Fed acknowledges climate risk, Biden transition rumors, and more

Federal Reserve Chair Jerome Powell said the U.S. central bank has been cooperating with its counterparts around the world to address risks presented by climate change.

“What we’re really working on is: how do we incorporate climate change risk into all that we do,” Powell said during an online panel Thursday hosted by the European Central Bank. “It has potential implications for monetary policy, for bank regulation, for financial stability, and I would say we’re in the very early stages of trying to work through what that means for our goals.”

The U.S. Federal Reserve for the first time called out climate change among risks enumerated in its biannual financial stability report, and warned about the potential for abrupt changes in asset values in response to a warming planet.

“Acute hazards, such as storms, floods, or wildfires, may cause investors to update their perceptions of the value of real or financial assets suddenly,” Fed Governor Lael Brainard said in comments attached to the report, released Monday.

Larry Fink, chief executive of the world's largest asset manager BlackRock BLK.N, said on Tuesday he backed the UK's recent move to make the reporting of corporate risk related to climate change mandatory, and urged the United States to follow suit.

“We welcome the UK Chancellor’s announcement yesterday (of) mandatory TCFD reporting,” Fink told the Green Horizon Summit in London, referring to the Taskforce on Climate-Related Financial Disclosures, which will be required from large companies and financial institutions by 2025.

President-elect Joe Biden faces a crucial decision in the coming weeks that could dictate how he plans to run his administration and shepherd the nation’s economy: whom to nominate as treasury secretary.

A leading candidate for the post is Federal Reserve governor Lael Brainard, who served as a senior Treasury Department official in the Obama administration. Brainard has broad policymaking experience, particularly during economic crises, as well as wide respect among international foreign ministries and central banks from her time as the department’s top diplomat.

MM is getting an increasing number of calls and emails from banking industry executives and lobbyists annoyed over many of the names on President-elect Joe Biden’s transitions teams for Treasury, the Fed and other financial regulators. Personally, we see the lists as relatively balanced, though perhaps tipping towards the progressive side. The Treasury team is headed up by Don Graves from Key Bank. But it also includes more progressive names like Michael Barr and Simon Johnson.

The Fed/Fin-Reg team is led by Gary Gensler, a former CFTC chair and former Goldman Sachs exec who is now beloved on the left for his progressive regulatory approach. The group also includes Better Markets CEO Dennis Kelleher, an advocate of much stronger banking regulations (and an MM regular). But there are much more moderate names on the list as well.

On Tuesday, the Biden presidential transition announced the formation of agency review teams. I don’t want to overemphasize the importance of these groups, sometimes known as “landing teams,” but I don’t want to underemphasize them either. They are intended to study the federal agencies, work with the existing officeholders on the transfer of power, and recommend policy changes for the Biden-Harris administration. The incoming Cabinet official, and Biden himself, can take them or leave them. You could see this as make-work for people who want a say in policy for the president-elect’s White House.

However, this does offer a first look at the type of personnel that a Biden administration will seek out. Members of the review teams are obviously favored by the incoming administration and could very well staff it, up to the subcabinet level. And looking at it through that lens, in what I imagine will become a familiar refrain for the next four years, there’s good news and bad news.

The prospect of a global green recovery from the coronavirus pandemic is hanging in the balance, as countries pour money into the fossil fuel economy to stave off a devastating recession, an analysis for the Guardian reveals.

Meanwhile, promises of a low-carbon boost are failing to materialise. Only a handful of major countries are pumping rescue funds into low-carbon efforts such as renewable power, electric vehicles and energy efficiency.