On Tuesday, the Colorado Division of Banking objected at Federal Reserve Bank of Kansas City’s explanation of how it classified fintech company Reserve Trust in its bank classification.

This dispute is another headacheFor President Joe Biden Fed nominee Sarah Bloom Raskin, and Democrats hoping she is confirmed to be one the most influential bank regulators worldwide.

CNBC was informed by Colorado’s agency that the Kansas City Fed had misrepresented its role in Reserve Trust’s 2017 quest to acquire a master account at the central bank.

In May 2017, Raskin, who had been the Treasury Department deputy secretary and was working to reformulate its application for Fed master accounts, joined Reserve Trust’s Board. 2018 was the year that Reserve Trust approved Raskin for a master accounts. Reserve Trust was closed by Raskin in 2019.

Colorado’s regulator disagreed with a section of the Kansas City Fed statement from February 7. It stated that Reserve Trust had “changed their business model” after it failed to request access to a master bank account. The Colorado Division of Banking then interpreted Colorado’s law so that RTC was a depository institution.

Colorado’s banking regulator retorted when asked about the characterization, and whether it allowed fintech companies to be qualified as banks by reinterpreting state law.

Rebecca Laurie, an official of the Colorado Division of Banking stated in an email that “we consider the statement by the division reinterpreted’ state legislation as a misrepresentation of the practice.” The analysis of the laws remains consistent. However, the factual information provided by an entity can alter our analyses.

She added that “Further the Division of Banking does not have the authority or the ability to modify, reinterpret, change or revise any law, without participating in the rulemaking process.”

Republicans claim Raskin’s communication with Kansas City Fed president Esther George and the Kansas City Fed secretary, Raskin, is a clear example of the “revolving doors” between corporate and government interest. Raskin served on the Fed Board of Governors between 2010 and 2014.

Senate Republicans were concerned by Raskin’s purported attempts to use her previous government connections to influence the Kansas City Fed to grant Reserve Trust a master bank. staged a boycottThe vote of the Banking Committee to recommend her to the wider chamber.

Pennsylvania Republican Senator Pat Toomey said that Raskin was the target of the move and that it is not a problem for the GOP to vote on other nominations by incumbent Chair Jerome Powell and would-be Vice Chairman Lael Brainard as well as Lisa Cook and Philip Jefferson.

Amanda Thompson was a Toomey representative and said that the comments of the Division support the GOP’s concerns about Raskin’s candidacy.

The Kansas City Fed claimed that there were two reasons why it reversed the decision to deny Reserve Trust access the Fed’s payments system. The Colorado Division of Banking had reinterpreted state law. It’s deeply disturbing to learn now — from the Colorado Division of Banking itself — that this claim is false,” Thompson wrote. “This could explain why Kansas City Fed refuses to give information requested about Ms. Raskin’s lobbying for Kansas City Fed Bank president Esther George, on behalf Reserve Trust.”

She stated that the “more we know, the more we have questions.” This is why Banking Republicans had to reject today’s vote. The Committee shouldn’t vote on Ms. Raskin until these questions are fully addressed. Raskin.”

Republicans believe that Democrats would be able to move forward with four other nominations if Raskin is held back. 

Senator Sherrod Brown (D-Ohio), was forced to resign as Chairman of the Banking Committee due to the Republican boycott. to delay the formal vote on RaskinPowell and also four other Fed nominees.

“Today, Ranking Member Toomey chose to abdicate his duty to the American people and put our economic recovery at risk, instead of doing his job and showing up to vote on Ms. Bloom Raskin, Dr. Cook, Dr. Jefferson, Gov. Brainard, and Chair Powell’s nominations,” Brown said in a statement earlier Tuesday.

Brown spokesmen declined to comment.

Although the beef of the division may not be significant, as Reserve Trust was ultimately granted depository status by the regulator, it still undermines the power and credibility of the document Democrats used over a week for Raskin’s ethics record.

Jen Psaki (White House Press Secretary) alluded earlier Tuesday to Kansas City Fed’s statement while supporting Raskin’s candidacy.

“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,” Psaki said. “Even after she’s made extensive disclosures to the Banking Committee, Senator Toomey has continued to promote false allegations that have already been shot down by ethics experts, the Kansas City Fed, the founder of Reserve Trust, Sarah Bloom Raskin herself, and more.”

This objection could also be focused on the Kansas City Fed statement of February 7, in which the Kansas City Fed claims Reserve Trust modified its business model prior to Colorado registering it as a bank.

CNBC reached out to the Kansas City Fed and Reserve Trust for no comment. CNBC reached out also to the White House.