Wall Street Watchdog Pick Who Scares Banks Faces Grilling
(Bloomberg) -- Bank regulators are typically boring. But that’s not Saule Omarova’s style.
The outspoken Cornell Law School professor has characterized Wall Street as a “quintessential a--hole industry” and mused that policy makers should want smaller oil, gas and coal companies to go bankrupt because it would be good for the planet.
Omarova, 55, will get her day in the spotlight Thursday when the Senate Banking Committee takes up her nomination to lead the Office of the Comptroller of the Currency. The proceedings are expected to be must-see TV for bank executives, who have actively opposed her candidacy.
It’s not just Omarova’s candor that will be picked over by lawmakers. Detractors have latched onto her long academic record, which includes calls for upending the U.S. financial system. In a 2020 law review article, for example, Omarova advocated moving personal banking accounts to the Federal Reserve -- a move that would take business, and cheap funding, away from private-sector lenders.
Still, much of the battle over Omarova has veered from policy to personal. After the White House announced her nomination in September, Republicans and conservative media seized on her background as an immigrant from Central Asia’s Kazakhstan, highlighting that she grew up in the former Soviet Union and questioning whether she supported communism.
Pennsylvania’s Pat Toomey, the top Republican on the banking panel, even took to the Senate floor to request a college paper she wrote on Marxism, “in the original Russian.” Toomey also noted that her scholarship at Moscow State University was named for Lenin, though he has repeatedly argued that his concerns aren’t about her background but her “radical ideas.”
Democrats fired back with claims of character assassination and 1950s style redbaiting. Banking Chairman Sherrod Brown, an Ohio Democrat, has pointed out that not only is Omarova a highly qualified scholar, she would be the first woman and person of color to hold the comptroller post. Massachusetts Senator Elizabeth Warren has also gone to bat for Omarova.
In prepared testimony released Wednesday by the committee, Omarova said her upbringing “under a totalitarian regime presiding over a failing economy” made her appreciate the American system even more.
“These issues are deeply personal to me,” she said. “Having grown up in an oppressive state-run system, with no free enterprise and no economic opportunity for people like me, I have a unique appreciation for our dynamic and diverse markets.”
The OCC, long known as the U.S. banking overseer most sympathetic to industry, has usually been run by white males. It regulates a who’s who of Wall Street, including JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. Here are several themes to watch as the hearing unfolds:
Not a single Republican is expected to back Omarova, so in a 50-50 Senate she will need every Democrat on her side. That means all eyes will be on the committee’s moderate Democrats, including Senators Jon Tester of Montana, Kyrsten Sinema of Arizona and Mark Warner of Virginia. If those lawmakers ask harsh questions or seem unsatisfied with Omarova’s answers, it could signal her nomination is on the rocks.
The Paper Trail
Industry lobbyists and political operatives have scoured Omarova’s past to unearth articles she wrote and video clips of her speeches. At the hearing, Republicans are planning to scrutinize a Marxist Facebook group they say Omarova belonged to and are likely to dig into her controversial Fed proposals, according to people familiar with their strategy. Republicans also intend to highlight her comment about the benefits of carbon polluters failing.
Will She Take the Bait?
Omarova has fought back against her critics, arguing in interviews that the attacks she’s faced were mired in “depravity” and racism. Her outspokenness is unusual because nominees typically go quiet ahead of their confirmation hearings.
“I thought that their pushback would be more sophisticated, more noble,” she said in a recent interview with Bloomberg News. Keeping her cool Thursday, however, could help Omarova get a recess appointment if her nomination stalls -- a main concern of the bank lobby.
Companies that use apps to provide banking services and cryptocurrency firms are especially nervous about Omarova as OCC chief. Omarova would have a major say in how the government oversees their industries and she hasn’t been shy in expressing skepticism about fintechs or digital tokens. The OCC has authority over granting national bank charters -- a license highly desired by some in fintech and that may become mandatory for certain crypto issuers.
Wall Street Concerns
Wall Street banks will be interested in Omarova’s views on capital and leverage -- the regulatory constraints that heavily influence their profits. She has been open about her distrust of megabanks and has argued their power should be curtailed. In the interview, Omarova told Bloomberg that she has a positive view of community lenders, calling them the “core of the banking industry.”
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