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A look into the ugly and incredibly personal fight over Biden's pick to oversee banks

Nov 18, 2021
Originally published on November 18, 2021 7:08 pm

Updated November 18, 2021 at 6:32 PM ET

The president's pick to become a top banking regulator doesn't usually attract a lot of interest, but this time is different.

President Biden has nominated Saule Omarova, a law professor at Cornell University, to be the next head of the Office of the Comptroller of the Currency (OCC), which is responsible for regulating the assets held by more than 1,000 banks.

At Omarova's confirmation hearing on Thursday, many Democrats on the Senate Banking Committee lined up in support of her nomination.

Progressives have applauded her nomination, seeing in Omarova a person who would bring a tougher approach to banks at an agency that has been criticized for being too friendly with the sector. But there was no indication any Republican on the committee will back her. Omarova's critics say she is a "radical" nominee who wants to nationalize banking.

Omarova has attracted unusually personal criticism. At the hearing, Sen. John Kennedy (R-La.) brought up her childhood in the former Soviet Union, and Republicans cited an academic paper she recently wrote proposing a reinvention of the U.S. financial system, which The Wall Street Journal's conservative editorial board argues is proof she hasn't "repudiated her Soviet-era views."

Omarova, who came to the U.S. as a university student, and is now a U.S. citizen, strongly denies she holds communist views. She accused her critics of singling her out because she is a woman and a minority.

Here's a look at Omarova and her nomination.

What is the OCC?

The Office of the Comptroller of the Currency, which has been around since 1863, regulates and supervises banks, from smaller, community lenders to large institutions, including Bank of America, Citibank, and Wells Fargo.

Although the OCC is housed within the Treasury Department, it operates independently, and part of its mandate is "ensuring fair access and equal treatment to bank customers."

The Treasury Building is viewed in Washington, D.C. on May 4. The OCC is a little known regulatory body within Treasury with an outsized role overseeing banking assets.
Patrick Semansky / AP

Why is this job so important?

Despite its relatively small size, the OCC has a sizable regulatory footprint.

Altogether, the institutions the OCC oversees have assets worth almost $15 trillion. They represent 65% of all "U.S. commercial banking assets," according to the OCC.

The OCC has previously come under criticism over perceptions it's too close to the banks it regulates. The comptroller during the Trump administration, Joseph Otting, reportedly referred to banks as his "customers."

Who is Saule Omarova?

The White House's nominee to be the next comptroller of the currency is currently a professor of corporate law and financial regulation at Cornell University.

Previously, Omarova worked as a lawyer at Davis Polk, and during the George W. Bush administration, she was a special advisor for regulatory policy in the Treasury Department.

Although her research is wide-ranging, on everything from energy policy to infrastructure investment, Omarova is a well known scholar of financial regulation.

A head portrait of Saule Omarova, a professor of corporate law and financial regulation professor at Cornell University. Omarova has faced withering criticism from some Republicans and conservatives over her views on revamping the financial system.
Cornell University

"Saule is widely regarded as one of the top financial regulatory scholars in the world," says Jeremy Kress, an assistant professor of business law at the University of Michigan. "Whether you agree with her, or disagree with her, you can't have a complete debate about current topics in U.S. banking law and U.S. financial regulation without taking into account what Saule has written on the topic."

But her research has come under withering attack by some critics.

In one paper, Omarova suggests the federal government could offer a bank account to every American through the Federal Reserve. Supporters of that proposal say it would reduce the number of "unbanked" persons significantly. Critics argue it would undermine commercial banks.

In another article, she calls for the creation of an agency not unlike the Food and Drug Administration, that would be charged with approving or rejecting new financial products.

What do Saule Omarova's critics say?

In a fiery speech in October, Sen. Toomey told his colleagues, "I don't think I've ever seen a more radical choice for any regulatory spot in our federal government."

Omarova "clearly has an aversion to anything like free-market capitalism," the senator said, citing examples of her academic work.

During his speech, Toomey said Omarova's interest in these topics and others could have been shaped by her upbringing.

"You could ask yourself, 'Where would a person even come up with these ideas?'" he said. "Well, maybe a contributing factor could be in if a person grew up in the former Soviet Union, and went to Moscow State University, and attended there on a Vladimir Lenin Academic Scholarship."

Omarova was born in what is now Kazakhstan. She came to the U.S. as part of an exchange program when she was a student at Moscow State University in 1991. But when the Soviet Union dissolved, she was stranded in the U.S. Today, she is a U.S. citizen.

Sen. Pat Toomey, R-Pa., is pictured during a a Senate Banking Committee hearing on Sept. 14. Toomey, the ranking member of the committee, has been one of the most outspoken Senate critics of Omarova.
Evelyn Hockstein / POOL/AFP via Getty Images

What have Omarova and her supporters said?

Omarova has defended her research and pushed back against the personal nature of the attacks against her.

"I am not a communist," she shot back to Kennedy during Thursday's hearing after the Louisiana senator said he did not know whether to describe her as a "professor" or a "comrade."

"I do not subscribe to that ideology. I could not choose where I was born," she also said.

In an interview with MSNBC, Omarova said, "My entire academic career has been centered around this issue of how to ensure that our financial system is stable, effective, and efficient."

Her supporters have also denounced Omarova's critics. In an interview with NPR, the chairman of the Senate Banking Committee, Sen. Sherrod Brown, D-Ohio, called Toomey's remarks "despicable" and "character assassination" — a term he used again Thursday, after Kennedy questioned Omarova.

How would Omarova approach the OCC job if confirmed?

Financial experts say Omarova is likely to adopt a tougher approach to banks, but many agree that her previous research has been misrepresented.

