Sen. Cynthia Lummis, a Republican of Wyoming, on Thursday called for more scrutiny into the role that Sarah Bloom Raskin played in helping a fintech firm become the first to get a so-called “master account” at the Federal Reserve. The accounts are needed for banks to arrange payments with the Fed and for settling funds with other banks.
Master accounts are the way banks have access to the payment system. On its website, Reserve Trust says it is “the first fintech trust company” to obtain the coveted privilege.
“We provide payments services that financial institutions and fintechs have previously only been able to obtain from correspondent and sponsor banks,” Reserve Trust says on its website.
Bloom Raskin is President Joe Biden’s pick to be the next Fed vice chairman for financial supervision. She served as a governor on the Fed board from 2010-2014 and was deputy U.S. Treasury secretary from 2014-2017.
After leaving Treasury, Raskin said she joined the board of directors of Reserve Trust and served for two years.
According to Lummis, Reserve Trust, a Denver-based fintech firm, gained the master account status in 2018 after failing in its first attempt the year before.
Lummis said that Bloom-Raskin played a role in helping Reserve Trust get the master account, and said she made a phone call to the Kansas City Fed.
“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 left, I have been very mindful of the rules regarding departure,” Raskin said.
Bloom Raskin left the Reserve Trust Board in 2019. Lummis said Bloom Raskin sold the Reserve Trust shares she received when she joined the fintech trust company’s board for almost $1.5 million in 2020. The Wyoming senator noted that Bloom Raskin’s shares were brought by Amias Gerety, who worked for the Obama Treasury with Bloom Raskin and is now a partner at QED Investor, which is the controlling owner of Reserve Trust.
“Even in this town, that’s a lot of money for being on a company’s board of directors for two years,” Lummis said.
Lummis said she was agitated because no other fintech firms, including several crypto-banks based in Wyoming, have been given a Fed master account. This could let them issue stable coins, noted Jaret Seiberg, an analyst with Cowen Washington Research Group.
“My state’s companies have been stonewalled, have been slow walked and have not been able to get approval even though they’ve been working with the Fed for two-and-a-half years,” Lummis said.
Lummis called for “additional scrutiny” by the committee.
It is unclear if Lummis’ allegations will gain any traction. Democrats who spoke after Lummis’ comments said they fully supported Bloom Raskin’s confirmation.
“I don’t think it is nothing, but I don’t think it is going to determine the outcome” said Ian Katz, managing director at Capital Alpha Partners, who analyzes public policy affecting banks.
Democrats can confirm Bloom Raskin without any Republican votes.
Republican senators spent more time on a controversial opinion article Bloom-Raskin penned for the New York Times making the argument that the energy sector should be excluded from receiving emergency Federal Reserve support during the pandemic.
Sen. Pat Toomey, the Republican senator from Pennsylvania who is also the ranking Republican on the Banking committee, said Bloom Raskin would use her new position at the Fed to make sure the banking system shifted capital away from energy companies and other industries that emit excessive Co2.
Bloom Raskin denied that this was her goal, telling Republican senators that it is not the Fed’s job to choose winners and losers.
“Banks choose their borrowers, not the Fed,” Bloom Raskin said.
Afterwards, Toomey called this “one of the most remarkable cases of confirmation conversion I have ever seen.”
At the hearing, Biden’s two other nominees to the Fed — Lisa Cook, an economics professor at Michigan State, who would be the first Black woman on the Fed board of governors and Phillip Jefferson, a Black economist who teaches at Davidson College — received relatively little scrutiny.