February 07, 2022

Toomey Presses Raskin on Work for Obscure Fintech That Obtained Unusual Access to Fed’s Payment System

Confirms Former Fed Governor Raskin Contacted Kansas City Fed on Behalf of Reserve Trust

Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) is asking Sarah Bloom Raskin, President Biden’s nominee for Vice Chair for Supervision of the Board of Governors of the Federal Reserve System (the Fed), for more details on how she helped a small financial technology (fintech) company obtain unusual access to the Fed’s payment system.

For seven years, Ms. Raskin served in the Obama administration, first as a Fed governor and then as the Deputy Secretary of the Treasury. In May 2017, four months after leaving Treasury, Ms. Raskin joined the Board of Directors of the Reserve Trust Company (Reserve Trust), an obscure fintech in Colorado. As Reserve Trust’s website boasts, in 2018, the year after Ms. Raskin joined the board, “Reserve Trust became the first state chartered trust company to obtain a Federal Reserve master account, granting direct access to Federal Reserve clearing, payment, and settlement services.” This came after the Kansas City Fed had originally denied Reserve Trust’s application for a Fed master account in June 2017. In 2020, Ms. Raskin received nearly $1.5 million by selling her shares in Reserve Trust to QED Investors, a firm co-managed by Amias Gerety, who was one of Raskin’s subordinates at Treasury.

In questions for the record, Ranking Member Toomey asked Ms. Raskin to turn over documents and to answer a series of detailed questions regarding her work for Reserve Trust, including what actions she took to help Reserve Trust obtain a Fed master account and any communications between Ms. Raskin and the Kansas City Fed or the Fed regarding Reserve Trust’s application.

“Reserve Trust appears to be the only nonbank fintech company with a Fed master account despite other banks and non-banks with non-traditional charters having applied for Fed master accounts,” Ranking Member Toomey wrote. “It remains puzzling how Reserve Trust obtained this account when other institutions have been denied access, leading one bank to file a lawsuit against the Federal Reserve Bank of New York over the issue. Yet, Reserve Trust’s application was quietly granted during the pendency of that litigation.”

As Senator Toomey notes in his questions to Ms. Raskin, on a call with Banking Committee staff on January 28th, Ms. Raskin said she did not know why Reserve Trust wanted a master account.

“This statement is puzzling given how much Reserve Trust and its investors tout the value of the company’s Fed master account and that you served on the company’s board when its master account application was denied but then later approved,” Senator Toomey wrote to Ms. Raskin.

During the same January 28th call with Banking Committee staff, Ms. Raskin tried to avoid answering whether she communicated with the Kansas City Fed or the Fed about Reserve Trust and ultimately said that she did not remember if she had.

Ms. Raskin also refused to answer whether she contacted the Fed or Kansas City Fed on behalf of Reserve Trust when asked by Senator Cynthia Lummis (R-Wyo.) three separate times during her nomination hearing before the Senate Banking Committee on February 3rd.

“Like Senator Lummis, I have learned that you did, in fact, call the Kansas City Fed in August 2017, which was after Reserve Trust’s master account application had been denied in June 2017. We only discovered your call to the Kansas City Fed on the evening of February 2, 2022, which was the night before your nomination hearing,” Ranking Member Toomey wrote.

Last week, Ranking Member Toomey sent a letter to the Kansas City Fed requesting information pertaining to its approval of Reserve Trust’s application for a Fed master account.

To read Senator Toomey’s questions to Ms. Raskin, click here.

To watch Senator Lummis’ questioning of Ms. Raskin during last week’s hearing, click here.