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Are Policymakers Readying Climate Change As An Excuse For Policy Decisions?


Image via Axios

Climate change is one of the most hotly-contested issues in the world today. It seems that almost everyone has an opinion on it - whether they believe in it, don't believe in it or simply don't care about it. While discussing the merits of climate change is beyond the scope of Market Crumbs, it appears the topic is increasingly on policymakers' minds.


The Federal Reserve and U.S. politicians have increasingly spoke about climate change recently and some of their statements seem outright ridiculous. A group of Democratic senators recently proposed a bill that would require the Fed to factor climate-change risks into its oversight of large financial firms. The bill would call for the Fed to "stress test" banks for severe-weather events.


The Fed now believes it is in their purview to protect the financial system from extreme weather, higher temperatures, rising sea levels and other effects from greenhouse gases. Fed Governor Lael Brainard recently said "It will be important for the Federal Reserve to take into account the effects of climate change and associated policies in setting monetary policy to achieve our objectives of maximum employment and price stability."


"Climate change is an issue we can’t afford to ignore," said San Francisco Fed President Mary Daly, who to our knowledge is not a scientist. She added "This is not a hypothetical risk of the future...the risks are here, we have to deal with them."


Surprisingly, Fed Chair Jerome Powell appears to be an outlier in this view as he said "We are not in a place where I think we would conduct monetary policy in order to deal with climate change type issues." He did admit, though, that it's on their radar, saying "But there’s a lot of forward-thinking analysis going on."


It's not just the Fed defaulting to climate change as an increasing risk to the economy. The Organization for Economic Cooperation and Development (OECD) released its quarterly report yesterday, saying for the first time that climate change is one of the biggest threats to world growth.


According to the OECD, "The number of extreme weather events is on the rise and insufficient policy action could increase their frequency." The OECD believes this will hurt investment, saying "The lack of policy direction to address climate change issues weighs down investment."


Even the Intergovernmental Panel on Climate Change believes "Climate change is a threat to the stability of the financial system and falls squarely within the jurisdiction of financial regulators." They estimate if temperatures rise to 4 degrees Celsius above preindustrial levels over the next 80 years that global economic losses could reach $23 trillion per year.


A conspiracy theorist would say there seems to be a growing, coordinated effort by policymakers to lay the groundwork for using climate change as an excuse to handle scenarios such as future economic downturns or stock market turmoil. Policymakers such as the Fed appear to be preparing to use climate change as an excuse to introduce new policies and potentially continue the same ones, such as QE and low interest rates, that have led to record inequality.


Leftover Crumbs

  • A sad ending for WeWork. As expected, WeWork announced it will lay off 2,400 employees to "create a more efficient organization." The job cuts represent 19% of WeWork’s total workforce. As we previously wrote, employees may be inclined to grab pitchforks as Adam Neumann, the co-founder and former CEO, walked away with $1.7 billion. His payout equates to about $700,000 per employee that was laid off. This story may not be over, though, as WeWork faces multiple investigations and a lawsuit from former employees over the botched IPO.

  • Going commission is started a domino effect. Charles Schwab is reportedly in discussions to buy TD Ameritrade in a deal that could be worth $25 billion. Consolidation in the sector was expected as brokerages all rushed to eliminate commissions. Schwab founder Charles Schwab foreshadowed this just last month, saying consolidation in the sector was a "logical conclusion." A deal would give the two companies, which are the two-largest publicly traded brokerages, a combined $5 trillion in assets under management. Walter Bettinger, CEO of Schwab, would reportedly run the combined company. 

  • You have to figure an IPO is in the cards. White Claw, the wildly popular alcoholic seltzer drink that even had a shortage earlier this year, will reportedly surpass $1.5 billion in sales this year. The company's senior vice president of marketing believes the total market will see sales between $2 billion and $2.5 billion this year, with White Claw having a 60% market share. With consumers' drink tastes rapidly changing, it may be only a matter of time before White Claw owner Mark Anthony Brands, which is privately held, gets acquired or looks to go public. 

  • Things could start getting testy. Xerox is threatening to go hostile on Hewlett Packard after the company rebuffed its offer to acquire the company. Xerox has threatened to go hostile if HP doesn't agree to a "friendly" discussion before this upcoming Monday, November 25. Xerox wrote a letter to HP saying "Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders." Xerox even dragged Goldman Sachs into the discussion, saying "We are confused by this reasoning in that your own financial adviser, Goldman Sachs & Co, set a $14 price target with a 'sell' rating for HP’s stock after you announced your restructuring plan."

  • Ask and you shall receive. Just yesterday, Market Crumbs summarized TikTok and how U.S. Senators Charles Schumer and Tom Cotton asked the acting director of national intelligence if the popular video sharing app TikTok could pose a "national security risk" to the U.S. Well, they got their wish. Army Secretary Ryan McCarthy said yesterday he ordered a security assessment of TikTok. TikTok did not immediately respond to a request for comment on the assessment.