The Federal Reserve Bank, the United States' central bank, is said to be governed by its 'dual mission' in all of its decisions. It is mandated by law to ensure price stability across the economy and to maximize employment.
It might be difficult to balance these two objectives at times. In recent years, there has been significant discussion in Congress about modifying this and giving the Fed merely the price stability mission. Whatever the merits of that idea, it is a long cry from the central bank's current position, which is attempting to give questionable counsel for the financial system on climate change and its possible consequences.
The Fed has been attempting to encourage banks to discover climate-related liabilities on their books based on the fantastical premise that weather constitutes a direct danger to the financial system. The objective is to provide a detailed study in 2023 declaring that the sky is falling on the nation's banks, providing another another propaganda win for climate alarmism for the media to laud. This will allow an unelected but powerful quasi-governmental institution to exert undue political pressure on the financial sector to dump fossil fuels, despite the fact that people require them and expect them to be inexpensive.
It might take another step backwards in terms of new Fed policy governing banks based on climate-related indicators rather than financial metrics.
Having failed to convince sensible, ordinary people to sacrifice their standard of living voluntarily, climate activists, now embedded in the Biden administration, are looking for new ways to impose their agenda without the voters' consent. (In that, they are following the bog-standard playbook of the Left.) They have failed in Congress, mostly failed in the courts, and found limited success in corrupting corporate governance, and now they are trying to exercise influence through the Fed.
There is no scientific consensus on climate change's long-term implications that would allow the Fed to give suitable guidelines. "Neither the rise of the Earth's temperature nor extreme weather occurrences pose a danger to the integrity of the financial system," Republican Sen. Pat Toomey, the Banking Committee's leading member, said in a hearing this spring. "We haven't discovered one bank collapse triggered by any weather catastrophe," Toomey said, despite the fact that four of the five most expensive storms in U.S. history occurred in the previous 11 years. In fact, we're not aware of any bank failures caused by weather in the recent age."
Interfering with climate change by the Federal Reserve is bad for business. It's already a member of the Network of Central Banks and Supervisors for Greening the Financial System, whose stated objective is to "activate mainstream finance to promote the transition to a sustainable economy."
This is a political aim that will be determined by elected members of Congress and state legislatures. It is not a financial aim for unelected central bankers to pursue as a stand-in for radicals in areas where they are unable to get political support. The Fed's dual mission to support or prohibit particular sorts of investments in the name of climate change is nowhere to be seen.
"Society's broad response to climate change is for others to decide — in particular, elected leaders," Fed Chairman Jerome Powell previously said.
Powell has to get his house in order and go back to doing what the Fed is intended to do: stabilize prices, especially now that inflation is wreaking havoc on American households. That would be both new and timely under the current circumstances. Bidenflation is a serious issue that central bankers should not overlook in favor of pandering to climate alarmists.