The Banking Community’s Extremism

The American banking community is losing its mind over the nomination of Saule Omarova as Comptroller of the Currency. This position is one that has real regulatory power over the banking community. So it is engaging in some old fashioned red-baiting to destroy Omarova:

The Tarshis episode is important to understand in light of the ongoing right-wing mania surrounding President Joe Biden’s bank regulatory nominee Saule Omarova — a case of modern-day McCarthyism in the strictest sense of the term. According to this chorus of dim demagogues, Omarova — a former Treasury official under President George W. Bush — is actually a “passionate Communist” bent on overthrowing American capitalism. Any Senator who feigns to give credence to this rot is insulting the dignity of their office.

We should not be overly serious about the details of the policy claims being made in this disgraceful display. One hit piece in the Daily Mail claims Omarova stiffed a college roommate for fifty bucks back in 1987 — proof, apparently, that she rejects the sanctity of debt contracts.

But the bad-joke quality of the assault from outlets including The Wall Street Journal, National Review, Fox News and broader QAnonia does not mitigate its political gravity. Sen. Pat Toomey (R-Pa.) has made himself the face of the crusade in Washington, assailing Omarova in a confirmation hearing on Wednesday for attending Moscow State University as an undergraduate and writing a paper on Marxism. Virtually the entire bank lobby is involved in an unusual and aggressive attempt to kill her nomination. American Bankers Association President Rob Nichols has accused Omarova of seeking to “effectively nationalize America’s community banks,” while Independent Community Bankers of America President Rebeca Romero emphasizes that Omarova is bent on “eliminating the banking system as we know it.” Both groups donate heavily to swing-state Democrats, and in a 50-50 Senate, they need only break off one to torpedo Omarova’s nomination.

Bank lobbyists think Omarova will be a serious regulator, and they are enlisting the most toxic wing of the conservative movement to block her nomination, using whatever wild denunciations they can muster. The rhetorical battery comes in two stages. First, Omarova is denounced for being born in the Soviet Union. Then her academic work on financial reform is cited to prove she is and always has been an Ultracommunist. Her more cautious defamers carefully insist they are not interested in Omarova’s birthplace or background — only her persistent, dirty beliefs.

All of this is outrageous. Omarova grew up on a street named after Vladimir Lenin and attended Moscow State University because she was born in Kazakhstan when it was part of the Soviet Empire. She fled to the United States in 1991 to complete her education, took a job at a corporate law firm and worked in the Treasury Department during the George W. Bush administration before moving into academia, where she writes papers on bank reform. She is 54 years old. This is not the career of a Bolshevik saboteur. 

But she does write papers on bank reform, and most banks don’t want to be reformed. She is best known for a proposal that would move deposit-taking away from commercial banks and into the Federal Reserve. This would indeed be a significant change to the banking system — Omarova boasts that it would “effectively ‘end banking’ as we know it” in her paper — but this is cheeky academic bravado, replete with a footnote clarifying it as a play on words. In truth the scheme is more like a reimagining of the 1933 Glass-Steagall Act for a post-2008 world.

What do you think the chances are that Manchin and/or Sinema go along here and torpedo Omarova? Fifty-fifty, probably.