Sen. Cynthia Lummis (R-Wyo.) on Thursday challenged Sarah Bloom Raskin, President Biden’s nominee to serve as the Federal Reserve’s vice chair for supervision, over the role she played in helping Reserve Trust, a little-known fintech company, get special access to the Fed’s payments system.

Lummis said Raskin’s receipt of nearly 200,000 shares of stock worth nearly $1.5 million from a company that got special access to the Fed’s payments system “doesn’t smell right.”

The senator and nominee got into tense back-and-forth during Raskin's confirmation hearing before the Senate Banking Committee. Her nomination is expected to come up for a vote on Feb. 15. 

Raskin’s work in the private sector after serving as a governor at the Federal Reserve and as deputy secretary at the Treasury Department is coming under scrutiny from Republicans on the Senate Banking Committee, who are zeroing in on the nominee’s two-year stint at Reserve Trust.

Raskin, who joined the company’s board in May 2017 and left in August 2019, received nearly 200,000 stock in the company, which she sold in 2020 for nearly $1.5 million.

Colorado-based Reserve Trust, founded in 2016, is the only non-bank, state-chartered trust company to have a coveted Fed master account. The company’s request to access the Fed’s payments system was turned down but it later received approval after Raskin joined the board.

“You leave Treasury, you serve on the board of Reserve Trust for two years. Their first application for a master account is denied but after the denial you call the Federal Reserve and Reserve Trust receives a Fed master account, the only state-chartered trust company in the country to get one, and you walk away with $1.5 million,” Lummis said during the exchange with the nominee.

“Something doesn’t smell right with the way this played out,” the senator said, noting that fintech companies in her state have been unable to obtain Fed master accounts.

“My state’s companies, my constituents have been stonewalled, have been slow-walked and have not been able to get approval even though they’ve been working with the Fed for 2 1/2 years,” Lummis fumed. “I don’t the details here because the Fed hasn’t provided us with any documents we’ve asked about Reserve Trust’s master account, but I think this requires additional scrutiny by the committee.”

Access to the Fed’s payments system is a significant advantage for financial institutions because it allows them to earn interest from deposits at the Fed and eases the ability to transfer large sums of money. It’s a major benefit to a company such as Reserve Trust, which touts itself as a “first of its kind payment and custody partner for B2B payment companies and fintechs in the U.S. and abroad.”

The Fed has been leery to grant access to its payments system to non-bank fintech companies, who must then partner with Federal Deposit Insurance Corp.-backed banks to use its services.

“Many non-banks, including Trust companies, have applied and failed to receive a Fed master account,” Lummis noted.

“A Fed master account gives Reserve Trust an enormous advantage over everybody else since it appears they’re the only one who has it. And you’re very familiar with Reserve Trust because you joined their board in 2017, just four months after leaving Treasury,” she added.

Lummis also noted that Reserve Trust’s application for a Fed master account was denied in June 2017 but then approved a year later.

“It’s a mystery to me how dozens of fintech companies have tried unsuccessfully. … How did Reserve Trust get there so quickly?” she asked.

When Lummis asked Raskin if she communicated with the Fed on behalf of Reserve Trust, the nominee didn’t answer directly but asserted that she has always followed ethics rules.

“I’ve had the honor to serve in various public capacities and each time I’ve left, I’ve been very mindful of the rules,” Raskin said.

Lummis cut her off, however.

“It’s my understanding you did call the Kansas City Fed regarding Reserve Trust’s master account application," the senator said.

“So I have significant questions about your involvement in Reserve Trust’s efforts to obtain a master account,” Lummis added, later noting the large number of shares she received from the company.

Lummis also pointed out that Raskin’s shares in Reserve Trust were purchased by QED investors, a venture capital firm where Raskin’s former colleague at Treasury, Amias Gerety, is a partner.

“They purchased your shares for almost $1.5 million. Even in this town that’s a lot of money for being on a company’s board of directors for two years,” Lummis said.

A White House official told The Hill Wednesday that Raskin has been transparent about her private sector compensation in public disclosure filings.

“Throughout her career, Sarah Bloom Raskin has taken her ethical obligations seriously,” the official said. “As part of her nomination, she worked with career ethics officials at the Federal Reserve and the Office of Government Ethics to comply with all ethics requirements.”

--Updated at 12:11 p.m.