NEW YORK (AP) – A fierce battle is waged in Washington over President Biden’s decision to run a typically low profile agency overseeing the banking industry.
Saule Omarova, 55, was nominated as the country’s next currency auditor in September. If confirmed, she would be the first woman and person of color to run the 158-year-old agency. But her nomination has met with fierce opposition from Republicans and the banking industry, with criticism sometimes reflecting the red horror that plagued the United States after World War II.
The Office of the Comptroller of the Currency is one of the few federal agencies that regulate various parts of the financial system. It oversees roughly two-thirds of the country’s banking system. Omarova’s criticism of the banking sector so far has led banks to fear that it will be a tough regulator on Wall Street. They are also suspicious of academic writings suggesting a major overhaul of the way banks operate in the United States
Some Republicans and their allies in the conservative media go further, using their birth in the former Soviet Union to suggest that they are in favor of a state takeover of the banking sector.
Omarova and her supporters say that their critics have wrongly misrepresented their work in academia at best and, at worst, have launched a smear campaign against a long-time financial regulation expert.
“I was a critic of the big banks,” Omarova said in an interview with The Associated Press on Tuesday. “Because I saw the 2008 financial crisis come about, and I don’t want that experience to happen again.”
Omarova will appear before the Senate Banking Committee on Thursday as part of her nomination.
Omarova was born in Kazakhstan as part of the Soviet Union and emigrated to the USA in 1991. She worked primarily as a lawyer and for several years as a law professor at Cornell University. Over the years she has testified several times as an expert on financial regulation. She worked briefly in the administration of President George W. Bush.
Republicans against Omarova say their concerns stem mainly from her earlier writings and public comments. Last year she released a paper calling for a revision of the national banking system that would expand the role of the Federal Reserve by allowing the central bank to hold consumer deposits. Proponents of such a move say that in times of economic downturn, the Fed could expand credit to individual accounts more quickly if necessary. After the Great Recession, banks hoarded deposits and gave little credit to rebuild their balance sheets.
On the face of it, such a proposal could deprive banks of one of their critical sources of funding for lending.
Omarova says the newspaper’s purpose was deliberately ambitious and far-reaching, ignoring the political realities of the time. It was written during the COVID-19 pandemic, she said, when trillions of dollars in government aid went to Americans due to the financial impact of the pandemic. Her proposals require a law of Congress, she said.
“The purpose of this paper was essentially to fuel the ongoing academic debate on how to make our financial system more accessible to all,” she said.
Pennsylvania Senator Pat Toomey, the senior Republican on the Senate Banking Committee, said Omarowa’s previous academic work disqualified her and made her proposals too radical for her to oversee the OCC. But his questioning of Omarova’s professional qualifications has expanded to include the personal. In a letter to Omarova after she was nominated, Toomey asked for a copy of a thesis she had written on Karl Marx “in the Russian original” while studying at Moscow State University.
Omarova told the AP that the work is necessary for all students.
“You write what you should write. This was not the kind of country where you had the freedom to contradict the totalitarian regime, “she said.” To be honest, it’s amazing that 32 years later this newspaper has somehow returned from the land of the dead.
In previous comments, Toomey has said that interest in Omarova’s writings from decades ago has nothing to do with her background.
The banking industry has unusually and publicly criticized Omarowa’s nomination, objecting mainly to her positions on financial regulation.
“Our problems with Dr. Omarova has nothing to do with her impressive personal background, but with her very public support for the end of banking as we know it, “said Rob Nichols, president of the influential American Bankers Association, in a speech last month.
Omarova says the banking industry’s opposition is not surprising.
“I think they are concerned that they have a strong-willed, independent regulator that has been investigating how risks have gotten into the system over the past few years,” she told the AP.
The Office of the Comptroller of the Currency is primarily responsible for overseeing medium to large banks that operate in multiple states. The OCC is often involved when banks are accused of misconduct or of endangering the security and soundness of the financial system. For example, the OCC was heavily involved in the Wells Fargo investigation after it became known that the bank’s employees had created millions of fake savings and checking accounts for customers.
Omarova continues to receive strong support from both the White House and most of the Senate Democrats. With Republicans almost certain to be united in the opposition, their endorsement will come from a handful of moderate Democrats like Jon Tester from Montana, Kyrsten Sinema from Arizona and Joe Manchin from West Virginia. Both Sinema and Tester sit on the banking committee.
Ken Sweet, The Associated Press