Senate

Biden nominee faces scrutiny over fintech work, compensation

Sarah Bloom Raskin, President Biden’s nominee to serve as vice chair of supervision at the Federal Reserve, is expected to get some tough questions at a Thursday confirmation hearing over her work for Reserve Trust, a non-bank financial technology company that received special access to the Fed’s payments system while she was serving as a director.  

Reserve Trust, a Colorado chartered trust company, is the only non-bank fintech company to have a Fed master account.

It got the account while Raskin was serving as the company’s director. 

Access to the Fed’s payments system is a major advantage for financial institutions because it allows them to earn interest from deposits parked at the Fed and eases the ability to transfer large sums of money. Other non-bank financial institutions have to partner with banks insured by the Federal Deposit Insurance Corp. to access the Fed’s services.   

“The only question is, why is there only one? There have been other applicants who haven’t been able to get an answer,” said Sen. Pat Toomey (Pa.), the ranking Republican on the Senate Banking Committee.  

Raskin’s compensation while at Reserve Trust, which falls under the Fed’s oversight, is also likely to come up.

Raskin, who as Fed vice chair of supervision would be the nation’s most powerful banking regulator, received nearly 200,000 shares of Reserve Trust stock while at the company that she sold at some point in 2020 for $1.5 million.

Toomey, noting that Reserve Trust got the master account while Raskin was a highly compensated director, said “there are going to be lots of questions about that.”   

Raskin is married to Rep. Jamie Raskin (D-Md.), one of the impeachment managers during former President Trump’s second impeachment trial. Seven GOP senators, including Toomey, voted to convict Trump.

Jamie Raskin filed a periodic transaction report with the House clerk in August reporting the sale of 195,936 shares of Reserve Trust at $7.50 a share. The document listed the transaction date as Dec. 18, 2020. 

Sarah Bloom Raskin had previously disclosed the sale to Office of Government Ethics (OGE), according to Banking Committee Republican staff, but her initial disclosure to the Banking panel did not mention it. She later amended her disclosure to the committee to include the sale of Reserve Trust stock.

  A Senate Republican aide said Raskin was required to file the report within 30 to 45 days of the transaction and filed it months after it was due.

Jamie Raskin told The Hill in a statement: “I filed my PTP late because we experienced a family tragedy in the middle of the reporting period.”  

Raskin’s son, 25, died by suicide on Dec. 31, 2020 — just a week before the Jan. 6 attack on the Capitol. Raskin has written about Thomas Bloom Raskin’s death and how the family coped with the tragedy in the memoir “Unthinkable.”

Sen. Sherrod Brown (D-Ohio), the Banking panel’s chairman, predicted that Republicans are going to attack Sarah Bloom Raskin’s support for having the Fed consider the impacts of climate change on the banking system and other issues at Thursday’s hearing.

“They’ve opposed most nominees that are going to stand up and make Wall Street accountable,” he said.

Asked whether Raskin’s position at Reserve Trust when it became the first state-chartered trust company to obtain a Federal Reserve master account raised any concerns of possible influence peddling, Brown responded: “Sounds like another issue that Republicans are just going to manufacture to try to bring down nominations and to stall them and bring them down.”   

A White House official said Raskin’s financial disclosures “have been reviewed and certified by career ethics officials [at] the Office of Government Ethics and the Federal Reserve.”    

The official also said that Raskin “has agreed in her Ethics Agreement, pursuant to all applicable ethics rules and regulations, to recuse from any particular matter that presents a conflict of interest or the appearance of a conflict and divest any assets which creates a conflict of interest.”   

The official noted that Raskin left Reserve Trust in August of 2018 and that the OGE and Fed determined that recusal was not required for future matters involving the company because she left her position more than two years ago. 

“Throughout her career, Sarah Bloom Raskin has taken her ethical obligations seriously,” the official said.   

Liberal Democrats such as Sen. Elizabeth Warren (D-Mass.), who want the Fed to conduct stricter oversight of financial institutions, are solidly behind Raskin and say she would be a major improvement over former Fed Vice Chair Randal Quarles.   

Warren praised Raskin last year as a “tough and thoughtful financial regulator with decades of experience at both the state and federal levels.”   

“In the important role of vice chair for supervision, she brings a commitment to protect the American people that has been sorely missing from the Fed Board for years,” she said.  

Raskin is also drawing criticism from Republicans because of her stints at Promontory, a consulting firm now owned by IBM, that traditionally has been stocked by former federal financial regulators. She joined Promontory’s advisory board as vice chair after serving under former President Obama as the Treasury Department’s deputy secretary responsible for domestic and global policy and operations from 2014 to 2017.  

She also served as a governor on the Federal Reserve Board from 2010 to 2014.   

Prior to that, Raskin served as one of Promontory’s first managing directors, joining the firm shortly after its founding.   

Promontory drew fire from Democrats and the media in 2013 for its relationship with banks after a review of foreclosure practices it conducted on behalf of banking regulators left homeowners with little compensation while netting huge fees for itself.   

The firm’s close ties with regulatory agencies previously earned it the nickname “shadow regulator.”

Its relationships with client banks drew criticism from Senate Democrats after the 2008-2009 housing collapse. Democrats at the time questioned whether Promontory conducted a truly independent review of banks’ foreclosure practices on behalf of the Office of the Comptroller of the Currency.

Raskin briefly held roles at both Reserve Trust and Promontory for a few months at the end of 2018 and beginning of 2019, according to information she provided to the Banking panel.   

Toomey said Democrats on the Banking Committee are applying a different standard to Raskin than to other former officials associated with Promontory.   

Toomey said Democrats have “made a big deal about” Promontory “with respect to other people.”   

“They ought to be consistent,” he said.

Asked Tuesday about Raskin’s time at Promontory, Warren told The Hill: “We need to change the rules and put a stop to the revolving door.”  

“The revolving door undermines public confidence in our officials and that’s true regardless of which for-profit outfit you went to work for,” she added.   

Updated 10:24 p.m. 

Tags Barack Obama Donald Trump Elizabeth Warren Jamie Raskin Joe Biden Pat Toomey Sherrod Brown
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