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Saule Omarova Nomination Hearing

Senate Committee on Banking, Housing, and Urban Affairs

Nomination Hearing

Thursday, November 18, 2021

Witnesses

 

Opening Statements
Chairman Sherrod Brown (D-Ohio)
In his opening statement, Brown highlighted Omarova’s qualifications for the position and decried Republicans’ efforts to harm her nomination. He then pushed back against accusations against her in a Washington Post opinion article and the use of her past writings to hurt her nomination.

Ranking Member Pat Toomey (R-Penn.)
In his opening statement, Toomey stated that her past writings are relevant to her nomination because they were cited on her resume up through 2017. He then highlighted her long history of promoting what he called radical ideas, including effectively ending banking as we know it. He also mentioned her comments on starving oil and gas companies of financing and setting systemically important prices.

Testimony
Dr. Saule T. Omarova, of New York, to be Comptroller of the Currency
In her testimony, Omarova mentioned the 2008 crisis, where powerful market players generated excessive risk and leverage outside of regulators’ view and left American taxpayers to foot the bill “when the speculative boom turned bust.” She said if confirmed, her priority will be to guarantee a fair and competitive market where small and mid-size banks that invest in their neighbors’ homes and small businesses can thrive and where every community has access to safe and affordable financial services. Omarova said community banks are crucial to local small businesses and hardworking families but are forced to compete with Big Tech companies, like Facebook, that do not play by the same rules.

Question & Answer
Banking Reform
Sens. Elizabeth Warren (D-Mass.) and Brown asked Omarova about her statement regarding nationalizing the banking system and ending banking as we know it. Omarova pushed back against characterizations of her statements, saying she does not support nationalizing the banking system. Rep. Steve Daines (R-Mont.) asked Omarova if she believes the government should have seats on the boards of private companies. Omarova said yes and that the idea of a golden share came from Margaret Thatcher’s government, from which Omarova derived her inspiration to have a very contingent and limited ability for the public voice in the governance of systemically important financial institutions under situations when systemic stability and national security are threatened.

Capital Allocation
Sen. Bill Haggerty (R-Tenn.) asked if high gas prices are bad for America, Omarova said yes, it is probably bad. Sens. Jon Tester (D-Mont.) Steve Daines (R-Mont.), and Brown asked Omarova about her comments regarding bankrupting oil and gas companies. Sen. Mike Crapo (R-Idaho) asked if she seeks to starve politically unfavorable industries of their capital. Omarova said it is not a correct characterization of what she said about the oil and gas industry. She said she does not want to bankrupt oil and gas companies and clarified her remarks, stating that we need to find ways to help oil and gas workers transition to high paying jobs.

Sen. Kevin Cramer (R-N.D.) asked if starving the U.S. oil and gas companies of capital would help climate change. Omarova said the oil and gas industry is an important part of the American economy but that there are important issues in the long-term, and she wants future generations to not suffer from catastrophic weather events.

Sen. Cynthia Lummis (R-Wyo.) asked Omarova if she believes federal bank regulators, through the use of capital requirements, loan loss reserves, and supervisory standards, have the legal authority to starve an industry of their sources of capital. Omarova said federal regulators should not have that as their goal and that it should be left to private banks to decide how they choose to allocate credit.

Cramer asked if a regulator should have the authority to determine what a socially suboptimal industry is and whether they should be lent to by a bank. Omarova said a regulator should never substitute their policy judgement for the judgement of Congress. Brown clarified with Omarova that her view is it is up to Congress to deem an industry or behavior as socially suboptimal.

Academic and Personal Character and History
Sens. Bob Menendez (D-N.J.) and Brown asked Omarova to discuss her citizenship, and Omarova said she had no affection for communist ideals and spoke about coming to the U.S. to escape the communist system. Sen. Jack Reed (D-R.I.), Chris Van Hollen (D-Md.), and Menendez asked about the context of Omarova’s academic history. She said her writings were a pursuit of academic thought that do not reflect her practical preferences for governing. She added that her concern is that digitization of the dollar would give an advantage to tech companies like Facebook and that her academic work was driven by the desire to give Congress proposals to consider addressing this. She also highlighted her desire to study American democracy and her feeling of being able to breath for the first time when encountering the free market American financial system. Omarova stated her understanding of the need to support free market allocation of capital to businesses and her focus on avoiding a repeat of the 2008 financial crisis.

