Climate Protesters Get in the Fed’s Face as the Policy Clash Grows Loud

A video of security officers wrestling a protester to the ground in the lobby of the Jackson Lake Lodge in Wyoming, outside the Federal Reserve’s most-watched annual conference, has been viewed more than a million times.

A protest that disrupted a speech by Federal Reserve Chairman Jerome H. Powell at the Economic Club of New York this fall generated widespread attention. And when the activists showed up again at Mr. Powell’s speech at the International Monetary Fund early Novemberthey seemed to get under his skin: the normally sedate central bank leader was caught on a hot mic using profanity as he told someone to close the door.

All three upheavals were caused by the same group, Climate Defiance, which a now 30-year-old activist named Michael Greenberg founded in the spring. Mr. Greenberg had long worked in traditional climate advocacy, but he decided he needed to do something louder to bring about change at institutions like the Fed.

“I realized there was a great need for disruptive direct action,” he explained in an interview. “It just gets so, so, so, so much more attention.”

The small but vocal group of protesters chasing the Fed chairman also spotlights an issue the central bank has long struggled with: exactly what role it should play in the global transition to green energy.

Climate-focused groups often argue that the Fed, as regulator of the nation’s largest banks, should play an important role in preparing the financial system for the damaging effects of climate change. Some want it to more openly discourage banks’ lending to fossil fuel companies. Mr. Greenberg, for example, said he would like the Fed to use regulations to make lending to oil and gas companies essentially unaffordable.

The Fed is unwilling – and, depending on who you ask, possibly unable – to put such a heavy thumb on the scale. Although central bankers monitor operations for safety and soundness, central bankers often argue that picking winners and losers by determining who banks can lend to would go beyond its mandate, thrusting the Fed into the political fray and compromising its independence. danger would come.

If we take climate policy so far that it causes political backlash, it could have serious consequences for the central bank. Fed officials in Washington are not elected: they are nominated by the president and confirmed by the Senate, and they are difficult to remove from office. That isolation exists so they can make tough decisions that keep the economy in balance over the long term, sometimes at the politically controversial price of short-term pain.

But Congress monitors the central bank’s actions and can punish it if it oversteps its bounds. To maintain its independence and room to maneuver, the Fed is trying to strike a balance: paying attention to the potential impacts of climate change even as it steadfastly tries to stay out of the partisan debate.

“They’re trying to make progress — and sustainable progress,” said Sarah Dougherty, a former Atlanta Fed researcher who now focuses on financial regulation and other issues at the Natural Resources Defense Council. “They’re trying to stay out of these bigger, cultural war, political issues.”

From her perspective, Ms. Dougherty said, the Fed has taken meaningful steps this year to improve climate-related policy and oversight, though she would prefer “more, faster, please.”

But some climate activists argue that by not being more proactive — by taking its time to embrace policies that the European Central Bank and the Bank of England, for example, have developed — the Fed is slowing down one of the world’s most important issues.

The Fed is “embarrassingly” behind its peers, said Eren Can Ileri, who focuses on financial regulation at the Sunrise Project, a group that provides analysis and strategic advice to climate-focused organizers. His work in financial regulation has helped focus Climate Defiance’s recent focus on the Fed.

Climate Defiance is not Fed-specific. It blocked entrances to the White House Correspondents’ Dinner. It has halted or disrupted speeches by top White House climate officials John Podesta And Ali Zaidi. It turned a book review by Senator upside down Amy Klobuchar.

But the four full-time employees and network of protesters have become interested in the central bank because of the Fed’s role in regulating some of the nation’s largest financial institutions.

“The Fed has enormous power over the extent to which banks finance the fossil fuel industry,” Greenberg said. He said no specific further disruptions were planned, but more were possible. (Mr. Powell will speak Friday at Spelman College in Atlanta, although that is a far cry from Mr. Greenberg’s home base in Washington, D.C.)

“They clearly haven’t done enough, so they clearly deserve to be targeted more,” he said.

The protest group has gained a number of notable supporters. Representative Ro Khanna, a California Democrat, spoke at a recent fundraiser.

“We have to take the climate into account, whatever the institution,” Mr. Khanna said in an interview, urging policymakers to “be involved with” the organization.

Climate Defiance isn’t alone in putting pressure on the Fed on climate issues, and Democrats have long called on the central bank to be more proactive.

The Fed angered lawmakers when it delayed joining a global group of central banks focused on climate change issues — a move it ultimately took in late 2020. Mr. Powell is regularly asked about the central bank’s climate-related activities when he testifies before Congress.

But Republicans have made clear the Fed must tread carefully, saying it risks overstepping its authority.

In mid-November, a group of Republicans from the House of Representatives suggested in a letter that the Fed and other regulators were being influenced by global agencies that were “advancing climate change policies that have been rejected by Congress on numerous occasions,” and warned that “it is the responsibility of Congress, not unelected bureaucrats, to to determine policy.”

The partisan political divide leaves the Fed in a complicated state of uncertainty – and could contribute to its careful approach.

The Fed has taken several major climate-related actions this year. The time will come in early 2023 details announced for its “climate scenario analysis pilot project” for the country’s six largest banks, asking them to figure out how to deal with climate-related shocks. And it took off climate principles which explains how banks should monitor the associated risks.

But these efforts are often less complicated than what some foreign counterparts are doing. The climate stress tests for banks from the Bank of England and the European Central Bank have started earlier and that is the case developed further. The European Central Bank has also adjusted part of its monetary policy accordingly prefer greener companies.

This is partly due to the different structures of central banks; in some cases the European Central Bank has more authority to tackle climate problems. Political reality and the Fed’s innate caution also play a role.

Mr. Powell has made clear that the Fed must proceed cautiously.

“Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or surveillance tools to promote a greener economy or achieve other climate-based goals,” he said this year. “We are not and will not be a ‘climate policy maker’.”

Lisa Friedman reporting contributed.