The Biden administration is vetting a new candidate for the job of top banking regulator after abandoning two earlier choices because a fight broke out within the Democratic Party. If the candidate — Saule Omarova, a professor of banking law at Cornell University Law School — is nominated to lead the Office of the Comptroller of the Currency and secures Senate support, Wall Street’s biggest banks can expect a less cozy relationship with her than they had with recent predecessors.
President Biden’s aides are vetting Ms. Omarova, and the process is in its early stages, said two people familiar with the matter, who were not authorized to speak publicly. She could be nominated in the coming months or by early next year, the people said. She would then need Senate confirmation to serve a five-year term.
Spokeswomen for the White House and the O.C.C. declined to comment.
Ms. Omarova is seen as less controversial than the two previous candidates to lead the agency, which is little known outside the financial industry but has recently gained in importance — especially among Democrats who see banking regulation as a way to address widening racial and economic disparities, both priorities of Mr. Biden.
The first candidate, Michael S. Barr, an Obama administration official, drew criticism from progressives who said he was too deferential to banks when the Dodd-Frank regulatory package was being negotiated after the 2008 financial crisis. And Mehrsa Baradaran, a banking law professor who was a favorite of progressives, was attacked by Mr. Barr’s supporters for lacking management experience and the support of moderate Democrats. Both were dropped after administration officials concluded that neither was likely to garner enough support to be confirmed.
Ms. Omarova, a native of Kazakhstan, was a special adviser for regulatory policy at the Treasury Department under President George W. Bush and, before that, worked five years at the white-shoe law firm Davis Polk & Wardwell.
Although she has kept a low profile, her academic writings offer a preview of how she might approach the job. She has highlighted the growing risks to banks of wading into the cryptocurrency business, which has experienced explosive growth but remains a digital Wild West. Cryptocurrency operations, she has argued, could allow banks to conduct more trading activity out of view of the Federal Reserve and other regulators.
As comptroller, Ms. Omarova could seek to enhance the O.C.C.’s oversight of such businesses, which banks including JPMorgan Chase and Citigroup are building. Already, the Securities and Exchange Commission is seeking to step up its policing of cryptocurrency markets, its chairman, Gary Gensler, said during a recent speech.
JPMorgan, the nation’s largest bank by assets, has introduced its own digital token, JPM Coin. The bank eventually hopes to make the token programmable — meaning that rules about when its value can be transferred and redeemed can be written into it.
JPMorgan has also conducted test runs of what it calls “a blockchain-based prototype for capital markets,” a system that would allow investors to trade tokens representing financial products such as commodities and bonds. Other banks, including Citi, have added digital asset divisions, aiming to help their clients buy and sell cryptocurrencies.
Ms. Omarova would probably also take a harder line on regulating financial technology companies, which are increasingly operating in many of the same businesses as traditional banks — such as lending — but with far fewer restrictions, including capital requirements. Yet they remain out of the purview of the O.C.C. because they are “nonbanks.”
In May 2020, Ms. Omarova told MSNBC that her research had led her to identify a core problem with the structure of the financial industry: In the course of normal activity, banks and investors make all the important decisions. The public is consulted only when something goes wrong.
“We suddenly become the janitor,” Ms. Omarova said in the television interview. “We’re never allowed to sit at the table when decisions are made upfront.”
If she is nominated, Ms. Omarova’s skepticism of the industry could help her case by silencing critics who have at times warned that the O.C.C.’s leaders were too friendly with banks.
Source: NY Times