Since the start of this year, Revolving Door Project has been digging into the nexus of financial and climate policy. From Wall Street villains to obscure agencies and untapped regulatory powers, it has everything RDP was designed to scrutinize. And this week, our newsletter is all climate finance.
You can keep up with this work here.
Transition:
Call him Schrödinger’s staffer. A full month after Axios first reported that Climate Envoy John Kerry was considering naming private equity mogul Mark Gallogly as part of his international climate team, no official announcement — nor disavowal — has come out. It’s unclear if Gallogly actually has a job on Kerry’s team, and if so, what his responsibilities are. It’s not even clear in what part of the executive branch his hypothetical position is housed, whether he’s taking a salary, or if he’s distanced himself from his personal investment office. It’s not as if Kerry hasn’t been globe-trotting and back-slapping with foreign officials in this time period. So it would certainly be nice if the public got to know whether a (particularly odious) Wall Street billionaire is privy to these conversations!
As our Max Moran and Dorothy Slater told E&E News, Gallogly would be a deeply concerning pick for the Biden administration. The hedge fund he co-founded, Centerbridge Partners, was a major investor in Puerto Rican national debt and helped foist a debilitating austerity regime on the island even in the wake of Hurricane Maria. Centerbridge also bought both stock in California fossil fuel utility PG&E, as well as insurance claims against it, and even a stake in a credit facility financing an attorney suing PG&E on behalf of wildfire victims — as Dorothy put it, Gallogly is “trying to get money out of it from basically all sides.”
He is, in other words, a committed profiteer of planetary destruction, not an opponent of it. This is an almost contradictory resume for an aide to the U.S.’ global climate envoy. But as Max and Dorothy wrote in The American Prospect, it’s what Kerry will almost inevitably end up with if he continues naively believing that Wall Street will voluntarily accede to the changes necessary to actually address the climate CRISIS. Kerry clearly hasn’t heeded our warning (what gives, John?!), instead doubling down and dismissing the concerns of over 100 climate activist groups through a State Department spokesman.
This deference to Wall Street is troubling enough from a diplomatic envoy. But it’s potentially lethal from the highest-ranked financial policy official in the Biden administration, Treasury Secretary Janet Yellen.
Dorothy, Max, and our Eleanor Eagan wrote in the Prospect that Yellen’s recent Senate testimony revealed a clear disinterest in scrutinizing the financial industry and maximally performing her regulatory duty. Yellen parroted BlackRock’s lobbying talking points about why it shouldn’t be designated a systemically important financial institution — in spite of voices from The Atlantic to the American Economic Liberties Project raising more and more concern about the interconnected asset manager’s power over publicly-traded companies, and the necessity of bringing the world’s biggest fossil fuel investor to heel, fast. She’s also failed to sink easy lay-ups like firing Trump’s IRS Commissioner and Acting Comptroller of Currency. If you told a Joe Biden voter in October that by his first 100 days, Biden still would have the man who protected Trump’s tax returns at the highest levels of government, they wouldn’t have believed you.
Speaking of missing easy lay-ups, we’re still waiting for action on a “slam-dunk climate opportunity” staring Biden in the face: the five open seats on the Federal Retirement Thrift Investment Board, which invests federal employees’ retirement money. What better way to show that the administration actually wants to green the financial system than starting with the civil service’s own pensions? The Thrift Savings Plan is the world’s largest defined contribution plan. Every seat on the Board which oversees it is up for a changeover. Federal employees themselves are invested in this change. This is an easy, impactful win — it just takes a few good nominees to begin moving mountains on Wall Street.
Governance:
The Biden administration’s initial budget proposal was due out last week but, here we are, still waiting. While it’s hardly a surprise that the budget has been lost amid the buzz around the infrastructure package, it is a shame. A robust budget request that reverses decades of deterioration in funding and staffing levels across government will be critical to achieving each and every one of the bigger-than-expected ideas Biden has already embraced, not to mention those he’s still being pushed to champion.
That is absolutely true when it comes to climate finance policy. Unfortunately, while there is a growing appreciation for the role that financial regulators will need to play in averting climate disaster, those bodies are just now starting to play catchup. As they set new standards, write new regulations, and engage in new enforcement actions, it will be critical that they have resources to match this expanded set of responsibilities.
As it stands, many agencies don’t have the capacity they need to handle legacy issues. In 2014, Americans for Financial Reform (AFR) detailed how staffing at the Commodity Futures Trading Commission (CFTC) had remained virtually stagnant even as commodity futures trading activity quintupled and the Commission was given the added responsibility of policing derivatives markets which are even larger. In the subsequent six years since that fact sheet was published, staffing at the CFTC has hardly budged.
Elsewhere, at the Office of Financial Research (OFR), headcount has fallen precipitously. Dodd-Frank created OFR to analyze and identify future threats to financial stability so that financial regulators could stop economic disasters like the 2007 crash before they occured. In theory, OFR will play a crucial role in understanding the financial risks from climate change and suggesting best courses of action, including labeling additional financial institutions “Too Big to Fail,” but not if this administration ignores the severe attrition it has undergone.
OFR has never been allowed to grow into the powerhouse that it was intended to be. Up until 2014, staffing at the office was on a steady climb towards a goal of 300. Then, suddenly, that progress stalled. And in 2017 it began to be reversed. By 2019, staffing levels had fallen to just 100 people, under half of what they were at the high point.
As we note for a recent piece in the American Prospect, this was no accident. In 2014, OFR began looking into whether BlackRock should be labeled “Too Big to Fail.” BlackRock responded with a lobbying blitz that left OFR wounded. The Trump administration, in part through BlackRock’s Craig Phillips, dealt it additional blows.
If Biden is serious about tackling the climate crisis, he cannot ignore the damage that Trump and corporate America have wrought. So long as institutions like the CFTC, OFR, and others lack the resources they need, bold new green initiatives are likely to sputter while corporations cheer and the public suffers. Government budgets are climate (finance) policy too.
Independent Agencies
Another month has passed and we’re still waiting on nominations for the vast majority of vacant and expired seats at independent agencies. With two new nominations in March, the grand total has risen to 7 (out of 73). While acting chairs at the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been charging ahead with a variety of new climate measures, each still awaits permanent leadership and a Democratic majority to begin setting new regulations. Gary Gensler seems set to be confirmed to lead the SEC shortly but there still is not a nominee for CFTC chair.
As we argue in our latest nominations update, Biden also needs to be moving now to nominate officials for upcoming vacancies. For example, Republican Neil Chatterjee’s term on the Federal Energy Regulatory Commission (FERC) expires in June; Biden should nominate his replacement now to ensure that they are confirmed in time to take Chatterjee’s seat as soon as possible. Similarly, several seats are likely to be vacant on the Federal Reserve Board of Governors early next year (in addition to the one that is already empty). Biden should not leave precious weeks and months on the table by waiting until the last minute to nominate successors for these seats.
For more on what financial regulators can do about climate change, read our guide to the Financial Stability Oversight Council (FSOC) which brings together resources on FSOC itself and its member agencies.
Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:
Janet Yellen’s Blind Spot on Regulation
Financial Disclosures Reveal Fossil Fuel Industry’s Pipeline To The White House
Biden's Budget Must Strengthen OSHA
Facebook Strengthens Defenses Against Break Up By Hiring Another DOJ Antitrust Official
Biden struggling to fill DOJ job that could rein in Silicon Valley
Amazon gears up to defend itself against escalating antitrust scrutiny
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