Lucas Cautions Financial Regulators on Impact of Climate-Related Regulations and Inflationary Concerns on the Economy

May 19, 2021

Washington, DC – Today, Congressman Frank Lucas (OK-03) participated in a House Committee on Financial Services hearing entitled, “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions.” Lucas questioned Acting Comptroller of the Currency (OCC) Michael Hsu about how the OCC’s focus on climate risk could result in regulatory requirements. 

Lucas warned that the financial regulators should not be used to implement the Biden Administration’s environmental policy objectives and cautioned the potential adverse effects on the agriculture and energy sectors.

Lucas also questioned Vice Chairman Quarles on the inflationary concerns in the market and reminded his colleagues of the devastating ramifications of unchecked inflation on businesses and consumers across the country.

Lucas Cautions Financial Regulators on Impact of Climate-Related Regulations and Inflationary Concerns on the Economy

Click here to watch Lucas’ Q&A.



On climate-related risks regulations

Lucas: (Questions as prepared) In her March testimony before this Committee, Secretary Yellen highlighted that climate change is a top priority for the Biden Administration, and that the regulators should be accessing the risks to financial institutions. And as any regulator that testifies before this Committee knows, the Third Congressional District of Oklahoma is a commodity driven economy – centered on agriculture and energy. So, the actions of the Fed, FDIC, and OCC have a real and significant impact on the businesses in my District. Acting Comptroller Hsu, in your testimony you explain that the OCC will act on the issue of climate risk with a sense of urgency. Mr. Hsu, could you describe the ways in which addressing climate risks could manifest in supervisory or regulatory requirements?

Hsu: Different financial institutions will be exposed to climate risk differently. What we want to ensure is that they are appropriately- that they know what their risks are. And so, in some cases there will be a lot and some cases there will be a little- it really depends and some of these are physical risks and some of these are transition risks. What was highlighted earlier, these are real things and we just want to make sure that banks are identifying those and measuring those appropriately– not with a desire or eye to putting their thumbs on the scale for different industries. 

Lucas: But how you identify those risks, how you put your thumb on the scale- all regulators- has a dramatic effect on the cost and availability of capital. We can drive capital decisions in this country away from very successful, ever-more efficient environmentally conducting themselves sectors by how we do this. I’ve watched this before. The goal is not to use financial regulation to create someone’s version of the world- the goal is to access the risk so that the market-economy can incorporate the demand from the public for a cleaner environment and proceed in that direction. Just an observation from someone who is mildly sensitive about the effects of the federal government on his constitutions going back to the 1930s. 

On inflation

Lucas: (Questions as prepared) Some sectors of the U.S. economy are seeing a surge in consumer prices – a result of high demand outpacing supply. This could be temporary, or these price pressures could continue to build. Vice-Chair Quarels, in September of last year, a market survey conducted by the Federal Reserve Bank of New York showed that less than 25 percent of respondents cited inflation as a risk to economic stability. Would you suspect that this market survey, if conducted today, would cite inflation as a greater concern? What is your sense given your extensive industry expertise?

Quarels: I wouldn’t want to speculate on what a poll currently would say but I will say that we do expect to see inflationary pressures over the course of probably the next year, certainly over the coming months. Our best analysis is that those pressures will be temporary- even if significant- but if they turn out not to be we do have the ability to respond them. 


Recent Posts

Feb 21, 2024

Lucas Stands Up for Oklahoma Beef Producers

Washington, DC – Today, Congressman Frank Lucas (OK-03) joined an effort to halt the Biden Administration’s rule allowing for the importation of fresh Paraguayan beef, which has historically been affected by the viral foot-and-mouth disease. The USDA’s most recent inspection of cattle in Paraguay was nearly a decade ago.  Congressman Lucas (OK-03) joined Rep. Ronny Jackson’s (TX-13) joint resolution […]

Feb 20, 2024

Lucas: USDA fails to deliver support to Oklahoma farmers.

Washington, DC – At today’s House Agriculture Committee hearing, Congressman Lucas questioned Secretary of Agriculture Tom Vilsack over the Biden Administration’s failed Emergency Relief Program (ERP). Congressman Lucas noted that producers in Oklahoma were feeling the negative affects of the ERP 2022 program. Secretary Vilsack questioned this claim, prompting Congressman Lucas to defend his constituents. Click here or […]

Feb 6, 2024

Secretary Yellen Dodges Basel Endgame Questioning

Washington, DC – Today, Congressman Lucas followed up with Secretary Yellen on whether Treasury has discussed the impact of the Basel Endgame proposal with the Federal Reserve. When asked a straightforward question on the detrimental impact of the proposal, Secretary Yellen had no answer. February 6, 2024 Lucas: “Are you concerned that the proposal will undermine the […]