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Banking groups unite against Biden’s choice for key regulatory post

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When White House officials looked for new candidates to head one of the banking industry’s top regulators this summer, they saw Saule Omarova as a compromise between the competing demands of moderate and progressive Democrats.

Ideological divisions had already diminished the chances of two other candidates running the bureau of the currency controller, but Ms Omarova seemed to have something to offer both sides. She specialized in banking law at a major law firm and worked in the Treasury Department during a Republican administration, while as a professor at Cornell Law School exploring ideas for revamping the financial system to increase its stability.

Expectations for Republican support were never high. But the most damaging backlash comes from elsewhere: the banks themselves.

Across the board, banks and their trade groups, including the American Bankers Association, which includes the major banks, and the Independent Community Bankers Association, which represents the smallest institutions, have sounded the alarm about Ms. Omarova.

Bankers usually take a reserved stance when responding to proposed new regulators, so such sharp objections immediately after the White House announced its intention to nominate Ms. Omarova on Sept. 23 are almost unheard of. And the united front of all the major trade groups is also unusual, as the agendas of the largest banks are sometimes at odds with those of the smallest.

At the heart of the opposition are some of Ms. Omarova’s academic writings, which explored ideas such as the federal government providing banking services to consumers through the Federal Reserve.

The criticism came quickly. A day after the White House announcement, Rob Nichols, the president of the American Bankers Association, said her proposals would “effectively nationalize America’s community banks.”

Some critics have suggested that her views border on communism. A few days after the White House announcement, the editors of The Wall Street Journal said Ms. Omarova:believes that the Soviet Union’s economic system was superior.”

The banking groups say Ms Omarova’s views pose a threat to the industry’s business models, even though creating a public banking option through the Fed would be well beyond the control of the Office of the Comptroller of the Currency, which oversees major nationally chartered banks.

“The crux of all this and the source of our main concerns is that we look at everything she has said or written publicly, there are bold ideas that are essentially looking at eliminating the banking system as we know it today,” said Rebeca Romero. Rainey, the chairman of the Independent Community Bankers Association, in an interview on Tuesday.

A White House spokeswoman and Ms Omarova declined to comment.

While most of the institutions represented by the Independent Community Bankers Association are not overseen by Ms Omarova, they are critical to her confirmation chances. The threat of disapproval can be enough to convince moderate Democrats not to vote in her favor, and even a single defector can sink her because of the 50-50 split between Democrats and Republicans in the Senate.

The American Bankers Association and another industry group, the Consumer Bankers of America, have contacted Senators Mark Warner of Virginia and Jon Tester of Montana, two moderate Democrats on the Senate Banking Committee, according to a person familiar with the matter and not. was authorized to speak in public.

The Independent Community Bankers Association has also reached out to Democrats least likely to support her if her nomination reaches a full Senate vote, West Virginia’s Joe Manchin and Arizona’s Kyrsten Sinema, the person said.

When asked about contacts with the two senators, Ms. Romero Rainey said her group expressed concern about Ms. Omarova, although she acknowledged that Ms. Omarova has worked on the side of community banks on some issues.

For example, Ms. Omarova has filed a lawsuit in support of a lawsuit by the New York State Banking Regulator over the OCC’s enactment of a new charter for non-bank financial technology companies known as fintechs, which small banks fear may break the law. taking things away from them while evading the strict rules they have to follow. She has also written about the need for more restrictions on industrial loan companies, another type of lender that community bankers see as a threat. And she has publicly warned of the risks of major banks and other major financial institutions becoming too powerful.

But none of that seems to matter compared to Ms. Omarova’s support for Federal Reserve-issued bank accounts.

“In the end it really comes down to this philosophical question,” said Ms. Romero Rainey, who added that she was open to talking to Ms Omarova about her views, but wasn’t sure what it would take to enlighten her. concerns.

While the head of the Office of the Comptroller of the Currency can influence banks’ broader regulatory policies through groups such as the Financial Stability Oversight Council and the board of the Federal Deposit Insurance Corporation, the institution of public banking options goes beyond the purview of the office.

However, some Democratic lawmakers have proposed giving the United States Postal Service new powers to provide basic banking services, and the Postal Service has begun a pilot program to check cashing options.

While ideas for public banks have received support from lawmakers and academics, some critics of Ms Omarova use her writings to suggest she could be a communist.

A Bank Policy Institute newsletter, written by its chief executive, Greg Baer, ​​pointed out that Ms. Omarova, who grew up in what is now Kazakhstan, won a scholarship to attend university in Moscow, the Lenin Personal Academic Scholarship . A spokesperson for the institute declined to comment.

And Brad Bolton, the president-elect of the Community Bankers’ Association, quoted an Alabama Republican congressman who tweeted a link to The Wall Street Journal’s editorial about Ms. Omarova, along with a warning that she had ruined the Soviet Union’s financial system. praised.

“This nomination must be stopped!” He wrote. Bolton did not respond to messages asking for comment on Tuesday.

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