When she was a child in western Kazakhstan, Saule Omarova fantasized about visiting America. Her wish was shaped in part by her father, who used to play old records for her. “There was one — Ella Fitzgerald and Louis Armstrong, and they sang ‘Hello, Dolly!’” Omarova said recently by phone. “I loved it. That was the song that I associated with America. But at that time, dreaming about coming to America was basically like dreaming about going to the moon. It just didn’t seem possible.”
Now she’s here, having charted an improbable path from Kazakhstan to Moscow to Wall Street to Washington, D.C. On Thursday, the Senate Banking Committee will hold a hearing on her nomination as comptroller of the currency, a crucial — but historically compromised — post in the financial regulatory system. And while surely no one thought that Omarova, who has been a sharp critic of the office’s role in loosening rules for some of the nation’s biggest banks, would be greeted by a starkly divided Congress with open arms and a bluesy rendition of “Hello, Saule!” few might have guessed that the respected scholar and veteran of the George W. Bush administration would be at the center of one of the ugliest nomination battles of the Biden presidency, replete with a red-baiting campaign straight from the 1950s.
In October, Pat Toomey, the senior ranking Republican on the committee, made a floor speech in which he told his colleagues, “I don’t think I’ve ever seen a more radical choice for any regulatory spot in our federal government.” He made heavy reference to Omarova’s undergraduate matriculation at Moscow State University, where she won the Lenin Personal Academic Scholarship. Toomey even wrote an inane, showboating letter demanding she produce “the original Russian-language” senior thesis she wrote there about the political philosophy of Karl Marx.
The right-wing press jumped eagerly aboard. Fox News ran a big story crowing that Omarova “could be the next Biden nominee to go down” alongside a large photo of Marx. Network exile Bill O’Reilly proclaimed that “what this woman wants … [is] communism,” while RealClearPolitics ran with the headline “Biden Is Nominating Soviet-Trained Radicals Now.” The Wall Street Journal editorial board asserted that her “radical ideas might make even Bernie Sanders blush” and that she “still believes the Soviet economic system was superior.” “She literally trained in the Soviet Union,” fumed Ted Cruz on television.
The banking lobby piled on. Rob Nichols of the American Bankers Association asserted that Omarova would “effectively nationalize America’s community banks,” while Brad Bolton, chair of the Independent Community Bankers of America, tweeted, “This nomination must be stopped!”
“Of course, I expected that Wall Street banks would be strenuously opposing my nomination,” Omarova told me, “because my work has been focused on how to minimize systemic risk that is created when large banking institutions start aggressively growing their trading operations and feed speculative booms that may be unsustainable. I expected that they would be worried about me becoming their regulator because they would know that I have strong views about not allowing another crisis to happen; they know I ask difficult questions and keep asking them, rather than being satisfied with superficially reassuring answers from the industry.”
But what has surprised her, she said, “is the personal character of those attacks. How it escalated into this, I don’t know.”
The Office of the Comptroller of the Currency was established in 1863 as part of the National Bank Act, which permitted the federal government to grant bank charters that had previously been issued only by state governments. It was an emergency measure used to finance the Civil War since it required the newly chartered federal banks to hold their reserves in U.S. government bonds, which could then be used to fund the Union. But it also created a tier of national banks that were positioned to starve out smaller state-chartered entities.
Virtually all of the Too Big to Fail behemoths have federal charters that put them under the regulatory jurisdiction of the OCC, including Wells Fargo, Bank of America, JPMorgan Chase, and Citigroup, and the agency has long been known for serving, rather than supervising, these ballooning financial entities. In the early aughts, the OCC became notorious for making itself so attractive to big banks — as a regulator whose looser rules would supersede stricter state regulations — that banks like JPMorgan, which used to be chartered by New York, eagerly took federal charters over state ones. Except for a very brief period under reform-minded comptroller Tom Curry during the Obama years, the OCC has been, many argue, a classic captured agency, or, as a piece in Washington Monthly framed it, “less a regulator than a big-bank trade association embedded in the federal government — a lobby with the power to write its own rules.”
The prospect of a comptroller who would actually enforce the rules is tantalizing to liberals who have watched a decades-long deregulatory bacchanal result in economic calamity for millions, as well as to those who regard the rise of cryptocurrency and fintech — both so far unregulated — with skepticism and grave concern.
