Omarova lays out ‘scary scenario’ in crypto, gets pushback from senators in hearing
Saule Omarova, President Joe Biden’s embattled nominee for a top banking regulator position, sketched out the possibility of “scary” scenarios emerging in cryptocurrency, but faced a mix of skepticism and agreement from senators on her views.
During her appearance before the Senate Banking Committee on Thursday, Omarova — who is being vetted to be the next Comptroller of the Currency, which regulates the majority of the nation’s banks — voiced concerns that large tech companies could control the payment infrastructure in the U.S. if private digital currencies are allowed to thrive, potentially displacing the value of the U.S dollar.
“I’m struggling with your view about digital assets,” Senator Cynthia Lummis (R-WY) told Omarova at the hearing.
When asked by the senator whether she only believes in fiat currency, Omarova replied, “No ... My concern is … we may end up in a situation where a large company like a big tech company might control all of the infrastructure through which the money that every American and every American business uses in their daily moves.”
Omarova agreed with Rhode Island Democrat Jack Reid, who posed a scenario in which Facebook designs a digital currency that overtakes the U.S. dollar making the dollar something that can’t be used to regulate our economy.
“National banks would not need a charter, they would just need to get a franchise from Facebook, is that right?” Reid asked.
“That’s correct,” the nominee replied. “This is the scary scenario everyone should take seriously these days.”
Omarova said she worried that embracing private cryptocurrencies could make it harder for the U.S. dollar to remain dominant — a concern even former President Donald Trump recently voiced to Yahoo Finance.
“My concern is that in the system where a lot of private actors like Facebook can issue their own version of currency, that can potentially outpace and even displace the U.S. dollar,” Omarova told senators.
That could have “implications far beyond what we typically consider in the banking sphere, but might also undermine our sovereignty and the value of the dollar,” she added.
Keep the dollar dominant
Omarova stated the new technologies offer a lot of potential benefits for better efficiency of payment and transactions as well as financial inclusion. Still, “it does raise a lot of issues with regard to the ability of our nation to maintain the dominant status of the U.S. dollar in the global economy.”
She argued the reason the dollar has retained its dominant status is because the Federal Reserve has been able to maintain the value of the dollar and maintain the money supply in the economy.
When asked by Lummis whether she thought Bitcoin (BTC-USD) threatens national security, Omarova said she’s not an expert in bitcoin, but worried that if all U.S. financial transactions were part of a blockchain system. Various actors might be acting in the interest of the U.S. could take control of the system, she suggested.
Omarova added that she worried private companies are pursuing profits, which may cut into the public interest by not allowing equal access to money for everyone.
“I do believe we have government issued money now in this country and it’s working great and I worry about allowing private innovation to undermine a lot of important public policies we need to pursue,” said Omarova.
While she worries about private currencies, Omarova says she favors a central bank digital currency (CBDC) over privately issued stablecoins because it’s issued by the government and will ensure access for everyone.
“The one potential advantage of CBDC over privately issued stablecoins is that it will be issued subject to statutory mandate legal decisions made by democratically elected lawmakers,” Omarova told the committee.
“So that will allow the central bank under the oversight of congress to ensure everyone has fair access to new forms of money,” she added.
Biden's top bank regulator nomination at risk after tense hearing
Courtenay Brown
Fri, November 19, 2021,
A high-stakes battle over the next bank cop just got shoved into the spotlight.
Driving the news: A crucial hearing yesterday — that was ugly and tense at times — made one thing clear: Saule Omarova's shot at leading one of the nation's most powerful financial regulators may be at risk, with growing opposition from both sides of the aisle.
Why it matters: The law professor — a vocal critic, who's put forth proposals that would "end banking as we know it” — is gunning to oversee lenders whose assets make up two-thirds of the banking system's total.
If confirmed as head of the Office of the Comptroller of the Currency, Omarova could leave a mark on hugely important issues, including how banks interact with cryptocurrency or lend to controversial industries — and who gets to be a national bank.
The latest: Omarova's critics are getting louder.
Republicans claim her academic research suggests support for nationalizing the bank sector. Moderate Democrats don't like that she opposed a law that eased some regional bank regulations — or that she said earlier this year that small oil-and-gas companies should go bankrupt to help “tackle climate change.”
During yesterday's hearing before a key Senate panel, Omarova pushed back: She said the fossil fuel industry was “a very important part of the economy” and that her research isn't an endorsement of any one idea.
Catch up quick: The OCC has had temporary leaders — though, acting heads might not feel totally entitled to pursue an aggressive agenda.
By the numbers: The office has been without a permanent head for nearly 18 months straight — including the 10 months Biden has been in office, according to data from the nonprofit Partnership for Public Service.
What we're watching: Other Democrats on the committee, including Sen. Elizabeth Warren (D-Mass.), support Biden's pick.
Warren said Republicans who oppose Omarova "are doing the bidding of giant banks that want to keep gobbling up smaller competitors, want to keep ripping off their customers, and want to keep getting away with it.”
If there’s no Republican support, just one Democratic opposition could sink the nomination. That may extend the regulatory limbo.
One thing looming: A half-century-old anti-redlining law that the next leader could revamp.
