Sarah Bloom Raskin, President Joe Biden’s pick for a top Federal Reserve role, is facing scrutiny over her role at a financial technology company and her husband’s violation of stock disclosure rules.
The fintech company in question is Colorado-based Reserve Trust, which is apparently the only nonbank fintech business in the country that has been able to secure a Fed master account, although many have sought one. Raskin was serving on Reserve Trust’s board of directors at the time and received shares of the company for the role, which she offloaded in 2020 for $1.5 million.
Prior to joining Reserve Trust, Raskin, who is married to Democratic Rep. Jamie Raskin of Maryland, served on the Fed’s Board of Governors and as deputy secretary of the Treasury.
During her confirmation hearing Thursday for the Fed’s vice chairwoman of supervision role, she was grilled about her time at Reserve Trust and the company’s ability to secure a Fed master account, which gives the fintech company a major edge over its competition. A master account allows a firm to have direct access to the Fed’s payment systems and to settle transactions in central bank money.
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Sen. Cynthia Lummis noted that many nonbanks, including trust companies, have applied for but failed to receive a Fed master account. She pointed out that there is only one state-chartered trust company that has a master account: Reserve Trust.
“Reserve Trust had its master account application denied in June 2017, but one year later, the Fed granted it a master account,” the Wyoming Republican said, noting that Raskin joined the company in 2017. “How did Reserve Trust get theirs so quickly? After Reserve Trust had their application denied, did you communicate with the Federal Reserve about Reserve Trust’s application?”
“If you are suggesting anything improper, I want to make very clear that I have first of all had the honor to serve in various public capacities, and each time I left, I have been very mindful of the rules regarding departure,” Raskin responded.
Lummis suggested that Raskin called the Kansas City Fed in August 2017 about Reserve Trust’s master account application. During the hearing, Raskin didn’t confirm or deny whether she called anyone at the Fed to discuss the application.
“First of all, I want to be very clear here, the Federal Reserve has approved plenty of master accounts,” Raskin said before being cut off by Lummis, who noted that those approvals were not in the fintech space.
“Something doesn’t smell right with the way this played out,” Lummis told Raskin.
Further compounding the scrutiny is the fact that Raskin was paid in company stock — nearly 200,000 shares that she sold in December 2020. Because she is the spouse of a congressman, under the Stop Trading on Congressional Knowledge Act, the payout had to be disclosed within 30 to 45 days of the transaction. Rep. Raskin did not report the sale until he filed a periodic transaction report last August.
The congressman said that the filing was turned in late because it happened just days before his 25-year-old son Tommy died by suicide, according to Business Insider. Late filing aside, though, Raskin failed to report his wife’s Reserve Trust holdings in the years leading up to their liquidation — something that is required annually for all assets of over $1,000.
During Thursday’s hearing, Sarah Bloom Raskin was also questioned about her views on climate change and what she sees as the central bank’s role, or lack thereof, in combating it.
Raskin bucked accusations from Republicans that she seeks to increase the Fed’s role in combating climate change and said she would remain committed to sticking to the central bank’s core mandate should she be confirmed to the powerful supervisory position.
“It is inappropriate for the Fed to make credit decisions and allocations,” Raskin told lawmakers. “Banks choose their borrowers, not the Fed. It’s inappropriate for the Fed to choose winners and losers. Doing so is not the proper institutional role of the Fed. That’s a cardinal principle of Fed supervision.”
Every single Democrat must vote in favor of Raskin’s nomination in order for her to be confirmed, given that the Senate is evenly split, with Vice President Kamala Harris serving as the tiebreaking vote.
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Sen. Joe Manchin of West Virginia, a conservative Democrat from a coal-heavy state, is widely seen as a deciding vote for Raskin and other Biden nominees. Her answers about the Fed steering clear from involvement with the energy sector likely bode well for her confirmation.
Two other Biden nominees for the Fed board, Lisa Cook and Philip Jefferson, are also faced questions from lawmakers Thursday.
