Excerpts from recent editorials in the United States and abroad:


Jan. 11

The Wall Street Journal on “the Greening of the Federal Reserve”:

Jerome Powell faced the Senate Banking Committee at his confirmation hearing for a second term at the Federal Reserve on Tuesday, and it’s a sign of the progressive times that a leading issue was the greening of the central bank. Not green as in money, but as in climate regulation.

Mr. Powell didn’t break any news on monetary policy, which is his main job. He stuck to his recent talking points that inflation has run hotter than expected, though not because of any Fed mistake. It’s all the result of a supply and demand mismatch caused by the pandemic, not from an excessive supply of money to the economy.

The wheels seem greased for Mr. Powell’s confirmation if only because the alternatives are thought to be worse. We’re not sure about that, and on that score one issue to watch is how the Powell Fed uses its regulatory power to drive lending and investment out of fossil fuels and into renewables.

Mr. Powell seems fired up for the job. The Chairman on Tuesday endeared himself to progressive Senators by agreeing that the Fed’s role in climate change is “limited” but “important.” He also said climate stress tests for banks will likely “be a very important priority” in supervision.

“I think it’s very likely that climate stress scenarios, as we like to call them, will be a key tool going forward,” he added.

But why? Climate policy isn’t part of the Fed’s dual mandate, which is to ensure stable prices and maximum employment. Having botched inflation in 2021, you’d think the Fed would focus on that.

But Mr. Powell is nothing if not political, and the left is pressing the Fed to adopt climate bank stress tests. Their concern isn’t whether bank balance sheets can withstand extreme weather or warming temperatures. A New York Federal Reserve Bank staff study last fall found that banks benefit from extreme weather events because they spur increased lending.

Instead, the left wants the Fed to use stress tests to make banks reduce and eventually eliminate financing for coal, natural gas and oil development. Banks would have to adjust their balance sheets to take account of the risks from government climate policies like mandates, regulation or carbon taxes. To pass the climate stress tests, banks would have to liquidate fossil-fuel assets.

This is political allocation of capital, which also isn’t the Fed’s job and brings its own risks of financial instability. Last week news broke that President Biden is considering former Treasury official Sarah Bloom Raskin to be Fed vice chair for financial supervision. Ms. Raskin in September wrote an op-ed titled “Changing the Climate of Financial Regulation” for the Project Syndicate endorsing bank stress tests, living wills and risk-based capital standards to advance the left’s climate agenda.

Rhode Island’s Sheldon Whitehouse, the Senate’s leading wind producer, tweeted that her nomination would be “good news,” since she “really gets it on climate. When that bubble bursts, it’s going to be hell. We have to prepare, and she will try.” Sen. Sherrod Brown, the Banking Chairman, said she would be “terrific” on climate regulation and also “I assume, will be good on monetary policy too.”

For Democrats these days, an economist’s credentials on monetary policy are now second to climate for a position on the Fed Board of Governors. One irony is that government anti-carbon policies are driving what some economists call “greenflation”—an increase in commodity and energy prices on everything from oil and gas to lithium and copper.

Investment in fossil fuels has fallen sharply even though consumer demand hasn’t. Behold Europe’s climate crack-up, which has resulted in soaring energy costs. Meantime, government policies have boosted demand for green energy, but the supply of minerals needed to make batteries for electric cars, solar panels and wind turbines is lagging, driving prices higher.

European Central Bank executive board member Isabel Schnabel last weekend warned: “The combination of insufficient production capacity of renewable energies in the short run, subdued investments in fossil fuels and rising carbon prices means that we risk facing a possibly protracted transition period during which the energy bill will be rising. Gas prices are a case in point.”

Federal Reserve chairmen ought to stay out of the capital allocation game, but Mr. Powell seems to think this is now part of the Fed’s job. This is how central banks get into political trouble, which leads to financial trouble.

ONLINE: https://www.wsj.com/articles/the-greening-of-the-federal-reserve-jerome-powell-climate-11641941000


Jan. 10

The Guardian on the challenges confronting President Joe Biden's agenda:

Joe Biden wants to go down in history as a transformative US president. He began his time in office by passing a popular economic stimulus and Covid-19 relief bill. The Biden White House basked in comparisons with Franklin Roosevelt’s country-changing presidency. With Democrats in control of the executive and legislative branches of government, the sky seemed the limit. However, in recent months Mr. Biden’s agenda – most notably on climate change – has been buried in a legislative graveyard.

This is in part because the US Senate is a rare law-making body: it needs a supermajority for ordinary business. Its rules require 60 senators to give the green light for a bill to go to the floor for passage with a straightforward vote. This is the hurdle required to beat a filibuster, where debate is extended so that no vote on a bill can take place. Frustrated and hamstrung, President Biden has cooled on such mechanisms. He’s right to think about ending this maneuver, which is used to block legislation a majority wishes to pass. The 41 Republican senators needed to defeat “cloture” motions – those required to end a debate – could represent less than a quarter of the US population.

As EJ Dionne pointed out in the Washington Post last October, the filibuster “is now a barrier to normal governing … From 1917 through 1970 (53 years), there were only 58 cloture motions. From 1971 to 2006 (35 years) there were 928. From 2007 to now (14 years) there have been 1,419.” As the use of the filibuster has become more frequent, so have the threats for “the nuclear option” to change the rules and impose simple majority votes. When Barack Obama was in the White House, Democrats eliminated the filibuster on presidential nominations other than those for the supreme court. In 2017, with Donald Trump as president, Republicans got rid of those too. ...

The Democrats are pushing two bills to secure American democracy. This is a battle that Mr. Biden cannot afford to lose. However he will struggle because of the filibuster. This could be abolished by a simple majority vote but, absurdly, two senators on the right of the party – Joe Manchin of West Virginia and Kyrsten Sinema of Arizona – won’t back him. The best Mr. Biden can do with his one-vote Senate majority is negotiate a filibuster carve-out for voting rights.

What the past year has taught Mr. Biden is that advances for economic and political rights will be dead on arrival in the Senate unless he can rewrite its procedural rule book. He must do so, and convince holdout Democrats that unless they back the party agenda, they risk dooming every legislative expedition. Electing Mr. Biden and Democratic majorities in Congress were meant to deliver the party’s agenda, not let it be obstructed by its opponents.

ONLINE: https://www.theguardian.com/commentisfree/2022/jan/10/the-guardian-view-on-joe-bidens-agenda-buried-in-a-legislative-graveyard

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