Progressives would welcome a tougher approach to banks, and Omarova's candidacy is in line with the Biden's administration approach to regulation so far.

"I do think that part of what she represents is an effort to shake up the status quo," says Kathryn Judge, a professor at Columbia Law School. "The comptroller has often been viewed as overly responsive to the interests of the industry that it oversees."

According to Judge, Omarova would see that relationship differently.

"She is really determined to make sure that banks are providing core services to the people who need them," she says.

At the same time, experts claim Omarova's critics, including Toomey, are misrepresenting her research.

"Many of us do thought experiments about how we would reimagine or restructure the financial system if we were starting from scratch," says Kress from the University of Michigan.

"That's not to say that any of us who have undergone those thought exercises, if put in a position of power in the government, would seek to effect this sort of large-scale changes."

What's the likelihood that Omarova is confirmed?

Despite pushback from Republicans, the White House pressed ahead with Omarova's nomination.

"Saule Omarova is eminently qualified and was nominated for this role given her strong track record on regulation and strong academic credentials," an administration official said in a statement to NPR. "The White House strongly supports this historic nomination."

But Democrats have a thin majority in the Senate overall, and on the Senate Banking Committee, where they can't afford to lose a single vote.

During the hearing, Sen. Jon Tester, D-Mont., one of the more moderate members of the committee, expressed some concerns about Omarova.

"Some of Dr. Omarova's past statements about the role of government in the financial system raise real concerns about her ability to impartially serve at the Office of the Comptroller of the Currency, and I'm looking forward to discussing them with her at her hearing," Tester said in a statement before the hearing.

But Sen. Brown is optimistic Omarova's nomination will get wide, bipartisan support.

"I care greatly about this nomination," he said. "We're going to make it happen."

Correction: 11/18/21

An earlier version of this story incorrectly said that Sen. Pat Toomey made his remarks about Saule Omarova's past education and scholarship during an interview with Fox Business. In fact, he made those remarks in an October speech.

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A MARTINEZ, HOST:

President Biden wants a new sheriff to oversee many U.S. banks, but she faces a tough process as critics are calling the president's pick a radical and a communist. Saule Omarova has the chance to respond today during her confirmation hearing on Capitol Hill. NPR's David Gura reports.

DAVID GURA, BYLINE: The Office of the Comptroller of the Currency has been around since the 1860s. And while it's not widely known, the OCC is responsible for the oversight of banks as large as Citigroup and Wells Fargo but also many smaller community banks. Kathryn Judge teaches at Columbia Law School, and she says there's a sense banks and the regulator have had too close a relationship.

KATHRYN JUDGE: The comptroller has often been viewed as overly responsive to the interests of the industry that it oversees.

GURA: One comptroller during the Trump administration reportedly referred to banks as his customers. Enter Saule Omarova, who spent her early career doing what most would-be bank regulators do. She worked at a big law firm, then in the U.S. Treasury Department - she did that during the George W. Bush administration - but then Omarova became a law professor. And Judge says, through her research, Omarova has wrestled with some big, provocative questions about how to reinvent the U.S. financial system.

JUDGE: So I do think that part of what she represents is an effort to shake up the status quo.

GURA: At Cornell, Omarova has written about climate finance. But what's gotten her into hot water is a recent paper suggesting every American should have a bank account with the Federal Reserve. She argues that would help communities that have been underserved by banks. Critics say she's in favor of nationalizing the banking system. Last year, Omarova told MSNBC's Chris Hayes these questions are at the heart of her research.

(SOUNDBITE OF ARCHIVED RECORDING)

SAULE OMAROVA: Do we have the financial system that is basically serving the needs of the real economy, serving the needs of the American people as it should? Or do we have a financial system that is essentially overbloated, self-referential, self-serving.

GURA: To Republican Senator Pat Toomey, Omarova's resume reads like a long list of warning signs, and the ranking member of the Senate Banking Committee is outraged by her nomination.

(SOUNDBITE OF ARCHIVED RECORDING)

PAT TOOMEY: I don't think I've ever seen a more radical choice for any regulatory spot in our federal government.

GURA: In a fiery speech, Toomey quoted from Omarova's papers and social media posts. And then he brought up Omarova's background.

(SOUNDBITE OF ARCHIVED RECORDING)

TOOMEY: How does it even happen that it occurs to someone to think up these things? Well, maybe a contributing factor could be if a person grew up in the former Soviet Union and went to Moscow State University and attended there on a Vladimir Lenin academic scholarship.

GURA: Those comments fueled op-eds about Omarova in The Wall Street Journal and the National Review. She's denied she's a communist. And in an interview with the Financial Times, Omarova, who would be the first woman to lead the agency, called herself an easy target, as an immigrant, a woman and a minority.

SHERROD BROWN: I just think it's despicable.

GURA: That's Democratic Senator Sherrod Brown, the chairman of the Banking Committee, who says Toomey is guilty of character assassination. Academics who are familiar with Omarova's work say politicians and pundits are misrepresenting Omarova's research and the spirit of it. Senator Brown knows how narrow the margins are, but he says he's confident Omarova will be confirmed.

BROWN: I care greatly about this nomination, and we're going to make it happen.

GURA: But there's at least one moderate Democrat on his committee who's among those who still need convincing. Montana Senator Jon Tester tells NPR some of Omarova's past statements raise real concerns. But, Tester says, he's looking forward to discussing them with her at her hearing today.

David Gura, NPR News, New York.

(SOUNDBITE OF BOOZOO BAJOU'S "BIG NICK'S") Transcript provided by NPR, Copyright NPR.