering” financial regulation based the size and risk profiles of supervised institutions. He also told senators that he would “commit to being evidence-driven and data driven in my approach to capital and liquidity regulation, and in regulation more broadly.”
While several senators brought up Barr’s previous disagreement with certain aspects of S. 2155, the bipartisan financial regulatory reform law that passed in 2018, he emphasized that “a number of concerns I had were addressed” through amendments prior to the bill’s passage, and that “overall, I thought it was quite admirable the way Democrats and Republicans worked together on that legislation.”
