Despite an actual study that says banks will do just fine in the event of climate change, Biden is using the fear of climate change as a tool to force the progressive agenda on banks. The Editorial Board of the Wall Street Journal explains:
The Biden Administration recently declared climate change an “emerging and increasing threat to U.S. financial stability.” The regulators must have missed a new New York Federal Reserve Bank staff study, which finds extreme weather may actually benefit banks. The real risk to the U.S. economy and financial stability is regulators, like Mr. Biden’s nominee for Comptroller of the Currency Saule Omarova, who want to bankrupt fossil-fuel companies.
The Fed staff study comes as the Administration ramps up plans to regulate how banks deploy capital in the name of protecting the financial system from climate change. But the authors find that banks are already doing an excellent job of managing risks from extreme weather that climate change will supposedly make worse.
Examining disasters declared by the Federal Emergency Management Agency from 1995 to 2018, the Fed staff found “insignificant or small effects on U.S. banks’ performance.” Disasters boosted loan demand, which offset losses and boosted income. Income at larger banks increased the more exposure they had to disasters.
Local banks tend to avoid mortgage lending where floods are more common than flood maps would predict, which suggests “that local knowledge may also mitigate disaster impacts,” say the authors. Unlike the federal flood insurance program, banks have a financial motive to accurately calibrate disaster risks. FEMA aid didn’t explain banks’ resilience.
The Fed staff note that their findings “are generally consistent with the few papers that study the bank stability effects” of climate change, including on German and Caribbean banks. Yet they contradict a report last month by the Financial Stability Oversight Council (FSOC), established after the housing meltdown to monitor systemic risks, that endorsed more climate regulation to prevent financial instability.
The Fed has already created a Financial Stability Climate Committee and a Supervision Climate Committee to monitor climate risk on bank balance sheets. The Comptroller’s new Climate Change Risk Officer is charged with carrying out the Administration’s “holistic efforts” to reduce banking’s “overall carbon footprint.”
This looming storm of financial regulation, however, isn’t actually intended to mitigate the potential impact of climate change on bank balance sheets. The goal is to conscript banks, insurers and asset managers in its crusade to banish fossil fuels.
Ms. Omarova gave away the regulatory game when she said at a seminar last winter that many small fossil-fuel players will “probably, go bankrupt in short order—at least, we want them to go bankrupt if we want to tackle climate change.” She also said “the way we basically get rid of these carbon financiers is we starve them of their source of capital.”
At her Senate confirmation hearing recently, she said her remarks were “taken out of context and I actually misspoke.” Her words sounded clear enough. Ms. Omarova wants to use financial regulation to bankrupt fossil-fuel companies. Then she wants a National Capital Management Corporation to “restructure” them with a “new technological business model,”—i.e., green energy.
You can read the entire Fed study here. The exciting conclusion reads “Our findings suggest the disaster channel is not likely a material source of instability for banks. Even very small banks facing extreme disasters are not substantially threatened.” Not exactly the premonitions of disaster coming from Biden & Co.
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E.J. Smith - Your Survival Guy
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