Adding to Planetary Alarm Bells, Top US Finance Official Warns Climate Crisis a Recipe for Global Economic Collapse

By Jessica Corbett, a staff writer for Common Dreams. Follow her on Twitter: @corbett_jessica. Originally published at Common Dreams

Demanding action from industries and government, a top federal regulator warned this week that the human-caused climate emergency poses a threat to the economy which rivals the subprime mortgage meltdown that led to the 2008 financial crisis.

“As most of the world’s markets and market regulators are taking steps towards assessing and mitigating the current and potential threats of climate change, we in the U.S. must also demand action from all segments of the public and private sectors, including this agency.”
—Rostin Behnam, CFTC

Rostin Behnam is part of the five-member Commodities Futures Trading Commission, an independent federal agency. As the sponsor of CFTC’s Market Risk Advisory Committee, he convened a public meeting Wednesday to discuss climate-related financial threats and the formation of a panel to produce a report which reviews those threats and offers solutions.

“As most of the world’s markets and market regulators are taking steps towards assessing and mitigating the current and potential threats of climate change, we in the U.S. must also demand action from all segments of the public and private sectors, including this agency,” Behnam said in his opening statement Wednesday.

“The impacts of climate change affect every aspect of the American economy—from production agriculture to commercial manufacturing and the financing of every step in each process,” he continued. “Any solutions seeking to address and mitigate climate risk must be equally focused on ensuring the safety and continued prosperity of our urban cores and rural communities. Failing to address financial market risks associated with climate change will impede economic growth, and most likely hit rural communities the hardest.”

Behnam pointed to extreme weather that scientists say is exacerbated by the climate crisis, from the heightened threat of wildfires in Northern California to catastrophic floods following heavy rainfall in the Midwest this spring, which could have a long-term negative impact on both farmers and food prices. “I believe it is time to examine the relationship of these terrible, and sadly, more frequent events, to financial market risk and more generally, market stability,” he said.

The commissioner’s comments at the meeting echoed his interview with the New York Times from earlier this week.

“If climate change causes more volatile frequent and extreme weather events, you’re going to have a scenario where these large providers of financial products—mortgages, home insurance, pensions—cannot shift risk away from their portfolios,” Behnam told the Times. “It’s abundantly clear that climate change poses financial risk to the stability of the financial system.”

Behnam was appointed by President Donald Trump to a CFTC seat that legally must be filled by a Democrat, the newspaper noted—and the forthcoming report he initiated will likely put his agency at odds with an administration that caters to the polluting industries driving the climate crisis.

Because the report, expected late this year or early next, would be a product of the federal government, it would most likely put Mr. Behnam in direct conflict with the policies of the Trump administration. The report, which Mr. Behnam said he expected would focus in particular on potential harm to the nation’s agriculture sector, is likely to emerge at a moment when Mr. Trump will be making the case to farm states, which have already been hurt by his crop tariffs, to re-elect him in 2020.

Though Behnam efforts and the panel’s recommendations may not be welcomed by the Trump administration, Democratic Sens. Brian Schatz (Hawaii) and Sherrod Brown (Ohio)—both members of the Senate Banking Committee—thanked the commissioner for his leadership on climate in a letter Wednesday.

“Climate change impacts are likely to exacerbate market volatility, erode investor confidence, and increase the risk of financial crashes,” the senators wrote. “We strongly support your decision to assess climate-related risks to our financial markets and the impact on the stability of the global financial system. We encourage you to reach out to other financial regulatory agencies to urge them to follow your lead. We also encourage you to engage with the group of 36 international central banks and bank supervisors working together to develop analytic tools to assess climate-related financial risks.”

“All of our financial regulatory agencies and Congress must work together to build resilience to this looming threat in our economy and financial markets,” they concluded. “We look forward to working with you on this going forward.”

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  1. Christopher Herbert

    I agree with the threat assessment, but I do not agree that the existing financial markets should design any particular programs. That should be the job of Congress and the federal government using fiscal policies that will fund programs to fight climate change. Most of the problems we’ve been having the past four decades stem from the emergence of a dominant financial industry that has reduced our ability to make productive use of our resources. This ‘financialization’ of our economy has been a disaster. The FIRE sector has insinuated itself into every nook and cranny of our economy, creating a huge overhead that has nothing but negative consequences. He who has the means of producing money controls our future. Right now it’s the FIRE sector. The last crew we need to listen too.

    1. Carla

      I agree with every word you said.

      Sadly, just because it is the JOB of Congress and the federal government to protect the American people from the predation of the FIRE sector doesn’t mean they will do it. They are just another arm of it, and actually cheerleaders for it, and so haven’t been doing their real jobs for decades.

      1. Susan the other`

        Agree as well. Congress has been so remiss for so long they seem to think it’s how things should be. They don’t know how to get the fiscal work done which is so desperately needed to mitigate climate change, so instead they pop off a letter (one bank servant to another) about making sure the Commodities Futures Trading Commission remains a viable agency to protect banking so everything can continue to run smoothly. It’s as good as saying – please make sure the banks can continue to help us out here. Trying to make the absurd case that any climate risk that somehow translates into financial risk (risk to private banking for profit) is a risk to the system and therefore banking as usual must not be “impeded”. Of course the big market here they would be referring to is the derivatives market, no? Which hasn’t been controlled because the financial system runs on speculation at the commodities level. That ability to speculate and make book on those bets keeps banking in the black and the rest of us in the red. And when they really screw up we bail them out. It was both Goldman and JPM that began buying up commodities after the 2008 crash. So for them this is all just monopoly. We need MMT now. Somebody tell Sherrod Brown please.

