WASHINGTON — The nomination hearing of Saule Omarova to be the next comptroller of the currency may be among the most contentious for a financial regulator in recent memory, and the reverberations for bank policy could be significant.
Nominated by the White House to lead the Office of the Comptroller of the Currency in September, Omarova has sparked considerable backlash from Republicans and many bankers, while the Cornell University law professor’s Democratic supporters on Capitol Hill have accused the GOP of “
After weeks of friction, Thursday’s hearing before the Senate Banking Committee will provide Omarova a chance to explain the context behind her academic writings and life experience, observers say.
"We’ve heard plenty of speculation about what Omarova thinks, but the public hearing is a good opportunity for her to speak for herself, and to see how she addresses concerns that are raised," said Jeff Naimon, a partner at Buckley.
Those concerns from bankers, Republican lawmakers and even some Democrats grew loud as soon as Omarova was announced as President Biden's OCC pick.
Her October 2020 academic paper proposing to shift retail bank deposits to the Federal Reserve and a focus by some in the GOP on her schooling in the former Soviet Union have even led to suggestions by some of Marxism.
The paper last year proposed a dramatic restructuring of the banking system into a "People's Ledger" that "would democratize not only access to financial services but the very process of generation and allocation of financial resources," she wrote.
Omarova's supporters argue she proposed the idea as an academic exercise, not as a serious policy doctrine, but bankers have taken issue with the suggestion that private financial institutions should be obsolete.
“Whether it's an academic exercise that she was talking about with these comments or otherwise, her comments, obviously, have given bankers a real cause for concern,” said Bob Fisher, CEO of Tioga State Bank and chairman of the Independent Community Bankers of America, on IntraFi Network's "Banking with Interest"
Asked what Omarova — a native of Kazakhstan who served in the George W. Bush Treasury Department — could say to alleviate bankers’ concerns, Fisher said that if she “basically assured me that she's not trying to transform the banking system into a similar system that she grew up with in the Soviet Union, that would maybe ease some of my fears, but, I mean, she said what she said.”
Omarova is expected to get tough questioning from Republicans such as Pat Toomey of Pennsylvania, the Banking Committee's ranking GOP member. Toomey recently took to the Senate floor to demand a paper Omarova purportedly wrote when she was the equivalent of an undergraduate student at Moscow State University in the late 1980s.
Others said the hearing could enable Omarova to clear the air about the fallout over her nomination.
It's “a good opportunity for Professor Omarova to define herself and her views on bank regulation and bank supervision rather than having them defined by others,” said Thomas Curry, a partner at Nutter and the
Others say that Omarova’s ability to communicate how she would approach leading the OCC could be the difference between
“Omarova is undeniably a qualified candidate, and a brilliant legal mind, but her confirmation is far from guaranteed and will likely depend on her performance during the nomination hearing,” Isaac Boltansky, a managing director at BTIG, said in a research note. “We believe the odds are currently against her being confirmed by the Senate, but will reassess following the hearing.”
In the meantime, progressives, led by Sens. Sherrod Brown, D-Ohio, and Elizabeth Warren, D-Mass., have maintained steadfast support for Omarova, arguing that she is uniquely qualified to guide the national bank regulator against the backdrop of potentially significant transformation for the U.S. financial system.
“She's not the extreme liberal who would socialize the banking sector, and she's also not this industry-captured shill either,” said Chris Odinet, a professor of law at the University of Iowa. “She understands the complex relationship, and the complex considerations which sometimes are adverse to each other, when you're talking about the relationship of the public and the private in the banking sector.”
Outside of her academic experience, Omarova worked briefly for the Bush administration Treasury Department, where she reported to now-Federal Reserve Gov. Randal Quarles. She also worked as an associate at Davis Polk between 2001 and 2006.
“That is really what makes her such a perfect candidate,” Odinet added. “You want someone who understands both aspects of that relationship, because this regulator is charged with balancing and modulating those two competing interests.”
For all the GOP criticism of Omarova, she would be able to clear the Senate if everyone in the Democratic caucus supports her, allowing Vice President Kamala Harris to cast the tiebreaking vote. But such universal support is far from guaranteed.
Sen. Jon Tester, D-Mont., a member of the Banking Committee, has
"The most interesting part of the entire hearing is not going to be what Sen. Brown or Sen. Toomey says, because we all know where they are," said one financial services lobbyist. "What's important is what Mark Warner asks, what Jon Tester asks, what Sinema asks."
Omarova's shot at confirmation "is going to come down to those three," the lobbyist added.
Tester, known for strong ties to the nation’s community banks, is likely to be sensitive to the concerns of small banks and their advocates. The ICBA has signaled deep reservations with Omarova, some of her academic writings and
The responsibilities that banks have to the public they serve has long been a focus of Omarova’s work, which could have significant implications for what she would do as comptroller, analysts say.
“Although Ms. Omarova has surely moved on from the Marxist views of which she is accused based on an early academic paper, she clearly sides with those who think that banking is for public purpose, not private profit,” Karen Petrou, managing partner of Federal Financial Analytics, wrote in a note to clients. “Indeed, according to at least some of her work, banking can’t be trusted to banks and thus should be seconded to the federal government or outside experts presumed to be not just objective, but also disinterested in all but the public good.”
A significant hurdle for Omarova will be communicating how her academic background and proposals will or won’t translate to being the chief regulator of national banks.
“There's a significant difference between being a professor, where one of your roles is to think big thoughts and launch ideas out into the world, and being an agency head — particularly at a supervisory agency like the OCC — where a lot of the job is providing answers and leadership on narrower, more practical questions,” Naimon said.