Joe Biden initially weighed two choices to run the OCC: Obama Treasury alum Michael Barr, who provoked howls from progressives who saw him as too friendly with fintech and crypto and noted that he had objected to stricter versions of the Volcker Rule, which limits proprietary trading by banks, and Mehrsa Baradaran, a law professor and expert on the systemic racial inequalities of the financial-services industries who was the favorite of the left. Biden settled the fight by choosing neither.
In September, it was reported that he would be nominating Omarova, a law professor at Cornell who had done previous stints in Bush’s Treasury Department and at the white-shoe law firm Davis Polk & Wardwell (not known as an incubator of left-wing idealism). She counts among her vocal supporters former Bush White House ethics counsel Richard Painter and has even garnered a measured defense from Larry Summers. But Omarova also writes regularly with her Cornell colleague Robert Hockett, an adviser to Bernie Sanders and Alexandria Ocasio-Cortez, and is admired by Elizabeth Warren, who said through a spokesperson, “It’s hard to think of anyone more qualified or well suited to take on this role.”
“The administration settled on a smart person with a background in the banking industry and in government as well as path-breaking scholarship on financial regulation,” said Carter Dougherty, a spokesperson for Americans for Financial Reform, a nonpartisan nonprofit that pushed for Omarova. “In less polarized times, somebody appointed by a Democratic president who worked for a previous Republican administration and for a Wall Street firm would be the kind of candidate everyone can agree on. But we’re at a moment where a candidate acceptable to Wall Street is a candidate that does the bidding of Wall Street. And that’s not acceptable to the public interest.”
But perhaps no one was prepared for the lengths the banking lobby would go to convey how unacceptable Omarova is to them. While there was some initial anxiety that moderate Democrats like Jon Tester and Mark Warner might have reservations about Omarova’s commitments to strict regulation (in fact, Tester has said he has “concerns” about Omarova), what emerged instead, and from the right, was the personal campaign centered on her youth in the Soviet Union.
Omarova was born in a provincial town close to the Russian border, to parents who were doctors. Her paternal grandparents were illiterate peasants from the mountains in southern Kazakhstan, near China, while her maternal grandparents had been among the first generation of ethnic Kazakhs to train as medical doctors, part of the Kazakh intelligentsia.
Omarova’s parents divorced when she was 11, something she described as “an incredibly unusual step to take for a woman, to file for divorce and to — as they used to say at the time — end the family.” Omarova and her mother moved into the one-bedroom apartment of her maternal grandmother, who largely raised Saule. She learned from her grandmother about how her great-grandparents, educated Kazakhs who were not interested in politics, had been labeled enemies of the state during Stalin’s efforts in the 1930s to sedentarize nomadic Kazakhs. They were sent to Siberia.
Her grandmother, a young child at the time, had been hidden by neighbors and grew up in an orphanage, living under a changed name. Omarova said, “She told me from a young age that basically I could only rely on my own strength and on my own brain and that my one ticket into the future and to safety was education.”
Omarova was granted admission to Moscow State University, an elite institution where there was little curricular freedom. But she said her time there, near the end of Mikhail Gorbachev’s administration, was thrilling. “We were idealistic,” she said of her fellow students, “so hopeful that maybe this regime would open up enough room for young people like us to change the way things were done.”
After finishing her undergraduate degree in philosophy in 1989, she was admitted into Moscow State’s Ph.D. program, where she was permitted to pick a topic of study. She chose the modern American theory of democracy and began investigating some of the very new, very few exchange opportunities with the United States. She was selected to spend the fall 1991 semester at the University of Wisconsin–Madison. She was living there when the Soviet Union collapsed.
“It was a difficult moment,” she said. “I didn’t know if I would even be able to go back to Moscow to continue my studies or if I would be kicked out, back to Kazakhstan. Would Kazakhstan take me? At the same time, I felt like maybe this was my opportunity, finally, to stay in America and get the education I wanted and become somebody that I couldn’t become at home.” Omarova stayed.
Mark Beissinger, now a professor of politics at Princeton whose work has often focused on the Soviet Union and the post-Soviet states, was Omarova’s dissertation director at Wisconsin. “She really impressed us, taking a full load of graduate courses. She came first of all to study democratic political theory, so the idea that she’s a Leninist is absurd,” he said. She would go on to write her dissertation about the oil industry in Kazakhstan, ultimately getting chased out of that country because her research was too intrusive.
