A coalition of nearly 70 advocacy organizations is demanding that the Federal Reserve immediately stop using its emergency Covid-19 lending facilities to buy up fossil fuel debt, warning that rescuing the faltering oil and gas industry is both a bad investment of public money and disastrous for the climate.
The Federal Reserve Board's "decision to use public funds to subsidize the fossil fuel sector exposes the nation to significant financial losses, both due to sunk costs in failed projects and the fallout from lawsuits over environmental catastrophe," wrote 69 environmental, religious, and economic justice organizations in a letter (pdf) to Fed Chairman Jerome Powell on Thursday.
"The Fed should be doing everything it can to slow and ultimately halt the freight train of economic risk bearing down on us because of the climate crisis. But with actions like these, it's shoveling coal into the boiler."
—David Arkush, Public Citizen
"The board should not be purchasing the debts of firms that accelerate climate change by expanding fossil fuels, create real risks of local environmental catastrophe, and threaten the lands of Indigenous people," the letter reads. "The board's investment in these firms means the public now also shares a part of these risks."
The groups point to a July 17 report by the non-partisan think tank InfluenceMap showing that the Fed has purchased around $748 million in fossil fuel industry bonds since the launch of its sprawling bailout effort in May.
"The Fed has previously warned of the financial risks of fossil fuels, as well as the monetary damages associated with environmental catastrophe," Collin Rees, senior campaigner at Oil Change International, said in a statement. "But the Fed is now investing public dollars in the debt of the same companies it warned others about."
"Instead of intensifying risks to financial stability by supporting the fossil fuel sector," said Rees, "the Fed needs to reduce systemic risk during this health and economic crisis and stop boosting the industry driving climate devastation."
Today we joined 69 groups in telling the Fed that bailing out fossil fuels is NOT the economic recovery we need. The Fed must stop using public money to purchase debt from firms exacerbating climate crisis & help #PeopleNotPolluters. More here: https://t.co/H1v1Fq8rhX pic.twitter.com/raqpVkz7Jv
— Sierra Club (@SierraClub) July 30, 2020
In a New York Times op-ed in May, former Fed board member Sarah Bloom Raskin noted that fossil fuel companies "now hold $744 billion in bonds and debt, much of it below investment grade or close to it."
"Almost 83 percent of the industry's debt is now eligible for cheap refinancing by the Fed," Raskin wrote. "For taxpayers, shouldering these liabilities is a bad deal. Buying this bad debt is not likely to support the creation of jobs or even ensure that existing jobs survive."
David Arkush, climate program director at Public Citizen, echoed Raskin in a statement Thursday, warning that "through these debt purchases, the Fed is exposing the public to financial losses through credit risk, market risk, and operational risk due to exacerbation of the climate crisis."
"The Fed should be doing everything it can to slow and ultimately halt the freight train of economic risk bearing down on us because of the climate crisis," said Arkush. "But with actions like these, it's shoveling coal into the boiler."