NEW YORK – A fierce battle is being waged in Washington over President Biden's choice to lead a typically low-profile agency that oversees the banking industry.
Saule Omarova, 55, was nominated in September to be the nation’s next comptroller of the currency. If confirmed, she would be the first woman and person of color to run the 158-year-old agency. But her nomination has drawn intense opposition from Republicans and the banking industry, with Democrats saying some of the criticism echoes the Red Scare that plagued the U.S. after World War II.
The Office of the Comptroller of the Currency is one of a handful of federal agencies that regulate different parts of the financial system. It oversees about two-thirds of the nation's banking system. Omarova's previous criticism of the banking industry makes the banks fearful she will be a tough regulator for Wall Street. They also are wary because of academic writings in which she has proposed substantial overhauls to how banks operate in the U.S.
Some Republicans and their allies in conservative media have gone further, using her birth in the former Soviet Union to suggest she favors a government takeover of the banking industry.
Omarova and her supporters say that, at best, her critics have unfairly mischaracterized her work in academia and, at worst, are conducting a smear campaign against a long-respected expert in financial regulation.
“I have been a critic of the big banks," Omarova said Tuesday in an interview with The Associated Press. "Because I have seen how the 2008 financial crisis came to be and I don’t want that experience to be repeated.”
Omarova will appear in front of the Senate Banking Committee on Thursday as part of her nomination.
Omarova was born in Kazakhstan when it was part of the Soviet Union and immigrated to the U.S. in 1991. She has worked primarily as a lawyer and, for the last several years, at Cornell University as a professor of law. Over the years she has testified numerous times as an expert witness on financial regulation. She worked briefly in the administration of President George W. Bush.
Republicans opposed to Omarova say their concerns lay primarily in her past writings and public comments. Last year, she published a paper arguing for an overhaul of the nation’s banking system that would expand the Federal Reserve’s role by allowing the central bank to hold consumer deposits. Proponents of such a move say the Fed could extend credit more quickly when needed to individual accounts during times of economic downturns. Following the Great Recession, banks hoarded deposits and did little lending to rebuild their balance sheets.
On the surface, such a proposal could strip banks of one of their critical sources of funds to make loans.
Omarova says the paper's purpose was deliberately ambitious and broad-reaching, setting aside the political realities of the day. It was written during the COVID-19 pandemic, she said, when trillions of dollars of government aid was going to Americans due to the financial repercussions of the pandemic. Her proposals require an act of Congress, she said.
“The purpose of that paper was basically to push the ongoing academic debate on how to make our financial system more accessible to all people,” she said.
Sen. Pat Toomey of Pennsylvania, the ranking Republican on the Senate Banking Committee, has said Omarova’s previous academic work disqualifies her, calling her proposals too radical for her to oversee the OCC. But his questioning of Omarova's professional qualifications has spilled into the personal as well. In a letter to Omarova after she was nominated, Toomey requested a copy of a graduation paper she wrote about Karl Marx “in the original Russian” when she was an undergraduate at Moscow State University.
Omarova told the AP that the paper was required coursework for all undergraduates.
“You write what you were supposed to write. This was not the kind of country where you had the freedom to disagree with the totalitarian regime," she said. "Frankly it’s amazing that 32 years later, this paper is somehow back from the land of the dead.”
In previous comments, Toomey has said that the interest in Omarova's writings from decades ago has nothing to do with her background.
The banking industry has been unusually and publicly critical of Omarova’s nomination, mostly raising objections based on her positions on financial regulation.
“Our issues with Dr. Omarova have nothing to do with her impressive personal background, but rather with her very public support for ending banking as we know it,” Rob Nichols, president of the influential American Bankers Association, said in a speech last month.
Omarova says the banking industry’s opposition is not surprising.
“I think they are worried about having a strong-minded, independent regulator that has studied how risks came into the system in prior years,” she told the AP.
The Office of the Comptroller of the Currency is primarily responsible for overseeing mid-size to large banks that operate in multiple states. The OCC is often involved when banks are alleged to have committed wrongdoing or to threaten the safety and soundness of the financial system. For example, the OCC was heavily involved with the investigation into Wells Fargo after it was discovered that the bank's employees had created millions of fake savings and checking accounts for clients.
Omarova continues to receive strong support both from the White House as well as most Senate Democrats. With Republicans almost assured to be united in opposition, her confirmation will come down to a handful of moderate Democrats such as Jon Tester of Montana, Kyrsten Sinema of Arizona and West Virginia's Joe Manchin. Both Sinema and Tester sit on the Banking Committee.