Her next move was law school at Northwestern, then the job at Davis Polk, where she joined its Financial Institutions Group, working closely with big banks and security firms. This was in the years before the 2008 financial crisis. “Financial institutions were trying to craft a lot of complex financial products, some of which, as we found out later, were part of this high-risk trading activity ultimately implicated in the crisis,” she said. “I nevertheless valued that experience because it gave me this incredibly important, foundational understanding of the nitty-gritty of how the banking world and financial world operate.”
In 2007, Randal Quarles, a former Davis Polk partner and an enthusiastic deregulator, brought Omarova in to work for him at Bush’s Treasury Department. She spent a year there before turning to academia, taking a job as a law professor at the University of North Carolina. “I needed to think about my values and about what I learned, and maybe think about ways of improving the banking laws and the financial regulatory system to make it better, basically,” she said. When she began publishing academic work, it was critical of the very sectors she had just emerged from. “I was changed by the crisis,” she said in retrospect.
Omarova’s 2009 paper “The Quiet Metamorphosis” meticulously tracked how big banks, from the 1980s to the aughts, had pushed the OCC via a series of administrative rulings to expand the definition of the “business of banking” to include dealing in derivatives, the “financial weapons of mass destruction,” in Warren Buffett’s phrasing, which became hugely profitable for banks in the subprime era while transferring enormous risk to the American people.
Mitigating that risk, Omarova said, is what guided her focus as an academic. “We need to protect ordinary Americans, families, businesses, communities, and the public as a whole from unwittingly becoming the last holder of all that risk,” she said.
Omarova’s friend Anna Gelpern, a Georgetown law professor who served at Treasury under both Clinton and Bush, said Omarova’s work is marked by her scrupulousness as a researcher and scholar. “She’s extraordinarily careful,” Gelpern said. “She went through all the comptroller letters on derivatives to come up with ‘The Quiet Metamorphosis.’ Her structural positions come from a very detailed place. The irony about her being presented as some kind of radical is that she’s often writing about stuff that others have raised in far flakier ways. Her big contribution is the care with which she works through all the implications of an idea; she works through every angle. She doesn’t screw around.”
“She’s amazing, she’s brilliant, she has an extraordinary and clear mind and a solution-focused approach,” said law professor Zephyr Teachout, who met Omarova after the 2008 crash as part of an AFR working group focused on systemic risk and was one of more than 70 academics to sign a letter of support for her nomination.
Others point to Omarova’s proposal for a National Investment Authority, an agency that could channel government money more directly into public-interest investments, including a greener economy. “The NIA is a great example of her intellectual and policy creativity,” said Felicia Wong, head of the Roosevelt Institute.
Omarova brings with her a reputation for frankness. Among the things she’s currently being derided for by bankers and their political defenders is her comment, in a Canadian documentary called Assholes: A Theory, that “the financial-services industry, in my view, and I don’t think I’m alone here, is the quintessential asshole industry.”
In her defense: It was a film about … assholes. “The terminology was not my invention,” she told me, noting that the film was based on philosophy professor Aaron James’s book about assholes. “The idea was to look at the phenomenon in modern culture where self-entitled, rude, disregarding behavior becomes not only tolerated but also rewarded. We all know who these people are in our everyday lives, right?”
Right.
In 2013, Omarova’s sharp tongue got her on The Daily Show when she was called to testify in front of Congress about the Fed-backed habit of Wall Street banks hoarding physical commodities. In response to Davis Polk’s Randall Guynn, who argued that the practice was kosher because it had been done in Mesopotamia, Omarova shot back that while in earlier eras banks had financed the slave trade, “that does not mean that JPMorgan today should be financing human trafficking.”
Guynn had, in fact, been Omarova’s mentor at Davis Polk. “I learned basically everything I knew at the time about banking law from him, and we were very close,” she said, remembering how Guynn used to joke “about my being trained back in Moscow as a Marxist and now having completely abandoned this and been reeducated to serve the interests of private banks on Wall Street. We used to laugh about it, and it was delightful, at the time.”
It is either more or less delightful now, depending on your perspective.
Omarova is currently being called out for having tweeted in 2019 that the United States lagged behind her home country when it came to equal pay and family leave. “Before coming to the United States, I never imagined that gender pay inequality exists in the world today,” she tweeted in 2019. “Whatever you say about the USSR, there was no gender inequality in wages. The market doesn’t always know what’s right.” The next day, she clarified: “I never said that in Soviet life, men and women were equal in all respects. But the wages of the population were fixed regardless of gender. All women received large maternity benefits. Both are dreams for our society.” This is the commentary that prompted Toomey to rage that “the Soviet regime was so profoundly evil and America’s so great, and yet she doesn’t appear to see it quite that way.”
