KC Fed's claim about fintech firm linked to Biden nominee Raskin disputed by bank regulator.

• On Tuesday, the Colorado Division of Banking opposed the Federal Reserve Bank of Kansas City's explanation of the process used to categorize fintech firm Reserve Trust as a bank.
• Sarah Bloom Raskin, one of President Biden's Fed nominees, is facing another headache as Democrats try to confirm her as a powerful bank regulator, with a dispute over her past work at a financial institution.
• In May 2017, Raskin, a former Fed and Treasury official, joined the company's board to help it revise its application for a Fed master account.
• In 2018, Reserve Trust was granted a master account by the Kansas City Fed, and it is claimed that Raskin lobbied the Fed on behalf of the company.

On Tuesday, the Colorado Division of Banking opposed the Federal Reserve Bank of Kansas City's explanation of the process used to categorize fintech firm Reserve Trust as a bank.

The confirmation of Sarah Bloom Raskin as a powerful bank regulator is causing another headache for President Joe Biden and Democrats.

The Kansas City Fed's statement last week about its role in Reserve Trust's acquisition of a master account at the central bank was "misrepresented" by the Colorado agency, according to CNBC.

In May 2017, Raskin joined Reserve Trust's board, shortly after leaving her position as the Treasury Department's deputy secretary, as the company worked to revise its application for a Fed master account. The firm was eventually approved for a master account in 2018. Raskin departed from Reserve Trust in 2019.

The Colorado regulator disagrees with a portion of the Kansas City Fed's statement from February 7th, which claims that Reserve Trust changed its business model after the first failed request for access to a master account, and as a result, the Colorado Division of Banking reinterpreted the state's law to determine that RTC qualified as a depository institution.

Colorado's banking regulator responded to inquiries about the characterization of that state law and whether its reinterpretation permitted other fintech companies to be classified as banks.

Rebecca Laurie, a representative for the Colorado Division of Banking, stated in an email that the division does not consider the reinterpretation of state law as a misrepresentation of their practice. She explained that the analysis of laws is consistent, but the outcomes can change based on the facts provided by the entity.

She added that neither the Division of Banking nor it has the authority to alter, amend or redefine any law without undergoing the rulemaking process.

The Kansas City Fed remained silent when asked for comment on the Colorado Division's statements.

The "revolving door" between government and corporate interest is exemplified by Raskin's communications with the Kansas City Fed and its president, Esther George, while he was a member of the Fed board of governors from 2010 to 2014.

On Tuesday, Senate Republicans boycotted the Banking Committee's vote to recommend Raskin for a master account at the Kansas City Fed, due to concerns about her alleged use of prior government connections to influence the decision.

Sen. Pat Toomey, a Republican from Pennsylvania, stated that the move to block Raskin's nomination was specific to him and that the GOP has no issue voting on the other pending nominations of incumbent Chair Jerome Powell, would-be Vice Chair Lael Brainard, and Lisa Cook and Philip Jefferson as governors.

Toomey's representative, Amanda Thompson, stated that the division's comments align with the GOP's concerns regarding Raskin's candidacy.

The Kansas City Fed has stated that there were two reasons for reversing its decision to deny Reserve Trust access to the Fed's payment system. One reason was due to a reinterpretation of Colorado's state law by the Colorado Division of Banking. However, it is now deeply concerning to learn that this claim is false, as stated by the Colorado Division of Banking itself. This may explain why the Kansas City Fed has refused to provide requested information about Ms. Raskin's lobbying efforts on behalf of Reserve Trust to Kansas City Fed Bank president Esther George.

The more we learn, the more questions we have, which is why Banking Republicans were right to refuse to move forward with today's vote," she added. "Until these questions have been adequately addressed, the Committee should not proceed with a vote on Ms. Raskin.

Democrats could move forward with the other four nominations if Republicans agree to hold Raskin back for further questioning, according to Republicans.

The delay of the formal vote on Raskin and four other Fed nominees, including incumbent Powell, was caused by the Republican boycott of Banking Committee Chairman Sen. Sherrod Brown, D-Ohio.

Earlier Tuesday, Ranking Member Toomey abandoned his responsibility to the American people and jeopardized our economic recovery by not showing up to vote on the nominations of Ms. Bloom Raskin, Dr. Cook, Dr. Jefferson, Gov. Brainard, and Chair Powell, according to Brown's statement.

Brown’s office declined to comment for this story.

The approval of Reserve Trust's status as a depository institution by the regulator, despite being minor, weakens the effectiveness of a document that Democrats and the White House have been using for over a week to promote Raskin's ethical background.

Jen Psaki, the White House press secretary, defended Raskin's candidacy by referencing the Kansas City Fed's statement from earlier in the day.

Sarah Bloom Raskin is one of the most qualified individuals to ever be nominated to the Federal Reserve and has made the strongest ethics commitments in the history of the Fed, according to Psaki. Despite extensive disclosures to the Banking Committee, Senator Toomey has continued to promote false allegations that have already been debunked by ethics experts, the Kansas City Fed, the founder of Reserve Trust, and Sarah Bloom Raskin herself.

The objection may concentrate on the first half of the Kansas City Fed's statement from Feb. 7, which asserts that Reserve Trust altered its business model prior to Colorado categorizing it as a bank.

CNBC reached out to the White House for comment, but Reserve Trust did not respond.