U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) today said that Congress and the American people deserve answers on Sarah Bloom Raskin’s lobbying on behalf of Reserve Trust, a nonbank fintech, and the Federal Reserve’s decision to reverse itself and award Reserve Trust with valuable access to the Fed’s payment system.

As Ranking Member Toomey highlighted in his interview with Squawk Box this morning, CNBC last night reported that the Colorado Division of Banking disputed the Kansas City Fed’s prior claim that “the Colorado Division of Banking reinterpreted the state’s law in a manner that meant [Reserve Trust] met the definition of a depository institution.” In a statement to CNBC, the Colorado Division of Banking said the Kansas City Fed’s claim was a “misrepresentation” of its role

Yesterday, Banking Committee Republicans refused to provide a quorum at the Committee’s markup to vote on Ms. Raskin’s nomination. Banking Committee Republicans were—and remain—more than willing to proceed with a markup on the five other nominees pending before the Committee.

“Committee Republicans aren’t seeking to delay her vote,” said Ranking Member Toomey. “We’re seeking answers. Until basic questions have been adequately addressed, I do not think the Committee should proceed with a vote on Ms. Raskin.”

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Key Excerpts

“The primary reason that I oppose Sarah Bloom Raskin serving as the Vice Chair for Supervision at the Fed is because of her often stated clearly articulated desire to have the Fed allocate capital away from carbon intensive industry. I think that’s a terrible idea to take the Fed down the path of becoming the arbiter of who gets access to capital and who doesn’t. It’s really unbelievable that somebody—especially someone who’s as knowledgeable as she is—would be so forcefully advocating for this for so long. That’s not the reason that Republicans denied a quorum yesterday so that the vote couldn’t proceed. The reason for the latter, the reason not to have the vote, is because we can’t get answers to important questions.”

“She frankly did a terrible job responding to the written questions that we submitted, and we’ve gotten a lot of questions about her role, and the Fed’s role, frankly, and Reserve Trust—a fintech company based in Colorado—eventually obtaining a Fed master account.”

“The circumstances are very peculiar. And she was involved. And we want answers. We want to understand what happened.”

“Look at the sequence of events. Look at what happened. Reserve Trust applied for a master account at the Fed and got turned down. Raskin, on the board, then calls the President of the Kansas City Fed, where my understanding is the decision occurs, and subsequently, the Fed does a 180 degree reversal and grants them the Fed account that had been denied prior. Later Raskin leaves the board, cashes out a million and a half bucks. . . . But how and why did the Fed do 180 degree reversal?”

“As I said, there are maybe hundreds of fintechs out there that would love to get a master account. They can’t get one. They’d like to know why and how it is that this one in Colorado could. When we ask these questions, we get no answers.”

Background

  • For seven years, Ms. Raskin served in the Obama administration, first as a Fed governor and then as the Deputy Secretary of the Treasury. While there, she signed an Obama administration ethics pledge to prevent “Revolving Door” lobbying.
  • In May 2017, four months after leaving Treasury, Ms. Raskin joined the Board of Directors of the Reserve Trust Company (Reserve Trust), a non-depository startup fintech in Colorado.
  • In June 2017, Reserve Trust’s application for a Fed master account was denied by the Kansas City Fed.
  • After the company’s application was denied, Ms. Raskin called, in August 2017, Kansas City Fed President Esther George—with whom she had served on the Fed’s Federal Open Market Committee—on behalf of Reserve Trust.
  • In the wake of Ms. Raskin’s lobbying of President George, the Kansas City Fed reversed its denial decision and granted Reserve Trust a Fed master account in 2018.
  • As a result, as Reserve Trust’s website boasts,“Reserve Trust became the first state chartered trust company to obtain a Federal Reserve master account, granting direct access to Federal Reserve clearing, payment, and settlement services.”
  • In 2020, Ms. Raskin received nearly $1.5 million by selling her shares in Reserve Trust to QED Investors, a firm co-managed by Amias Gerety, who was one of Raskin’s subordinates at Treasury.
  • On a call with Banking Committee staff on January 28, 2022, Ms. Raskin said she did not know why Reserve Trust wanted a master account.
  • During the same January 28, 2022 call with Banking Committee staff, Ms. Raskin tried to evade answering whether she communicated with the Kansas City Fed or the Fed about Reserve Trust and ultimately said that she did not remember if she had.
  • Ms. Raskin also refused to answer whether she contacted the Fed or Kansas City Fed on behalf of Reserve Trust when asked by Senator Cynthia Lummis (R-Wyo.) three separate times during her nomination hearing before the Senate Banking Committee on February 3, 2022.
  • In questions for the record, Ranking Member Toomey asked Ms. Raskin to turn over documents and to answer a series of detailed questions regarding her work for Reserve Trust, including what actions she took to help Reserve Trust obtain a Fed master account and any communications between Ms. Raskin and the Kansas City Fed or the Fed regarding Reserve Trust’s application.
  • In Ms. Raskin’s written responses to Ranking Member Toomey’s questions for the record, Ms. Raskin provided a blanket “I do not recall” or “I am not aware” in response to more than 35 questions.
  • On February 1, 2022, Ranking Member Toomey sent a letter to the Kansas City Fed requesting information pertaining to its approval of Reserve Trust’s application for a Fed master account.

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