Sen. Pat Toomey (Pa.), the ranking Republican on the Senate Banking Committee, is pressing the Federal Reserve Bank of Kansas City for answers on what role Sarah Bloom Raskin, President Biden’s nominee to serve the Fed’s vice chair of supervision, played in the decision to grant a “master account” to a company that gave Raskin nearly 200,000 shares of stock.
Raskin joined the company, Reserve Trust, in May of 2017 and left in August of 2019. During that time, the company’s application for access to the Fed’s payments system was initially rejected and then, after Republicans say Raskin contacted the Kansas City Fed, approved in 2018.
The overlap in Raskin’s time on Reserve Trust’s board and the decision to give it the only master account granted to any non-bank state-chartered trust the company has Republicans on the Banking Committee crying foul.
“It remains puzzling how Reserve Trust obtained this account when other institutions have been denied access, leading one bank to file a lawsuit against the Federal Reserve Bank of New York over the issue,” Toomey wrote in a letter to Kansas City Fed President Esther George.
Toomey wrote that lawmakers “are entitled to know what role Ms. Raskin may have played as a Reserve Trust director in persuading the Fed to grant Reserve Trust’s application for a Fed master account.”
Raskin sold her shares in Reserve Trust in 2020 for nearly $1.5 million.
She served as a Fed governor from 2010 to 2014 and as the No. 2-ranking official in the Treasury Department from 2014 to 2017 under then-President Obama.
Access to the Fed’s payments system allows financial institutions to earn interest from deposits at the Fed and easily transfer large sums of money. Reserve Trust touts its status as the first state-chartered trust company to obtain a master account, which gives it an advantage over competitors as a payment and custody partner for business-to-business payment and fintech companies.
Sen. Cynthia Lummis (R-Wyo.), who represents fintech companies in Wyoming that have been unable to get access to the Fed’s payments system, declared at Raskin’s confirmation hearing Thursday: “Something doesn’t smell right with the way this played out.”
“A Fed master account gives Reserve Trust an enormous advantage over everybody else since it appears they’re the only one who has it,” she added.
Lummis said it was her understanding that Raskin called the Kansas City Fed in August of 2017 to discuss Reserve Trust’s application to use the payments system.
Toomey has asked the Kansas City Fed to provide a list of all meeting and phone calls with Raskin or Reserve Trust by Feb. 8, a week before Raskin and other Fed nominees are scheduled to receive a confirmation vote in committee.
Toomey is also requesting all email correspondence and text messages between Kansas City Fed officials and staff on the decision to grant Reserve Trust access to the Fed’s payments system as well as a list of all meetings and phone calls about granting such access to nonbank entities such as Reserve Trust.
Toomey complained that staff at the Kansas City Fed haven’t cooperated with previous requests for information.
“KC Fed staff told my staff that they believed the records and information requested may contain confidential supervisory information. I have trouble understanding how that could be the case,” Toomey wrote. “It is inconceivable that the mere fact that a phone call or meeting took place between KC Fed staff and Ms. Raskin would be confidential supervisory information.”
Raskin pushed back against Lummis’s suggestion Thursday that she had improperly influenced the Fed’s decision on Reserve Trust.
“Certainly [if] you are suggesting anything improper, I want to make very clear that I have, first of all, had the honor to serve in various public capacities and each time I’ve left, I’ve been very mindful regarding the rules,” she said.
The tense exchange appeared to catch the attention of Sen. Elizabeth Warren (D-Mass.), who supports Raskin’s nomination.
Warren told colleagues later in the hearing that she wants to enact rules to limit the ability of all Fed governors to cycle in and out of lucrative private-sector jobs.
“I believe that we must examine a nominee’s total balance of qualifications but I’ve asked nominees from both the Republican and Democratic administrations to abide by higher ethical standards,” she said. “I’m discussing these standards with every Fed nominee.”
She said new standards are needed to “restore Americans’ trust in our political system.”
This story was updated at 2:40 p.m. on Feb. 4.