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The Fed’s End-Run Around Democracy

State of the Union: A former chief economist for the Senate Banking Committee highlights how the central bank’s unaccountability plays out concretely.
Credit: Olivier Douliery/Getty Images

In a speech hosted by the Bastiat Society of Washington, DC, Thomas Hogan, the former chief economist for the U.S. Senate Committee on Banking, Housing, & Urban Affairs and currently a senior fellow at American Institute for Economic Research (AIER), explained how the Federal Reserve under Jerome Powell is unilaterally forcing promotion of green policies on American banks. The Federal Reserve is doing this by forcing banks to adopt “Climate Stress Tests” where the banks analyze the supposed effects of Climate Change on particular assets, through the framework of “Climate Risk Management.”

Hogan talked about how the “politically independent” Fed joined the Network for Greening the Financial System (NGFS) in December of 2020, shortly after Biden’s election. In order to comply with NGFS standards, the Fed requires banks to incorporate the supposed effects of climate change into their risk assessments and valuations of their assets. Using these risk assessments, banks must adjust their investments to appear “safe” and avoid further penalties, leading to them divesting from traditional sources of energy and into “green” energy.

Banks that do not meet these standards may be branded as having practices “inconsistent with safe and sound banking practices,” through which a lengthy and expensive process of examinations and hearings can be brought against the bank in question. Banks tend to comply with these standards laid out by the Fed. 

While this issue is separate from the ESG and DEI issues within the corporate world that have been covered in The American Conservative, it provides another instance of technocratic and managerial organs promoting left-wing energy policy.

Editor's note: A previous version of this article stated that the conference was hosted by AIER. The conference was hosted by the Bastiat Society of DC, of which AIER is the sole sponsor.