    2. Synoia

      I believe proposals from any sector are helpful. The more proposals there are, the better the chance of integrating them and having the USG produce a program.

      It is about generating consensus, and the desire to act.

      1. Susan the other`

        Yes we do need all hands on deck. But consider the spin-offs. Just like gold, the dollar is sacrosanct for no particular sane reason and to allow an industry, finance, to believe it understands the interaction between money and the “economy” at this point in time is foolish. Everything we do with financiers who are also private actors must be done with the caveat that the first things to be valued are the environment and human civilization. If they all run away in a big huff and buy gold it is the exact opposite. They value some ethereal obsession – that’s all.

    3. eg

      FIRE are the modern day equivalent of the oligarchic rural userers that plagued Bronze Age civilizations.

  2. none

    Don’t these financial types understand the huge threat to their own wallets? I thought that was the one thing they did understand.

      1. Wukchumni

        If the all cats & no cattle ranch with a bountiful river was in India, there’d be 500 people within the confines of our property.

        Hard to place a value on water, until you don’t have any, and then will pay any price.

  3. Ignacio

    Will this trigger a debate in the GOP, and more importantly, in the government?. It is essential to get on board everybody including guys like the Koch brothers. An offer that they cannot refuse should be devised.

      1. Ignacio

        That is certainly one strategy. Or at least, tell them to do so if they don’t stop lobbying for fossil fuels.

  4. Jon Cloke

    You gotta love those ‘top federal officials’… in a set of planetary changes that have the potential to lead to another Great Dying (251 million years ago), they’re worrying about a global economic collapse.

    I suppose a large part of the global population dying would precipitate a global economic crisis, yes, but it certainly seems an odd way of looking at priorities….

    1. drumlin woodchuckles

      Perhaps these ‘top federal officials’ are privately worried about another Great Dying. But they know that their target audience does not care about that. And perhaps they are trying to raise the kind of concern in the kind of language that their target audience will respond to.

      They may well know their audience.

  5. Rodger Malcolm Mitchell

    What climate change? Haven’t they heard it’s all a Chinese hoax? Who are you going to believe — a bunch of stupid scientists or the stable genius in the White House and his toadies?

    1. Synoia

      The stable genius has a property somewhere in Florida which could become a victim of rogue waves, but not climate change, because climate change is a conspiracy by one or more of the Mexican-Chinese-Russian-Deomcrat cabals.

      Perhaps he’ll have to build a wall to keep them out. /s

      1. drumlin woodchuckles

        Perhaps by that time the Florida State Government will be majority Bitter Berner. And the Bitter Berners will deny TrumpCo Incorporated permission to build a seawall.

        ( One wishes Ireland would deny TrumpCo permission to build the seawall that TrumpCo wants to build around their golf course resort in Ireland).

  6. Math is Your Friend

    I’m not sure whether this is a delusion of control, a cynical ploy to get the government to guarantee the profitability of their business model, or both.

  7. drumlin woodchuckles

    If such a collapse comes soon enough, gets deep enough and lasts long enough . . . and never ever recovers . . . . the Carbon Skydumping problem may solve itself.

    Are the readers here ( or the bloggers here for that matter) ready to survive and outlive that kind of collapse?

  8. jefemt

    FIRE— watch property casualty deny all weather -related claims. “They” are under assault!
    Personal— hail/ tornadic microcell roof damage in eatern Montana. Denied.
    Tree falling on roof/ car from microburst in SW Montana. Denied.
    6′ fence blown down, SW Montana. Denied.

    Acts of God. My son (he outta go to Law school) quipped, What if you are an atheist?

    Lots of implied ‘otherism’— no compassion or collective self-saving action as long as one is above and immune..

  9. Sound of the Suburbs

    What does the winner in an open globalised world look like?
    China was the big winner from an open, globalised world.

    Maximising profit is all about reducing costs.

    China had coal fired power stations to provide cheap energy.
    China had a low cost of living so employers could pay low wages.
    China had low taxes and a minimal welfare state.
    China also had lax regulations reducing environmental and health and safety costs.

    China had all the advantages in an open, globalised world.

    It did have, but now China has become too expensive and developed Eastern economies are off-shoring to places like Vietnam, Bangladesh and the Philippines.

    An open, globalised world is a race to the bottom on costs and the West is already paying the price with massive off-shoring.

    Now we can see why globalisation has been an environmental disaster.
    It was always going to happen when maximising profit is all about reducing costs.

    Why do US firms off-shore to Mexico?
    See list above.

    US companies prefer Mexico with its cheap labour, lax health and safety standards, and lack of environmental regulations. They can expose workers to hazardous chemicals and just pump toxic waste straight out into the environment, without incurring the costs associated in dealing with them in an environmentally friendly way.

    Female workers are best as they are less likely to stick up for themselves and are easier to exploit.
    Every avenue must be explored to reduce costs.

    The lower the costs, the higher the profit.

    1. Sound of the Suburbs

      China had all the advantages in an open, globalised world.

      China became a superpower and the US went into decline running a massive trade deficit.

      What were the Americans really doing?

      American politicians are controlled by lobbyists.

      The 1% would get better returns from investing their capital in the rapidly growing Asian economies than the mature economies of the West.

      Multi-national corporations could make higher profits in Asia due to the low cost of living that they had to cover in wages.

      (Employees get their money from wages, so the employer pays through wages.)

      American politicians were governed by interests different from those of the US as a nation.

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