On Monday, the Biden administration nominated Graham Steele to serve as Assistant Secretary for Financial Institutions in the Treasury Department. This is a legitimately big deal, and as I said at the time, Steele may be the single best possible choice for the job. But when he gets there, he’ll have to contend with a climate-skeptical insurance lobbyist hired by former President Trump for one of the most important positions in global economic policy.
What is the Assistant Secretary for Financial Institutions? It’s the Treasury Secretary’s aide in charge of handling her duties as head of the Financial Stability Oversight Council (FSOC), a confab of all the major financial regulators in the federal government. FSOC, which was created by the 2010 Dodd-Frank Act, designates which private financial companies are too big, complex, and interlinked with the rest of the U.S. economy to be allowed to suddenly go bankrupt, and then provides the necessary regulation and oversight those firms require. They are called “systemically important financial institutions” (SIFIs), and every major player in the financial world fears being named as one.
There are few people on earth who understand the power of FSOC and SIFI designation better than Steele who, as a Senate aide, helped draft and pass the Dodd-Frank Act itself. A large amount of his scholarship since then has been about how FSOC is under-utilizing its powers, and how those powers can be applied to some of the most pressing issues of our time, especially climate change.
Several of the ten FSOC voting members are still acting heads of agencies, and some are serving multi-year terms which began before Biden’s Presidency. But there’s still one Trump-appointed voting member whom Biden could fire tomorrow — and should. The only voting member of FSOC who doesn’t also lead a federal agency is the “independent member with insurance expertise.” Since insurance is regulated exclusively at the state level, there isn’t an obvious federal appointee who can speak to how FSOC’s activity will or should impact insurance, so someone outside of the federal government is brought in.
This can mean that the insurance representative is sometimes the most attentive of FSOC’s permanent voting members, since they don’t have a whole other agency to suck up their time. For better or worse, the other voting members can end up relying heavily on their staffers and aides who focus on FSOC work, but the insurance representative might have the capacity to handle more of their FSOC duties personally.
Donald Trump, as one might expect, took the ambiguity about the role’s qualifications and ran with it. On March 29, 2018, he nominated Thomas Workman for the role. Workman came with exactly zero experience as an insurance regulator, but plenty of experience from the opposite side of the courtroom: for 17 years, he’d been the President and CEO of the life insurance industry’s main lobbying group in the state of New York, the Life Insurance Council of New York (LICONY).
In a May 2019 interview with an industry group, Workman highlighted how his lack of other responsibilities lets him double down on attentiveness to FSOC. “Each of those folks [the other voting members] has their agency leadership responsibilities. They each have a deputy assigned to support their work on the Council. The deputies meet as a committee, or as a group, every other week. […] I attend the deputies’ meetings. I am not a member, but I go to observe because there is considerable policy discussion,” Workman said.
It’s a good thing Workman has taken it upon himself to “observe” since the interview also elucidated his seeming lack of clear views on many key issues before the Council. When asked if he thought removing SIFI designation from all insurance companies was a good decision, Workman replied “I would say that — I’m not sure.” When asked about FSOC switching to an “activities-based approach” to regulation (a stealth deregulatory move in which the Council doesn’t actually look at the size and complexity of specific companies), Workman seemed bewildered that so many economists had so many different opinions on the subject. He noted that he’d read a third (can you believe it!) 18-page article on the subject recently. “In fact, the only way that I could fully appreciate it was to lift key sentences out of it, and put them in a separate list of key points for review. […] I don’t think there is yet a complete understanding of what it takes to actually apply an activity-based approach analysis. I don’t think it’s been settled.”
I don’t begrudge Workman for any difficulty reading these dense economics papers, but it is quite literally his job to familiarize himself with these issues and form an actionable opinion.
Far worse than having trouble with academic minutiae is that Workman doesn’t seem convinced that climate change is a threat. When asked about issues confronting the insurance industry, Workman casually mentioned ”[O]f course, there’s climate change, and catastrophic events. I know there are many folks who are convinced that it’s the end of the world and we’ve got only 12 years left, but then there are others who say it’s not an issue, but it certainly is a debate.”
It certainly is not a debate. Workman sits on a board which could do tremendous good for the fight against climate change, and here he is uncertain if it is even worth worrying about! Steele has led the charge in seeing FSOC through a climate lens. Turns out, one of his challenges may come from an FSOC voting member — one who went on to say a sentence too absurd to merit commentary: “The American people can feel confident that those whom President Trump has appointed to serve on FSOC—all of the current voting members—are extraordinarily capable and working very, very hard to serve in the highest traditions of high-level public service.”
The only question that remains is why Workman hasn’t been fired yet. Nothing prevents Biden from doing so — while Workman was appointed to a six-year term, he serves at the pleasure of the President. Biden has also recently shown his willingness to clean house of Trump appointees even when it could anger implacable Republicans. He correctly fired Trump Social Security Administrator Andrew Saul for sabotaging COVID-19 relief payments for older recipients and defying SSA’s career staff. The bar is even lower for Workman — why is he still around, and on such a key Council?
The most likely answer is that the Biden team just hasn’t prioritized dealing with him. But as fires ravage the West and Glasgow draws ever closer and more prescient, the simple action of firing Workman ought to rocket up the list of problems.
PHOTO: “Thomas E. Workman official photo” by United States Department of the Treasury is public domain.