SAN FRANCISCO – An economics expert says President Joe Biden’s nominee for a key Federal Reserve position could be disastrous for the energy sector and for West Virginia.
Biden has picked Sarah Bloom Raskin as his nominee for Vice Chair for Supervision at the Federal Reserve Bank. Raskin, a Duke University law professor, has been outspoken in pushing the Fed and other financial agencies to use regulatory powers to stifle the flow of capital to the coal, oil and natural gas industries. She was questioned last week by the Senate Committee on Banking, Housing and Urban Affairs.
And in a 2020 New York Times opinion piece titled “Why is the Fed Spending So Much Money on a Dying Industry?,” Rasin said the Federal Reserve should use its power to withdraw capital from traditional energy sources such as coal, oil and natural gas and direct it toward emerging technologies.
Winegarden
Wayne Winegarden, a senior fellow in business and economics for the Pacific Research Institute, said Raskin’s ideas “obviously would have a very negative impact on those industries.”
“Of course, it’s going to vary by different parts of the industry and by the size of the company,” Winegarden told The West Virginia Record. “Nobody is going to be spared though. That’s the purpose of her claim.
“They’re trying to encourage less use of those products. Smaller coal companies would have a more difficult time than a big multinational conglomerate that has other capital sources.”
Winegarden’s research explores the connection between policies and economic outcome, and he often focuses on the energy sector.
“You’d see some of the largest impacts would be on those small and medium-sized companies that rely more heavily on domestic financial institutions,” he said. “That would mean fewer jobs, fewer opportunities. Those are the types of employment effects you’d see.”
Winegarden said consumers would see the impact as well.
“When you start shutting down reliable sources of energy, winters get colder and darker and summers get hotter,” he said. “You’re just harming the people who have the least income the most. It’s going to come to this.
“All of this is bad for the economy, especially lower income and working families. Economically, it’s very destructive.”
He also said investors would be affected if Raskin’s writings became policy.
“Investors work on expectations,” Winegarden said. “And you, as an investor, take into consideration these factors. You will not be as willing to invest because you would wonder if she meant what she wrote. Even if she’s not going to act on those past writings, expectations matter. It would be very rational for an investor to be hesitant to sink money into those types of projects.
“I mean, would you put your hard-earned money into those projects in that situation?”
Winegarden said West Virginia would be greatly affected by such policies.
“West Virginia would have a bull’s-eye on its chest,” he said. “That’s especially true for a lot of those medium-sized companies that are drilling or mining. When you cut off their financial lifeline, their options are fewer.
“It’s a much greater threat to West Virginia than it is to, say, California. There is a disproportionally larger impact on West Virginia compared to other states.
“You would hope that Senator Manchin would consider these impacts because his constituents are at risk.”
If Raskin is confirmed, Winegarden said it would further signify the Fed is moving further away from its primary objective.
“The most important focus of the Fed is and should be inflation and price stability,” Winegarden said. “That needs to be job number one. And right now, they’re failing at that. Other issues are overwhelming this. They need to keep their focus on that.
“What the fed does is so incredibly important. It can be esoteric and boring, but maintaining the right amount of money for the economy is a terribly important and difficult job. You need people focused on monetary policy, not other matters.”
He also said Raskin’s nomination risks the independence of the Fed.
“You’re politicizing inflation,” Winegarden said. “You don’t want politicians playing games with this. But the flip side is staying out of the politics. If you’re on the Fed board and saying you need political independence, you also have to be politically independent.
“There is a danger this nomination demonstrates that we would be taking the Fed away from its very important role and jeopardize its independence by inserting it in political issues that need to be resolved in the political realm.
“We shouldn’t bastardize the role of the Fed by allowing them to get into politics. They’re independence is important, and they have the obligation to be independent.”