Press Releases

Barr Delivers Remarks at Hearing to Examine the Biden Administration’s Injection of Partisan Climate Policies into Banking Regulations

Washington, July 18, 2023 -

Today, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, led by Chairman Andy Barr (KY-06), is holding a hearing entitled “Climate-Risk: Are Financial Regulators Politically Independent?”

Watch Chairman Barr’s opening remarks here.

Read Chairman Barr’s opening remarks as prepared for delivery:
“Federal regulators represented here today have recently coordinated to promulgate principles for managing climate-related financial risks.
“The guidance and information requested by the regulators align with a 2021 Executive Order, efforts promoted by the Financial Stability Oversight Council (FSOC) Chair Yellen, and recommendations from various international global governance organizations. 
“The Federal Reserve is extending furthest with a mandatory supervisory climate scenario analysis and formal collaboration with Treasury’s Office of Financial Research on climate data and analysis, which the Board of Governors never voted to approve. 
“FSOC Chair Yellen has repeatedly identified climate change as an existential crisis and has called climate change ‘an emerging and increasing threat to financial stability.’ 
“Following the administration’s posture on climate-related financial risk, regulators have begun inserting climate policies into bank regulation and supervision.
“There is little transparency about regulators’ climate efforts and what occurs in Administration-led climate working groups or international global governance organizations. 
“Four bills have been attached to this hearing to address this lack of transparency and regulatory capture.
“There is also lack of transparency about funding of some of the climate-related efforts of the international organizations, including a tangled web of financing associated with the Network of Central Banks and Supervisors for Greening the Financial System, or NGFS. 
“There is nothing wrong with regulators wanting to learn more about data, methods, and analysis or to ask questions of banks about what they are doing. 
“No one believes that financial institutions should ignore not-fully-understood risks. 
“But we and the regulators know that institutions are already analyzing climate-related financial risks, and many large institutions have public-facing information available describing how they are monitoring and managing this risk.
“Yet, somehow, after an Executive Order was issued and FSOC made pronouncements, the regulators found a sudden need for a coordinated public-facing campaign of guiding principles for climate risks that research says are manageable.
“Regulators are saying that their efforts are intended to ‘help’ banks manage risks that are not yet fully understood, even by the regulators, with the underlying premise that somehow the prudential regulators know better than the private sector.
“That seems odd given that the Fed says that they must exercise humility about spotting risks, and they couldn’t even ‘help’ institutions manage interest rate risks.
“The Fed’s Vice Chair for Supervision promises, as he did with Silicon Valley Bank’s failure, to write a public-facing report of his personal assessment of what his climate scenario analysis reveals, using data that Congress will not be able to see to corroborate his findings. 
“At best, existing climate-related financial risk analysis can show long-run directionality of financial and economic effects of alarming climate futures.
“But to think that existing analyses can accurately predict near-term effects of projected climate changes 5, 10, or even 100 years out is misleading and false advertising. 
“Climate models are typically unwieldy mongrels characterized by cascading uncertainties as they mix and match inputs and outputs from economic, climate, ocean temperature, and other modules to produce questionable numbers with highly questionable predictive content. 
“There are so many degrees of freedom available to climate analysts that, like cooking soup with a cabinet full of spices, you can get whatever flavor of results that you’d like.
“As Nobel Prize winning economist Lars Peter Hansen counsels to regulators and central banks: ‘Their credibility will be further enhanced by avoiding the temptation to exaggerate our understanding of climate change.’
“On climate policy, driven by Biden administration directives, regulators are choosing politicized policymaking, putting their independence at risk, and giving in to the temptation to exaggerate our understanding of climate change.”

Print version of this document