Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. President Joe Biden's three latest picks for the Federal Reserve board are headed to Capitol Hill today for their nomination hearing, where the theme is likely to be an existential one: What is the job of the central bank? Republicans have blasted two of the president's nominees, Sarah Bloom Raskin and Lisa Cook, as activists who would stretch and push the bounds of the Fed's congressional mandate to advance the administration's social and environmental agenda. Raskin and Cook's supporters insist this is nonsense and argue that the two candidates would bring a different and urgent perspective on the Fed's role in advancing economic opportunity and stability. The crux of the issue is, how far would they go? Activists who have bemoaned what they see as Chair Jay Powell's baby steps on climate have said that Raskin would take bigger steps — leaps maybe — to incorporate climate risks into the Fed's work. But her defenders say she's not the radical Republicans portray, noting the Fed has already started moving in this direction under Powell. The GOP isn't buying it. "I'm very concerned about any candidate that would go beyond what I see as the limited mandate of the Federal Reserve," Sen. Bill Hagerty (R-Tenn.) told our Victoria Guida on Tuesday. Thursday's hearing will be a chance for Raskin and Cook to clarify their views on how much power the Fed has, for example, to steer banks away from fossil fuel investments or address racial disparities in the economy. Here's more from POLITICO climate reporter Zack Colman on Raskin: Raskin has joined other financial and climate experts in calling on banks to prepare for climate-related shocks and has encouraged regulators to consider ways to support a "rapid and just green transition." The dangers most closely watched by the Fed include not only physical risks posed by severe weather but also the possibility that global policies enacted to curb greenhouse gases could hurt financial institutions with sizable fossil fuel investments. Environmentalists say Raskin is generally aligned with Powell and former vice chair Randal Quarles, both Trump appointees. Under Powell, the Fed has joined the Network for the Greening of the Financial System, a coalition of central banks assessing climate risks, and is in the process of developing a framework for making banks game out climate-related risk scenarios. And, in fact, the U.S. is a laggard on preparing for climate risk compared with the European Union, said Ben Cushing, campaign manager with the Sierra Club's fossil-free finance program. "There's been a lot of this being politicized, but really the Fed is already moving in this direction," said Sarah Dougherty, a former Fed economist who now directs the Natural Resources Defense Council's Green Finance Center. But Republicans and some Democrats say Powell has been more muted on climate than they assume Raskin would be; indeed, the Fed chief has been the target of withering criticism by activists for not doing more. Powell said at his confirmation hearing last month that the Fed's climate role is "limited." "Jay Powell has never talked about allocating capital and steering capital away from the oil and gas sector," a GOP Banking Committee aide told POLITICO. Raskin "wrote that these companies will be worthless in the near future, which would be news to anyone who bought Exxon Mobil stock in March." Republicans also question whether the Fed or banks could adequately model climate risk scenarios. And they have slammed Raskin as an ideologue who would halt cash flows to coal, oil and gas firms, though such an extreme move is highly unlikely, particularly in the near term. Taxpayer watchdogs said opponents have distorted Raskin's statements, particularly her criticism of the Fed's pandemic lending programs, which stemmed from concerns that the Fed was making risky taxpayer investments. And they're also touting her credentials in other areas, such as cybersecurity, to parry Republican attacks. FIRST IN MM: BROWN'S OPENING STATEMENT — Senate Banking Chair Sherrod Brown (D-Ohio) plans to emphasize today the importance of having a Fed board at full strength, according to excerpts of his opening statement obtained by MM: "It's been almost a decade since we've had all seven board members. That's what makes this so urgent. Governor Bloom Raskin, Dr. Cook, and Dr. Jefferson are the proven leaders we need at this critical moment. These three experienced public servants understand the importance of empowering workers through full employment, and the need to combat inflation so paychecks go farther." On Raskin: "No one is better equipped than Ms. Raskin to protect Americans from risks that could bring down financial markets and institutions and wreck people's savings — from cybersecurity threats to climate financial risk…She understands that we need to think about all the financial risks our economy faces — including the possible economic impact of severe weather and climate change. As we heard from Chair Powell, this is a priority for the Fed." On Cook and Jefferson: "They are highly respected and experienced economists with sterling credentials. They understand how monetary policy can contribute to our economic growth and strengthen our economy for everyone…"
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