As Democratic senators on the Senate Banking Committee began to back down, the confirmation that Biden’s presidential nominee Saule Omarova would head the Office of the Comptroller of Currency (OCC) got worse. Senators Jon Tester (D-Montana), Christen Simena (D-Arizona) and Mark Warner (D-Virginia) are reported to have reservations about the Cornell University law professor. Specializes in financial institution supervision, banking law, international finance and corporate financing.
In a 50-50 Senate, the defect of a Democrat will defeat the nomination. Ms. Omarova’s past stance on banking policy is rising to an unconfirmable level.
Omarova is no stranger to the banking industry. In fact, she is deeply immersed in the intricacies of this industry and the many colorful characters working in it. She once called it “a typical one-an industry”.
The problem for the senator is that she has a strong point of view, and they worry that if she becomes the head of a powerful institution that oversees the National Bank of the United States, it will affect the OCC. Readers of RedState should have no doubt that the head of the banking regulatory agency has the real power to have a substantial influence on policies that will not only affect the financial industry, but also the lives of ordinary Americans.
Field of coins
One aspect of Omarova’s criticism is that she supports the idea of excluding so-called demand deposit accounts (DDA), including ordinary people’s checking and savings accounts, from commercial banks, and depositing these accounts directly with the Federal Reserve. . Every American will have a direct account with the Federal Reserve, just like a bank. The change in “banking as we know it” stems from advances in technology, allowing complete centralization of transactions through a Federal Clearing House rather than a series of intermediaries, which is a function that bankers serve when technology cannot do it.
This is an extension of the same argument of cryptocurrency advocates regarding the efficiency of blockchain currency transactions. About ten years ago, advanced banking infrastructure thinkers like Omarova began to recognize these efficiencies, but did not believe that emerging cryptocurrency companies have such strong control over money. They saw the similarities with the functions of the Federal Reserve and said: “Why not put it there?”
The problem with this concept is that these DDA accounts are called “core deposits” in the banking industry and are considered the most valuable form of deposits on the bank’s balance sheet. They are very stable. They are owned by real customers in the community. They are an indicator of the service provided by branches to the areas they serve. They are gateway relationships to other banking services such as loans and credit. In other words, they are the foundation for building a house of cards in financial services.
Advocate to change this, and throw various commercial interests into chaos. Banks must completely change their business model to continue to make money. In turn, this will initiate the so-called systemic risk of the American financial and economic design. If the process is not designed correctly, the risk can become very ugly. It usually does this, because a complex economy is ultimately a process of trial and error. The tried-and-tested method is to allow innovation to develop gradually, with each party taking on a smaller risk, so that no errors will threaten the entire system.
In any case, extracting every DDA from private banking and federalizing it is not a gradual change. Facebook’s Libra project, now called Diem, has begun to try to start with a stable token. This is the DDA system operated by the Federal Reserve unless it is owned by the US government. The next version of the Kingdom and Company script uses old metaphors dating back to eight pieces in Spain.
Congress is not sure that this is a good idea. The bankers are pretty sure this is a bad idea for them. Bankers contribute to the Congressional campaign, no matter which side of the aisle they sit on. As for ordinary Americans? Most people are at the low-information end of this lofty debate; and only slowly come into contact with things that can change the way we use money; including but not limited to how private our monetary affairs are under the prying eyes of the government .
Control of private investment
Another area where Omarova has been criticized is related to her concept of the National Investment Agency, which will be an independent agency with the authority to direct public and private investment in the United States. The concept of this organization aims to centralize and nationalize US strategic expenditures in order to achieve national goals.
NIA will have the power to force investment to move in the direction of the agenda. It replaced free market decision-making with a controlled market. This is a way to guide state spending. Many countries use a stronger central government, such as China. They can guide the entire economy toward a common goal.
Academically, it can be said to be more efficient. It can also be said that it is not so free. For a country like the United States where freedom of choice is deeply rooted in culture, this is a hard pill to swallow.
Perhaps, even for the Democratic senators, they are too tough. They still represent the fifty independent states of the Union, and their own agendas and self-interests are not the same. Tell voters, companies, and donors that giving control of their fate to the federal hegemon will not win the election.
This obviously led to the suspension of the Senate Banking Committee’s ranking.
In the final analysis, the question is whether the Democratic Party is willing to risk the development of banking policy in the direction of concentration that academic scholars have been advocating? Or do they hope that the U.S. economy will remain a socioeconomic experiment of incremental innovation driven by personal choice and risk-taking?
The answer to this question will determine the result of Saule Omarova’s nomination as the head of OCC.
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