House Democrats want restrictions on big bank lending to fossil fuel industry
Progressive House Democrats on Wednesday introduced legislation to restrict lending by big banks to the fossil fuel industry.
The measure, the Fossil Free Finance Act, would order the Federal Reserve to use its financial regulatory tools to ensure that the biggest banks cut back on lending to the oil, gas and coal sectors.
âIn the last five years alone after the signing of the Paris Climate Agreement, the big banks have invested nearly $ 4 trillion in issue finance. This flow of money exposes our financial system, our economy, our communities and our planet to astronomically high levels of climate risk. “said Representative Mondaire Jones, a freshman Democrat from New York, at a press conference introducing the legislation.
The measure would prohibit large banks from investing in new or expanded fossil fuel projects after 2022. Funding for coal projects would stop after 2024 and funding for all fossil fuel projects would follow by 2030.
Environmental groups have welcomed the bill.
“The Wall Street banks have made it clear that, without strong federal oversight and regulation, they plan to keep pumping money into the fossil fuels that are causing the climate crisis,” Ben Cushing said. , who is working on the project for the Sierra Club, in a statement accompanying the measure.
Supporters of the legislation see a threat to the economy and have compared banks dumping billions of dollars into a declining fossil fuel sector with the overinvestment in the housing sector that sparked the 2008 global financial crisis.
In a blog post on Wednesday, Bill Nelson, chief economist at the Bank Policy Institute, which lobbies Congress on behalf of banks, said in a blog post on Wednesday that “banks’ exposure to losses due to The steady decline of old companies and the emergence of new ones is not new. Economists who have serious concerns that banks will suffer a high level of loan losses due to such climate-related changes should investigate past cases of similar changes. to assess the risks. “
The Fed is in the political hot seat on climate change. The Fed has started developing risk management tools to understand climate change risks to the resilience of the financial system. This could mean mandatory disclosure by the banking industry.
Progressive Democrats say the Fed has done too little, while some Senate Republicans have said the Fed’s actions are already going too far.
Experts predict climate change will continue to be at the forefront of the Fed as it is a priority for the Biden administration. The White House could appoint four governors to the seven-member central bank governing council by next spring.
Dallas Fed Chairman Rob Kaplan, whose district includes much of the nation’s oil drilling operations, has tried to find common ground.
Earlier this month, Kaplan said that “whether we like it or not,” even with the dramatic adoption of wind, solar, electric cars and other transformative businesses like battery storage, l The US economy will depend on the fossil fuel industry “for many years to come.
“We’re going to have to find a way, as we aggressively move towards alternatives, to still have a healthy fossil fuel industry to meet the needs of our people and avoid price spikes,” Kaplan said, during a public meeting. event in its regional bank.
At a press conference on Democratic legislation, David Arkush, chief executive of the Public Citizen’s Climate Program, disagreed.
âWe don’t need any new investments in fossil fuels, that’s for sure. What we need to do is wean them as quickly as possible. And that’s why we need the involvement of financial regulators to help establish Wall Street and make it happen, âArkush said.
When asked if shadow banks would just step in and fund projects for the oil and gas industry, Arkush said no company could match the cheap loans big banks are giving to the fossil fuel industry. .
âIt is always effective to regulate the biggest banks and gradually reduce them,â he said.