What's next: There's no date yet, but the banking committee will vote on whether to advance Omarova — who would be the first nonwhite and first female to permanently get the job — to a full Senate vote.
Go deeper: More Democrats cool on Biden currency comptroller pick
Biden Nominee, Who Was Born in Soviet Kazakhstan, Defends Herself at Senate Hearing: 'I'm Not a Communist'
Aaron Parsley
Fri, November 19, 2021
Saule Omarova
Michael Brochstein/SOPA Images/Shutterstock
President Joe Biden's pick to lead the Office of the Comptroller of the Currency — an independent bureau within the Treasury that oversees the national banking system — defended herself to members of the Senate Banking Committee who questioned whether she's more aligned with communism than free-market capitalism.
"I'm not a communist," Saule Omarova, a Cornell University law professor who was born in Soviet Kazakhstan and studied in Moscow, said during Thursday's confirmation hearing. "I do not subscribe to that ideology. I could not choose where I was born."
Omarova, who became a U.S. citizen in 2005 and served in President George W. Bush's administration, was asked by Republican Sen. John Kennedy whether she'd been a member of a young communist organization in her youth.
"I don't know whether to call you professor or comrade," he said.
Omarova explained that membership in the Leninist Communist Young Union of the Russian Federation had been compulsory for young people when she was growing up in the former Soviet republic.
US Senator John Kennedy
JIM WATSON/AFP
She also said she had very little academic freedom when asked about writing a thesis on Karl Marx's economic analysis as an undergrad at Moscow State University more than 40 years ago. The thesis, she said, was written in Russian on a typewriter and she didn't bring it with her when she emigrated to the U.S. in 1991.
Her more recent academic papers were also brought up during the questioning with Republicans suggesting that her opinions show a willingness to recreate the country's consumer banking system, allow fossil fuel companies to go bankrupt and to dictate private investment decisions.
RELATED: Joe Biden Picks First-Ever Black Nominee for Defense Secretary
"She wants to nationalize the banking system, put in place price controls, create a command-and-control economy where the government allocates resources explicitly, instead of free men and women making their own decisions about the goods and services they want to buy and sell in an open market," Sen. Pat Toomey, the top Republican on the panel, said, according to The Hill. "These are exactly the kind of socialist ideas that have failed everywhere in the world they've been tried."
Omarova defended her writings as merely "academic debate" over the evolution of the country's financial systems and that said she doesn't necessarily endorse every topic she's written about.
In her opening statement, Omarova spoke about growing up in Kazakhstan as an ethnic minority "in an all-women household, under a totalitarian regime presiding over a failing economy."
Saule Omarova
Michael Brochstein/SOPA Images/Shutterstock
"I was raised by my grandmother, a soft-spoken woman who was orphaned and barely escaped death when, in the 1920s, Stalin sent her entire family to Siberia," Omarova said. "The crime for which my grandmother's family was killed was that they were educated Kazakhs who did not join the Party."
She added that her pursuit of an education was "an act of defying political oppression and injustice."
"I studied hard, got into the best university I could, and was ultimately able to fulfill my dream of coming to America – the land of opportunity and freedom," she said.
If confirmed, Omarova would be the first woman to hold the position, NPR reports.
Sen. Elizabeth Warren defended the nominee while also criticizing Republicans for conducting a "vicious smear campaign" on behalf of the banking industry which has "declared war" on Omarova for her "willingness to enforce the law to keep our system safe and that you may cut into big bank profit."
"Are you a capitalist who believes in free markets?" Warren asked.
"Yes I am," Omarova responded.
‘Morning Joe’ Rails Against GOP Sen John Kennedy for ‘Sick’ Questioning of Biden Nominee
Lindsey Ellefson
Fri, November 19, 2021,
The “Morning Joe” hosts and panelists were outwardly disgusted Friday over the “cynical and hateful” questioning by Sen. John Kennedy (R-Louisiana) of Saule Omarova, Joe Biden’s appointee to lead the Office of the Comptroller of the Currency.
During a Senate Banking Committee hearing on Thursday, Kennedy called Omarova “comrade” and suggested she might be a Communist because she was born in Kazakhstan.
“You might look at that and think that Sen. Kennedy is stupid,” MSNBC host Joe Scarborough said. “No, he’s not. He knew exactly what he was doing. He went to Oxford. This is going around in the Republican Party: People with Ivy League degrees — people that went to Oxford — try to play as dumb as possible for the cameras. They’re not fooling anybody. That was just as cynical and hateful of a spectacle, attacking somebody because they were born in a — under a — totalitarian regime.”
Co-host Mika Brzezinski fumed: “Look what she’s done and what incredible accomplishments in her life and now wanting to serve. This was sick. This was really hard to watch. It made me want to cry.”
Omarova, a Cornell University law professor, previously served as an adviser to the Treasury Department under former president George W. Bush, a Republican.
“Senator, I’m not a communist,” Omarova said at one point during the hearing. “I do not subscribe to that ideology. I could not choose where I was born.”
Omarova, like all children in the Soviet Union, was expected to participate in a Communist youth organization. Kennedy asked her if she ever resigned and pushed her even after she explained that children age out of the program with no formal resignation requirement. She pivoted to explain that her family suffered under communism, which ultimately propelled her to the United States and fueled her dream to live here and serve her adopted homeland.
