WASHINGTON — It took the Biden administration nine months to settle on a nominee to run the Office of the Comptroller of the Currency, passing over other candidates along the way. The process to get Saule Omarova approved by the Senate does not appear it will be any easier.
To say that Omarova's nomination has stoked controversy is putting it lightly. Industry trade groups have all voiced public concerns about her views as an academic, suggesting some moderate Democrats may vote against the confirmation.
Some question her chances of getting through the 50-50 Senate, based on criticism of past writings by the Cornell law professor that many view as outside the mainstream. Others say her prior government experience in the George W. Bush administration could attract bipartisan support to offset that opposition.
“Is this going to be an easy confirmation? Absolutely not," said Ed Mills, a policy analyst with Raymond James. "Is there a chance she doesn’t get confirmed? Absolutely.”
Several national bank trade groups have thrown up red flags. Critics have focused on a 2020 article in which Omarova promoted an idea to radically overhaul the banking system by moving private customer deposits to accounts at the Federal Reserve.
The Independent Community Bankers of America “and the nation's community banks have concerns about Cornell University law professor Saule Omarova’s policy proposals to dramatically reshape the nation’s banking system,” said ICBA president and CEO Rebeca Romero Rainey said in a statement last week.
Rob Nichols, chief executive of the American Bankers Association, echoed that sentiment. "We have serious concerns about her ideas for fundamentally restructuring the nation’s banking system which remains the most diverse and competitive in the world," Nichols said in comments published by the ABA Banking Journal.
The opposition stretches beyond banks. On Tuesday, the U.S. Chamber of Commerce wrote to leadership on the Senate Banking Committee that the group “strongly opposes” Omarova’s nomination.
“Her pursuit of policy proposals expressed in her academic writings are outside the mainstream of either major political party and, if implemented, would lead to a near complete government takeover of banking,” said Neil Bradley, executive vice president and chief policy officer for the U.S. Chamber, in the letter.
But others say banks’ existential fears about Omarova serving as comptroller of the currency are ill-founded. They argue her broad policy career extends beyond academic writings, and includes a stint in the George W. Bush Treasury Department, where she worked under now-Federal Reserve Vice Chair of Supervision Randal Quarles.
“What you're looking for is someone who can administer a large agency, can implement policy directions but all within the context of existing laws and interpretations,” said Todd H. Baker, a senior fellow at Columbia University and managing principal of Broadmoor Consulting.
Baker noted that a comptroller would not have the power to implement sweeping policy proposals that require congressional action.
“It's not a position where one should try to change the law," he said. "One can emphasize one aspect or another, but it really isn't a position that should be used for revolutionary purposes.”
Much of the early criticism so far has been aimed at Omarova’s paper entitled "The People’s Ledger: How to Democratize Money and Finance the Economy." She argued that moving deposits en masse to the Fed's balance sheet would simplify banking and better serve the needs of consumers.
"The proposed restructuring of the Fed’s balance sheet would democratize not only access to financial services but the very process of generation and allocation of financial resources," Omarova wrote. "It would therefore directly impact not only the banking industry but also 'shadow banking' and capital markets."
Virtually all analysts agree that Omarova’s confirmation will be difficult in the Senate where each party has equal representation and Vice President Kamala Harris can cast a tie-breaking vote for the Democrats.
“It’s hard enough to get anything done in a split Senate,” said Ian Katz, a policy analyst at Capital Alpha Partners, in a research note. “There’s no margin for error for the Democrats. But when a nominee is unconventional, or has views that don’t sit well with some moderates, it’s even tougher.”
Observers say Omarova could face skepticism from Democratic moderates including Joe Manchin of West Virginia, Krysten Sinema of Arizona, Jon Tester of Montana and Mark Warner of Virginia.
But Mills said the nominee could enjoy support in other areas. For example, she would be the first woman and first person of color confirmed as comptroller, and her experience in a Republican administration could also help her.
“There is an opportunity here, as someone who worked in the Bush Treasury, worked for Randy Quarles, and would be the first confirmed female head of the OCC,” Mills said. “That at least opens a conversation with someone like [Republican Sens.] Susan Collins and Lisa Murkowski.”
Fellow academics say that there is a significant difference between writing about the law as a scholar and actually leading a regulatory agency in practice.
“You have to keep in mind that the incentives of an academic life are very different from life in banking, or in banking law,” said Baker. “That is to say, being provocative and coming up with new and interesting ideas is your currency in academia — that's how you move ahead in the academic field.”
Kathryn Judge, a law professor at Columbia University, agreed that “if you take her papers as a blueprint of what she’s going to try to do in office, that could lead to some concerns, but I think that really misunderstands the nature of scholarship."
“There is a very significant gap that exists between someone who is as deeply informed and principled as Omarova and what she would do in a position of authority, relative to the thought experiments she sought to engage in as an academic,” Judge said.
Omarova's nomination concluded an already rocky process for the administration to name its pick for comptroller after having considered other potential candidates. The current head of the agency is acting Comptroller Michael Hsu, the third interim head since former Comptroller Joseph Otting — appointed in the Trump administration — departed in May 2020.
In a widely read 2009 paper, she sharply criticized the OCC’s approach to allowing banks to explore derivatives trading, arguing that such a decision would have been better left to Congress.
“Her early academic work was in many ways quite conservative, because she was taking the view that the OCC had exceeded its statutory mandate and extending the concept of the business of banking to cover a whole variety of capital markets products," Baker said.
But industry skepticism about her candidacy does not seem limited to her Fed deposits proposal.
The controversy following Omarova's nomination has exceeded that of other progressive nominees, such as Securities and Exchange Commission Chair Gary Gensler and Rohit Chopra, the administration's pick to run the Consumer Financial Protection Bureau.
Some analysts suggest Omarova’s nomination — seen by some as a dramatic win for progressives such as Sen. Elizabeth Warren, D-Mass., and Senate Banking Committee Chair Sherrod Brown, D-Ohio — may be an attempt to persuade liberals not to fight a potential reappointment of Fed Chair Jerome Powell.
“Professor Omarova is more than progressive and lacks the agency and industry credentials that strengthen other controversial appointees such as Gary Gensler and Rohit Chopra,” said Karen Petrou, managing partner of Federal Financial Analytics, in a research note this week. “This résumé gap makes confirmation still more questionable, but I doubt confirmation was the point here.”
Baker disagreed that Omarova's nomination could be tied to a Powell reappointment.
“I think there's a chance that Omarova will not be confirmed, but she will or won't be confirmed on her own two feet, not as part of any sort of political deal,” said Baker. “She's a credible candidate.”
Reporter, American Banker