Omarova marvels that anything has been made of this. “In the 30 years that I’ve been in this country, the only time they found any mention that was favorable of the Soviet Union was that one tweet,” she said. “Literally, one tweet.” And for what it’s worth, the message of the tweet was indubitably accurate: The United States is backward in its failures to enforce fair-pay protections and offer paid leave.
But expecting reasoned debate in this era of political profiteering is probably naïve. So here is Omarova, forced to respond to lug-nutty demands that she produce a term paper she wrote while an undergraduate under a Soviet regime, something that was never demanded of Trump FDIC chair Jelena McWilliams, who grew up in communist Yugoslavia but nonetheless earned lavish praise from Toomey himself.
Omarova doesn’t have the paper. “It was a written-exam type of thing,” she said. “We were assigned mandatory topics, and I got assigned something about Karl Marx, economic theory, I don’t even remember. Nobody took it seriously; it was not meant to be an actual academic exercise. All you had to do was basically copy from whatever the textbook said, and that was that. So I wrote that paper, got my degree. Literally the next day, I forgot about it, just like every other graduate in my class forgot about their papers.”
Gelpern, who grew up in the Soviet Union and left at 13, scoffed at the notion of her friend harboring Marxist tendencies. “Even though I never went to university in the Soviet Union, I know that you start everything with ‘As Marx said,’” Gelpern said. “But you can trace a continuity in all of her work, and if there were any extension of some deeply held Marxist belief, you would have seen it 50 times over, particularly in her early work. And it’s the opposite of what you see. This whole thing is just so patently goofy, so patently irrelevant to anything she has said or done as an adult.”
Senator Sherrod Brown, chair of the Banking Committee, remains livid about the red-baiting. “Her whole family was essentially murdered by Stalin,” he said, “and then my colleagues go to the floor, and these bankers — so desperate to defeat somebody that will level the playing field and stand up to them and protect consumers and protect small businesses that get screwed by Wall Street — they are so desperate to defeat her, they’re playing McCarthy; they’re playing anti-Soviet stuff. It’s a remarkable thing that they have stooped so low.”
Omarova has described herself as an “easy target … an immigrant woman, a member of an ethnic minority. Unlike a regular currency comptroller, I have a different story. It is easy to turn me into a monster and insult me.” She is the first woman and the first person of color ever nominated to lead the OCC.
It’s possible the retro xenophobia may help Omarova; it is ugly enough that some moderate critics may want to stay as far from it as possible. And Omarova is getting solid backing from the White House. “The administration is absolutely engaged,” Brown told me. “They have a stake in this. And I’m working harder on this nomination than any I ever have, with the possible exception of what happens next with the Fed.”
Ultimately, the banking lobby may be working against its own interests. Smaller community banks could certainly benefit from an OCC chair willing to enforce the rules against the big dogs of Wall Street. But even those bigger banks may want to reconsider the potential benefits of a watchful regulator as they steer into an uncertain future.
One of the reasons crypto and fintech are in a position to muscle into Wall Street’s territory, Omarova told me, is that after the 2008 crisis, so many Americans lost confidence in the banking system. “It is frustrating,” she said, “that a lot of banks keep doing things that only reinforce that mistrust and lack of confidence from the American people, including constantly fighting against any effort to regulate them. They should welcome reasonable, rational, good regulation because it actually helps all of them to do good and not be outcompeted by the bad guys. They should welcome a strong regulator who understands the industry and who can be a strong protector for the banking sector as well. We need to rebuild trust, and the only way to do it is not fight regulation tooth and nail but work toward making that regulation workable for everyone.”
“They know,” she continued, “that I won’t let them do whatever they want. I’m not the one to easily go along with whatever big banks would tell me is ‘good for them, therefore good for the country.’ I want to make sure that what is good for them is also good for the country.”
“I’m also very reasonable,” she added, “and I will have an open door, and I will work with any bank that wants to do good for the country. Any bank that wants to channel credit into the real communities, real economy, I’ll be their best friend. If wealthy banks genuinely commit to doing good for the United States, then they have nothing to be afraid of from me. Nothing.”
