Sen. Pat Toomey, the top banking committee Republican, sent letters to three regional Federal Reserve leaders expressing concern that they have exceeded the bounds of their missions by delving into “woke” politics.
The Pennsylvania Republican sent letters to Fed regional bank Presidents Neel Kashkari of Minneapolis, Eric Rosengren of Boston, and Raphael Bostic of Atlanta about their recent work regarding economic racial equality.
Toomey highlighted a joint series by the banks titled “Racism and the Economy” and said that while he is supportive of the Fed studying economic disparities along demographic lines, including race and gender, “this subject matter is fraught with ideological assumptions and interpretations, and the work and analysis of the [Minneapolis/Boston/Atlanta] Fed seems heavily laden with political and value judgments.”
Toomey pointed out that the Fed’s statutory mandate is nonpartisan, independent, and restricted to monetary and regulatory policies, and he accused the leadership at the three Fed banks of “mission creep” by playing politics.
“Whether or not this is your personal view, I would remind you that only Congress has the authority to reform the Federal Reserve or modify its statutory mission,” the senator wrote. “Moreover, I would caution you on the reputational damage being inflicted on the [Minneapolis/Atlanta/Boston] Fed and the Federal Reserve as a whole by pursuing a highly politicized social agenda unrelated to monetary policy.”
Toomey is requesting that the regional banks provide him with records about planning for any of the “Racism and the Economy” events, memorabilia and emails generated from July 2019 to the present that describe or refer to the motivation behind the banks’ focus on racial justice issues, and the banks’ annual expenses over the past decade related to research and community development. He wants the records turned in no later than June 7.
During a Monday phone call with reporters, Republican staff on the Senate banking committee said the matter hits at the very heart of how the Fed is supposed to operate. They warned that sinking further into the political mire of social issues could damage the core of the central bank’s mission.
“Our boss and a lot of Republicans worry that credibility of the Federal Reserve is at stake, and when the Fed goes down these discursive paths that are fraught with political value judgments, it makes it harder for the Fed to maintain their nonpartisan and independent credibility,” one staff member said.
Another member of Toomey’s staff pointed out that the United States is experiencing inflation that is higher than anticipated as the economy continues to heat up after rounds of high federal spending and pent-up post-pandemic demand. Consumer prices increased by 4.2% for the year ending in April, with the costs of goods rising across the board. The rise was the most intense since 2008 and shattered the expectations of economists who predicted only a 3.6% increase.
Despite the Fed claiming that the spikes are only transitory, staff with the banking committee said that average people might become more focused on the Federal Reserve and its mission as they see prices of goods begin to increase.
“I think, big picture, a lot of Americans that usually wouldn’t pay attention to what the Fed is doing, may not even know what the Federal Reserve does — they are going to the grocery store and they’re seeing prices go up and they’re realizing that inflation is a really big issue,” the staff member said, adding that consumers want the Fed focused on monetary policy.
“Whether or not they are worried about racism in our country, they’re worried about climate change, I think a lot of Americans would want the Federal Reserve to be paying more attention to inflation and leave some of these other issues to accountable politicians.”
The Fed has kept interest rates near zero and said it expects to continue doing so in the months ahead despite some prominent economists, including former Treasury Secretary Larry Summers, a Democrat, warning that doing so could exacerbate too-high inflation.
Toomey’s letters to the Fed leaders were not his first request for information from regional banks about mission creep. In late March, he asked that the Federal Reserve Bank of San Francisco provide documents on its increasing focus on climate change and social justice issues.
This week’s letters came as Bostic, the Atlanta Fed president, addressed speculation that President Joe Biden might choose him to replace Jerome Powell as chairman of the Fed, should he not keep Powell on when his term ends. Bostic, who said earlier this year that there are “definitely merits” to reparations programs, told Axios that if chosen, he would run things “differently” than in the past.
“My voice is distinctive, and I’ve been talking about things in ways that have been different,” Bostic said of his tenure in Atlanta.
The Washington Examiner contacted the Fed banks in Minneapolis, Boston, and Atlanta for comment but did not immediately receive responses from Minneapolis and Atlanta. A spokesman with the Boston Fed said that the bank would “carefully review correspondence from the senator.”