Fed nominee Raskin agrees to expanded ethics pledge to slow revolving door with Wall Street

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WASHINGTON — Sarah Bloom Raskin, chosen by President Biden to become the Federal Reserve’s chief banking regulator, said she would take additional steps to assure lawmakers she would avoid potential conflicts of interest.

An expanded ethics pledge, which comes at the request of Sen. Elizabeth Warren, is intended to slow what the Massachusetts Democrat described as a revolving door for finance officials who continue to hold top positions in Washington, or vice versa. Republicans have raised questions about a trade deal Ms Raskin struck after she last left government in 2017.

“These are the highest ethical standards ever accepted by candidates for the Federal Reserve Board,” Ms. Warren said, adding that they would avoid conflicts of interest.

Republican lawmakers challenged Ms Raskin for her term on the board of a Colorado payments company, Reserve Trust. She took on this role after serving as Fed governor and senior Treasury Department official during the Obama administration.

While Ms. Raskin served on the company’s board in 2018, she gained access to Federal Reserve payment systems that traditional banks use to move money quickly, a benefit the company advertises on its website. The issue is important to other financial firms in the same situation and could be a policy issue that comes back before Ms. Raskin again if confirmed at the Fed.

Under the revised ethics agreement announced Wednesday evening, Ms Raskin would extend by four years, rather than two, the recusals she would have to make to the Fed for cases involving companies with which she previously had a relationship. of work. She also agreed not to seek employment or compensation from financial services companies for at least four years after leaving government.

“If confirmed, I will be mindful of both the legal requirements that govern my conduct and the appearances of such conduct to ensure the public has no reason to question my impartiality,” she said. written in response to written questions from Ms. Warren.

Two other Fed nominees – academic economists Lisa Cook and Philip Jefferson – have also agreed to abide by the expanded ethics pledge, though its application to other Fed officials may be spotty as no similar agreement has been reached. announced involving Fed Chairman Jerome Powell and Governor Lael Brainard. . Mr. Powell has been selected for a second term as head of the central bank and Ms. Brainard is Mr. Biden’s vice-chair.

Senate Banking Committee Chairman Sherrod Brown (D., Ohio) said he plans to run all five nominees through his panel on Feb. 15.

Richard Painter, a professor at the University of Minnesota Law School and former chief White House ethics counsel at the George W. Bush White House, said that while the extended cooling-off periods had sense, it would be preferable if they applied to all members of the Fed. Advice.

“It’s difficult to administer when different board members have different rules for recusal,” he said.

An expanded pledge could also lead to lopsided decision-making if newer nominees, who might favor tighter restrictions on Wall Street, have to recuse themselves from more questions before the board, Mr. Painter said.

A vocal minority of Democrats, led by Ms Warren, last year called for a replacement for Mr Powell, favoring a Fed leader who would be more active in pressuring the central bank to regulate banks and address risks related to climate. Ms Warren also said the business activities of former Fed officials indicated a “culture of corruption”.

During a confirmation hearing last week, Sen. Cynthia Lummis (R., Wyo.) asked Ms. Raskin if she relied on her personal contacts during previous stints at the Fed and Treasury Department to help Reserve Trust to get a so-called Fed master. account, which gives banks direct access to the Fed’s payment systems. The company was first denied such an account in the year before it was received. Ms Raskin did not answer the question directly but said she had done nothing improper.

The Federal Reserve Bank of Kansas City, which approved the main account, later said it had not deviated from its review process when evaluating the company’s application. The company changed its business model after its initial rejection for a Fed account, the The Kansas City Fed said.

Reserve Trust chief executive Dave Wright declined to comment.

Ms Raskin said she did not recall any communication she made to help Reserve Trust get her main account. “Had I done so, I would have complied with all applicable ethical rules in such communications,” she said in separate correspondence with GOP member Sen. Pat Toomey (R., Pa.) of the Senate banking panel.

A spokeswoman for Mr Toomey criticized Ms Raskin’s responses as “a stunning case of selective amnesia”, in a written statement.

White House spokesman Chris Meagher said Republican attacks on Ms Raskin’s integrity were unfounded.

“Despite their best efforts, the slanders of Senator Lummis and Toomey continue to fall flat in the face of scrutiny and facts,” he said.

Write to Andrew Ackerman at andrew.ackerman@wsj.com

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