Sen. Jon Tester, a key Democrat on the Senate Banking Committee, said he’s taking a closer look at Sarah Bloom Raskin’s involvement in a financial technology company that gained direct access to the Federal Reserve’s payment system as he weighs whether to support her nomination for the Fed board.

Republicans say Raskin used her influence as a former government official to secure a Fed master account for the Colorado-chartered Reserve Trust, the fintech company where she was a board member from 2017 to 2019. Raskin said she didn’t do anything improper.

“Initially I was told there was no there, there, but then my staff said there possibly could be, so I’ve got to download on that,” Tester, D-Mont., said in an interview. “If she was telling people what to do from a Fed standpoint, that’s not good.” 

Senate Banking’s even party split means a Democratic defection could sink Raskin’s nomination to be the Fed’s vice chair for supervision. The committee is scheduled to vote on the nomination Tuesday. Even if the panel advances her to the floor, Sen. Ben Ray Luján’s absence due to a stroke leaves the party with only 49 senators until the New Mexico Democrat’s return. 

Republicans, who already opposed Raskin’s nomination because of her view that climate change poses financial risk, have seized on the fintech episode to paint her as emblematic of the “revolving door” connecting Washington watchdogs and the industries they oversee. Democrats have criticized the practice. 

“If Ms. Raskin had been lobbying Congress on behalf of Reserve Trust she would have had to disclose that fact publicly. But in the Fed’s upside-down world, a former Fed Governor can lobby the Fed on behalf of a particular business, concerning an issue that will financially benefit her and the business, and the public has no right to know,” Sen. Patrick J. Toomey, R-Pa., said Friday in a letter to Fed Chairman Jay Powell.

An Obama administration executive order barred officials from contacting former agencies or departments to lobby on someone else’s behalf for at least two years after their departures. Raskin left the Fed board in 2014, and joined Reserve Trust’s board in 2017. She had a three-year stint at the Treasury Department in the interim.

Toomey, Senate Banking’s ranking Republican, said Reserve Trust is the only state-chartered fintech company to have a Fed master account. The Fed does not disclose which companies have master accounts, though the banks themselves can share that information if they wish. 

Special treatment of a company connected to a former Fed board member undermines trust in the Fed’s “fairness, transparency, and consistency,”  Toomey said in the letter. 

Raskin, a Fed board member from 2010 to 2014 and then second-in-command at the Treasury Department, joined Reserve Trust’s board after leaving Treasury in 2017. While she was on the company’s board, the Kansas City Fed denied and then later approved Reserve Trust’s application for a master account. 

The accounts grant banks access to the Fed’s payment system, allowing them to execute transactions in central bank money. In the case of Reserve Trust, a Fed master account allows the company to move money directly on the Fed’s ledger without going through a partner bank, like other fintechs must.

Raskin left the board in 2019 and in 2020 sold almost 200,000 Reserve Trust shares for about $1.5 million, according to financial disclosures filed by her husband, Rep. Jamie Raskin, D-Md., in 2021. In response to written questions from Toomey, Raskin said she received the shares when she joined the board. They had no market value at that time, she said. 

Sarah Bloom Raskin and Rep. Raskin are among the most prominent progressive couples in Washington. She is not only an experienced government official, but has since been outspoken in using financial regulators to address climate change. Rep. Raskin was a member of the House impeachment team in January 2021.

Rep. Raskin first disclosed ownership of the shares in a 2021 filing covering the previous year and disclosed their sale at the same time, about nine months after the transaction took place. Lawmakers are required to disclose ownership annually and transactions within 30 to 45 days, though late filings, omissions and corrections are frequent. More than 50 members of Congress ran afoul of the disclosure law in 2021, according to Business Insider. 

‘Nothing routine’

Led by Toomey and fellow Senate Banking member Sen. Cynthia Lummis, R-Wyo., Republicans have seized on the issue. Toomey asked Raskin, Powell and the Kansas City Fed in writing for answers about her involvement in Reserve Trust’s application and whether she communicated with regulators. 

The Kansas City Fed on Monday said the regulator “did not deviate from its review process” in evaluating Reserve Trust’s application, and that communication with an applicant’s management, including board members, is “routine.” 

After first denying the application, the regulator granted the master account because Reserve Trust changed its business model, the Kansas City Fed said in a statement. 

Toomey on Friday in a follow-up letter said the response was inadequate and demanded the regulator turn over a list of contacts it had with Raskin, notes from those meetings and documents detailing why the reserve bank reversed its decision on Reserve Trust’s master account application. 

“There is nothing routine about a former Fed Governor, like Ms. Raskin, calling the president of a regional Fed bank about such a decision,” Toomey said in his letter to Powell. 

Raskin also denied any improper behavior at her confirmation hearing before the Banking Committee this month, in response to questions from Lummis. Lummis told CQ Roll Call she’s more concerned about preferential treatment for one fintech rather than unethical behavior.

“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 that I left I have been very mindful of the rules regarding departure,” Raskin said. 

Republicans have zeroed in on whether Raskin talked to officials at the Kansas City Fed on behalf of Reserve Trust. Toomey said Raskin spoke with Kansas City Fed President Esther L. George. The Kansas City Fed said it would not comment on communication between Raskin and the regulator beyond the statement released Monday.

In response to Toomey’s written questions, Raskin said she did not recall whether she had contact with the Kansas City Fed or Federal Reserve.

“Had I done so, I would have abided by all applicable ethics rules in such communications,” she wrote. 

‘Immensely qualified’

Many Senate Banking Democrats have held firm in their support of Raskin. Even Tester said he would likely support her confirmation, but couldn’t give a final answer without getting back questions submitted for the record and taking a closer look at all the information.

Sen. Elizabeth Warren, D-Mass., said she’s working to shut the revolving door, but plans to vote for Raskin. 

“I am asking nominees across a range of areas to commit not to work for the people that they regulate while they’re in government service. It’s an effort to stop the revolving door cold,” she said in an interview. “That’s what we need to do.”

When asked whether she’s asked Raskin to make that commitment, Warren said she doesn’t talk about private conversations in the press.

Democratic Sens. Mark Warner of Virginia, Chris Van Hollen of Maryland and Catherine Cortez Masto of Nevada said they plan to support Raskin’s confirmation. Sen. Jon Ossoff, D-Ga., who is spearheading an effort to ban stock trading by members of Congress and their families (S 3494), said he was still reviewing materials. 

Senate Banking Chairman Sherrod Brown, D-Ohio, dismissed Republicans’ questions, calling them attempts to smear a qualified candidate. 

“She is immensely qualified. There’s never been a question of her and her husband’s ethics,” Brown said in an interview. “Some of the big energy companies want to bring her down, and some on Wall Street want to bring her down, so it’s no surprise.”