American Enterprise Institute scholar Paul Kupiec thinks it may.
In May President Biden authorized the Financial Stability Oversight Council (FSOC) to look into how the banking system should be regulated in light of risks from climate change. Writing in The Hill, Kupiec says the latest report of the council suggests a plan could be brewing to nationalize the financial system.
He points out that there are two risks at issue—risk of weather-related effects and transition risk, which includes the costs of switching to a carbon-free energy economy.
The first is not backed by evidence, says Kupiec.
“Regulatory concerns about the importance of hypothetical weather-related financial sector losses are misguided. Banks and insurance companies have coped with losses caused by hurricanes, tornadoes, droughts and other extreme weather events for centuries.
However, the other could be used to justify a takeover of the financial sector. He writes:
“The real paydirt for climate change doomsayers is transition risk. Transition risk is the risk that someday in the future, new information will convince government policymakers and consumers that the climate has reached ‘a tipping point’ and that drastic steps must be enacted to reduce greenhouse gas emissions if humanity is to be saved from a global warming catastrophe.”
To underscore his points, Kupiec links to a law review article by Graham S. Steel, the Treasury Department’s assistant secretary for financial institutions. It was published in 2020 when Steel was head of the Corporations and Society Initiative at the Stanford School of Business. Some excerpts from the introduction:
“This Article outlines the various financial risks of climate change. It then analyzes the case for classifying climate change as a systemic risk to the stability of the financial system. . . .
“As a result of the above examination, this Article then lays out a framework for macroprudential regulation to curtail the financial risks caused by climate change. . . . It further identifies legal authorities available to U.S. financial regulators that provide a basis of issuing specific macroprudential regulations that could address the risks from, and role played by, large financial institutions’ financing of the industries and activities that drive climate change.”
Kupiec concludes, “The real goal is to control the allocation of capital in the financial system using the regulatory powers of FSOC members,” and lists a variety of ways FSOC could do that.