Sen. Tim Scott (R-S.C.) said he cannot think of someone more poorly suited to be the Comptroller of the Currency and referred to her disdain for the financial services industry with the documentary “Assholes”, as well as her view of tackling climate change by bankrupting the coal, oil, and gas industries. He added that the idea of holding all deposit accounts at the Fed is extremely disturbing.

Regulatory Oversight
Brown asked what her vision is for the Comptroller of the Currency. She said she will make sure every American has access to credit. Menendez asked how she would improve oversight of financial institutions to prevent scandals and risk and if she believes that as examiners are embedded in institutions, they become too familiar with those organizations. She said that allowing large financial institutions to commit fraud and hurt customers undermines confidence in the system and that an impartial regulator should enforce the law as written. Tester asked what specifically she opposed about S. 2155. Omarova clarified her concern about inadvertently loosening oversight of the largest financial institutions engaging in high-risk trading operations. Asked by Warren how to regulate banks, Omarova said banking regulators should make sure no bank gets away with repeated violations of the law, the fines should have real bite, and that executive compensation should be on the line. Sen. Catherine Cortez Masto (D-Nev.) asked if it is important for regulators to see the protection of markets and consumers as their main responsibility. Omarova said yes and that the OCC’s customers are American families, businesses, and farms. Cortez Masto asked how Omarova would work to combat money laundering. Omarova said she would talk seriously to OCC staff about what they understand to be the main challenges on the ground.

Community Banking
Sen. Mark Warner (D-Va.) asked what the OCC can do to support Community Development Financial Institutions (CDFI). Omarova said that she intends to make supporting CDFIs one of her main priorities and increase access to capital for CDFIs. Warner asked how to make sure the OCC can retain qualified examiners and address its management challenges. Omarova said she intends to speak to supervisory personnel and possibly embark on a listening tour of regional offices.

Sens. Tina Smith (D-Minn.), Warren, and Cortez Masto asked about Omarova’s vision for community banks and how to help and regulate them. Omarova said community banks are the backbone of our financial system and that she intends to protect, preserve, and strengthen the role of community banks in our financial system. She also plans to facilitate community banks’ ability to innovate responsibility without getting absorbed by larger institutions and perform their main lines of business and would scrutinize consolidation in the banking industry and level the playing field for community banks against larger institutions.

Cortez Masto asked about changes to the CRA, and Omarova said the CRA is an important tool to make sure banks channel credit to banking desert communities. She added that the OCC would work with other regulators on the comprehensive revamping of the CRA.

Digital Currency
Sen. Jon Ossoff (D-Ga.) asked about the implications for fiat currency of the proliferation and evolution of cryptocurrency technology. Omarova said we are amid a transformational period that could increase efficiency and inclusion in the financial system but raises issues like maintaining the dominant status of the U.S. dollar. Ossoff also asked about the benefits of a central bank digital currency (CBDC). Omarova said CBDC would make the efficiency of moving money around and access to money easier to achieve in the financial system. She added that CBDC would be issued by statutory mandate, enabling a central bank to ensure fair access to the new form of money.

Toomey mentioned Omarova’s article “The People’s Ledger” which outlines a series of structural reforms that would radically redefine the role of a central bank and advocates full migration of demand deposits onto the Federal Reserve’s balance sheet. Omarova said the paper was written in the context of an ongoing academic debate of how to approach digitizing the dollar and seeks to address the implications of that step for the entire financial system. She said if we allow the digitization of currency and issuance of a CBDC without thinking through implications, community banks will inherently be put in a losing position.

Sen. Mike Rounds (R-S.D.) asked how to justify removing the critical relationship between bankers and their communities, citing Omarova’s belief for full migration of demand deposits under the Fed’s balance sheet. She said she believes in the American banking system and that whatever Congress decides to do with a digital dollar, she wants to preserve community banks.

Cybersecurity
Van Hollen asked about her thoughts on cybersecurity risk. Omarova said cybersecurity is the number one threat to our financial markets and that she intends to speak to the professionals at the OCC and other regulators to work together and use new technologies to protect banks and their customers from cyber-attacks.

For more information on this hearing, please click here.