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national economic council
After Bank Collapses, US Regulators Urged to Impose Rules on Climate-Related Financial Risk
"If management at a wide swath of banks failed to properly address a well-understood risk, they cannot be trusted to independently address other complex emerging risks," argued 50 green groups.
Mar 28, 2023
In the wake of recent bank collapses and protests across the United States demanding financial institutions end fossil fuel financing, 50 climate, environmental justice, and Indigenous rights groups on Tuesday advocated for new regulations.
"We the undersigned strongly urge financial regulators and Congress to learn from the collapse and bailout of Silicon Valley Bank (SVB) and rapidly implement new regulations to mitigate against climate-related financial risk," the coalition wrote.
"Climate-related risks are moving us toward a financial crisis. But regulators have not taken adequate steps to actually mitigate those risks."
The groups' letter was sent to key leaders at the U.S. Treasury Department, Federal Reserve, Federal Deposit Insurance Corporation (FDIC), National Economic Council, and relevant U.S. House and Senate committees.
After explaining how the SVB collapse is partly the result of poor management enabled by regulatory rollbacks under the Trump administration, the letter states that "this is only the latest example of a bank being wholly unprepared for a large and obvious financial risk."
The letter continues:
It is a stark reminder of the chaos that can unfold when a financial institution has high exposure to a risky industry, and of the fact that the leaders of major financial institutions are frequently far more concerned with their short-term gains than with robust risk management measures that ensure their safety and the safety and soundness of the financial system. As a reminder of the latter, senior managers at SVB paid themselves millions in bonuses hours before their bank failed and the federal government financially backstopped it. Here again, stronger rules—including the Dodd-Frank executive compensation rules that remain unfinished—could have incentivized greater bank attention to risks.
To prevent any potential for a cascade of bank runs after SVB's collapse, federal regulators have now effectively set a precedent of guaranteeing all bank deposits in all banking institutions nationwide, to be backstopped by the Federal Deposit Insurance Fund and then taxpayer dollars. Moreover, the Federal Reserve has begun lending at extraordinarily generous terms to any other banks with assets whose real value has been curbed by interest rate hikes—in effect, the Fed is offering a first-of-its-kind, get-out-of-bank-failure-free card to any firms that made the same foreseeable mistake as SVB. Regulators justified this extraordinary shift in the structures of American finance by relying on emergency rules in place to prevent systemic risk to the financial system. In effect, regulators argued that SVB's inability to mitigate one of the most obvious forms of financial risk—the potential for rising interest rates amid high inflation—constituted a grave risk to the whole financial system, and, thereby, the whole economy.
"If management at a wide swath of banks failed to properly address a well-understood risk, they cannot be trusted to independently address other complex emerging risks," the groups argued. "Regulators must intervene to protect the financial system from risks associated with climate change and the ongoing transition to a green economy."
The letter notes recent remarks from Treasury Secretary Janet Yellen about the economic and financial impact of the climate emergency as well as how, as it worsens, "banks of all sizes holding mortgage-backed bonds will see their assets drop in value" while "banks invested in the fossil fuel industry will eventually be saddled with stranded assets."
"Climate-related risks are moving us toward a financial crisis. But regulators have not taken adequate steps to actually mitigate those risks," the coalition warned, calling on U.S. policymakers to:
- Move with urgency and speed to implement proposed guidance for banks and financial institutions related to preparation for climate-related financial risks and to follow up with more detailed guidance;
- Rapidly move forward on rigorous exams for banking institutions, including for medium-sized banks, regardless of industry pressure for light-touch supervision of climate-related risks; and
- Please also see previous coalition letters recommending action on the Federal Reserve's and the Treasury Department's climate guidance.
"Banks cannot be trusted to independently evaluate and protect against the systemic risks of the climate crisis in real-time. They also cannot be trusted to avoid creating risks for other institutions and the financial system through their support for fossil assets and greenhouse gas emissions," the letter says. "This process requires regulators to set clear rules and ensure banks and financial institutions do not engage in unsafe behavior and do not create undue risks and costs for the financial system and the economy."
Signatories include Greenpeace USA, Lakota People's Law Project, Sierra Club, and Third Act—who came together earlier this month for a "Stop Dirty Banks" national day of action, the first elderly-led mass climate demonstration in U.S. history.
"Today is a major drive to take the cash out of carbon," declared Third Act's Bill McKibben. "We want JPMorgan Chase, Citi, Wells Fargo, and Bank of America to hear the voices of the older generation which has the money and structural power to face down their empty, weasel words on climate. We will not go to our graves quietly knowing that the financial institutions in our own communities continue to fund the climate crisis."
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Obama Appoints Bain & Co Consultant to Top Post
The 2012 Obama campaign went after Bain for outsourcing jobs, closing plants, devastating US communities
Sep 13, 2013
President Obama has appointed Jeff Zients as head of the National Economic Council. A former executive of Gov. Mitt Romney's Bain & Company investment firm--Zients worked at Bain & Co. from 1988 to 1990. Romney was running Bain Capital at the time, so the two did not work directly together.
Romney worked at Bain & Company, first from 1977-1984, and then again from 1991 and 1992, when he was the Bain & Company chief executive officer.
Bain Capital was heavily criticized by the 2012 Obama campaign as an 'outsourcing pioneer' responsible for closing plants, devastating U.S. communities, and even contributing to the deaths of disenfranchised workers.
Zients work at Bain was one of many lucrative positions at corporate management and media firms that allowed him to build a multimillion dollar fortune. He has worked as a close aid to Obama since 2009, serving twice as the president's acting budget director, among other positions. He will now ascend to head of the National Economic Council, replacing Gene Sperling, who says he is departing for personal reasons.
The appointment was leaked to the New York Times and reported by the paper Friday morning and formally announced by the White House later in the day. The article failed to mention Zients' former tenure at Bain.
Obama has already been slammed for ushering in corporate influence and pursuing policies that deepen poverty and unemployment for the vast majority, flipping on his campaign promises to stand up for the common person. Studies show that Obama has overseen the widest income gap between top 1 percent earners and everyone else since 1928--the year before markets crashed.
Obama heaped praise on the new appointee Friday, declaring, "Jeff has a sterling reputation as a business leader."
Yet, his glowing praise contrasts strongly with the picture he painted of Bain Capital during his 2012 campaign, which he repeatedly slammed as an uncaring corporation that outsourced jobs to China while cutting jobs and suppressing wages at home, running roughshod over people's lives to increase bottom-lines.
In one video, the Obama campaign suggests that Bain's role in closing a GST Steel plant in Kansas City contributed to the death of a former worker's wife because of his lost health insurance.
This is not the first time Obama has contradicted his campaign criticisms of Bain Capital. Obama has received over $182,000 in donations from the company, while the Democratic Party has received millions.
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