President Joe Biden’s Federal Reserve nominee Sarah Bloom Raskin personally lobbied for a company she worked for to secure access to the central bank’s payments system, Sen. Pat Toomey claimed.
Raskin has been under Republican scrutiny for her role at Reserve Trust, a fintech firm whose board she sat on right after she left a position in the Obama Treasury Department and after she served on the Fed’s Board of Governors. Reserve Trust had applied for a Fed master account and been denied but reapplied after Raskin joined the board and was granted one, apparently becoming the only nonbank fintech business in the country to do so.
Republicans have said that Raskin’s role with the company raises questions about “revolving door” lobbying and have probed whether she actively worked with the Fed to secure the account. In a letter to the Kansas City Fed released on Friday, Toomey claimed that Raskin, who served on the Fed’s board from 2010 to 2014, directly lobbied Kansas City Fed President Esther George over the matter.
“On the evening of February 2, 2022, you and your staff spoke with my staff,” Toomey said in the letter to George. “You did so only after learning that uncomfortable questions would be raised the next day at Ms. Raskin’s Senate Banking Committee hearing about the Kansas City Fed’s unusual decision to grant Reserve Trust a Fed master account. On that … call, you revealed that Ms. Raskin had, in fact, personally called you about Reserve Trust’s master account application after it had been denied.”
RASKIN DENIES ACTING IMPROPERLY IN DIRECTING FINTECH FIRM THAT GOT PRIZED FED ACCOUNT
A master account allows a firm to have direct access to the Fed’s payment systems and to settle transactions in central bank money. Raskin was later given shares of the company for her work on Reserve Trust’s board, which she sold in 2020 for $1.5 million.
Reserve Trust itself has touted the value of its access and how it is unique in being granted that access. The fact features prominently on the landing page of the company’s website.
Raskin has denied any wrongdoing and claims not to remember contacting the Fed about Reserve Trust’s master account application, although she said that if she did, she would have abided by all applicable ethics rules.
The Kansas City Fed put out a statement in response to the GOP inquiry noting that it is not unusual for the bank to be in contact with firms requesting master accounts.
“It is routine for the Federal Reserve Bank of Kansas City to communicate on an ongoing basis with a requesting organization, its management (including directors), public officials and any relevant federal or state regulatory counterparts,” the bank said. “This communication is for the purpose of evaluating eligibility for access to Federal Reserve services, including an analysis of the risk posed to the payment and banking system.”
In a separate letter to Fed Chairman Jerome Powell, Toomey claimed that although the Fed might communicate with firms about their master account applications, this situation is unique.
“While the Kansas City Fed has stated that it is ‘routine’ for it to communicate with the management (including directors) of a company seeking a decision from the Fed, there is nothing routine about a former Fed Governor, like Ms. Raskin, calling the president of a regional Fed bank about such a decision,” the Pennsylvania Republican wrote.
“Ms. George indicated that to me herself. She said she was not aware of ever receiving a call from a former Fed Governor on behalf of an organization seeking a decision from the Kansas City Fed,” he added, noting that George has been president for the past decade.
Raskin is married to Democratic Rep. Jamie Raskin of Maryland. The couple have also faced heat from Republicans because the congressman failed to disclose his wife’s sale of Reserve Trust shares within the time allowed by congressional guidelines. The congressman has said that the filing was turned in late because it happened just days before his 25-year-old son Tommy died by suicide.
At the urging of Sen. Elizabeth Warren, Raskin, along with two other Fed board nominees, recently took a pledge committing “not to seek employment or compensation” from any financial services company for four years after leaving the board.
When contacted on Friday about Toomey’s letter, White House spokesman Michael Gwin told the Washington Examiner that Raskin has committed to “the strictest ethics requirements in history” for any Fed board nominee.
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“Sen. Toomey has waged a baseless smear campaign for weeks against an exceptionally well-qualified nominee without providing a single scrap of evidence to support his false claims, and his allegations have already been refuted by the Kansas City Federal Reserve Bank,” he said.
Raskin has already had her confirmation hearing, and the banking committee is expected to take action on her nomination in the coming days.
