As politics engulfs Powell, Federal Reserve rolls back oversight of reputational risks
WASHINGTON — The Federal Reserve on Monday moved to stop examining potential reputational risk as part of its financial institution oversight. The action comes after the first meeting of the Financial Stability Oversight Council under the Trump administration earlier this year, where Treasury Secretary Scott Bessent urged financial regulators to end evaluation of reputational risk and follows the same move by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. In response, Elyse Schupak, policy advocate with Public Citizen, issued the following statement:
“The Federal Reserve’s removal of reputational risks as a component of bank supervision is a capitulation to the political priorities of the Trump administration and congressional Republicans who would prefer to ignore financial risks rather than mitigate them. The Federal Reserve’s role is to address all risks in the financial system, even if they arise from politically favored industries or conflict with the President’s rhetoric.
“This move is driven by politics, not the concerns of consumers or the public interest. It seeks to entrench certain companies and industries, such as fossil fuels and cryptocurrency, even if doing so creates undue financial, reputational, or legal risks for banks. Ending the consideration of reputational risks is a high priority for cryptocurrency executives and venture capitalists, while doing nothing to mitigate risk in the financial system for Americans. A bank’s reputation is consequential to its financial performance and stability, as banks themselves and policymakers from both parties have acknowledged. There is no reason beyond politics to remove this critical component of bank supervision.”
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