Thu, Nov 18, 2021 2:20 PM
By Bethany Blankley | The Center Square contributor, The Center Square
(The Center Square) – Texas Gov. Greg Abbott is calling on President Joe Biden to “immediately” withdraw a Cornell Law professor as his nominee for Comptroller of the Currency over concerns he has about her policy positions on the banking and oil and gas industries.
Saule Omarova testified Thursday before the U.S. Senate Banking Committee.
Omarova has openly suggested that her goal to reach climate change objectives includes bankrupting small oil and gas operators, and has proposed completely restructuring the banking system, proposals that Abbott said would impact Texas – as the largest oil and gas producer with the greatest number of community banks in the U.S. – the most.
"Neither a president, nor his appointees, should advocate for the bankruptcy of American businesses," Abbott said in a letter to Biden. "As Governor of the largest oil and gas producing state in the United States, I call on you to immediately withdraw the nomination of Saule Omarova for Comptroller of the Currency. Dr. Omarova’s hostility toward the oil and gas sector and the men and women who work in the industry disqualify her from serving in your administration."
Earlier this year, during a Jain Family Institute's Social Wealth Seminar, Omarova said, “a lot of the smaller players in the oil and gas and coal industry will probably go bankrupt in the short order, or at least we want them to go bankrupt if we want to tackle climate change."
The oil and gas industry provides the majority of U.S. energy supply and contributes more in taxes and jobs than any other industry in the private sector.
The Texas Oil and Gas Association notes that the oil and gas industry pays 6.3 times more in taxes on a per job basis than the average of the rest of the private sector.
In Texas, the industry paid $13.9 billion in state and local taxes and royalties in fiscal year 2020, funds that directly supported Texas schools, teachers, roads, infrastructure and essential services.
Banking associations have raised “serious concerns” over Omarova because of a 71-page paper she wrote, which was published by the Vanderbilt Law Review. In it, she proposes a federalized banking system that would replace the existing dual banking system that’s been in place since 1863. The Comptroller of the Currency oversees banking regulations in the U.S.
The OCC charters, regulates and supervises all national banks and federal savings associations, as well as federal branches and agencies of foreign banks. Currently, banks apply for a national charter through the OCC or a state charter through a state banking department.
As of the second quarter of 2021, there are 4,791 community banks that are state chartered in all 50 states, Bankingstrategist.com reports, representing 97% of all banks.
Roughly half, 2,371, are headquartered in smaller, rural counties with populations of less than 50,000.
Texas and Illinois have the most community banks, 392 and 391, respectively, followed by Minnesota (268), Iowa (266), Missouri (233) and Kansas (219).
In her paper, Omarova proposes “replacing commercial bank reserve accounts with universally available deposit accounts” to “allow all U.S. citizens and law-abiding citizens and lawful residents, local governments, nonbanking first and nonbusiness entities to open transactional accounts directly with the Federal Reserve, thus bypassing private depository institutions.”
Her plan would also transition all commercial bank deposits to the Federal Reserve, which would then have the authority to take the money out of Americans’ accounts if its monetary policy fails.
She suggests when the Fed determines “that it is necessary to expand the money supply in order to stimulate economic activity and ensure better utilization of the national economy’s productive capacity,” it could take depositors’ money out.
The American Bankers Association, which represents the nation’s largest banks, argues her proposal would “undermine the valuable role community banks play in their communities.”
ABA President and CEO Rob Nichols said, “Her proposals to effectively nationalize America’s community banks, end regulatory tailoring based on risk and eliminate the dual banking system are particularly troubling.”
Independent Community Bankers of America President and CEO Rebeca Romero Rainey said Omarova’s plan “would displace locally based community banking and restrict economic growth in local communities.”
Her plan would also conflict with Fed policy, Rainey noted, which was explained during a Senate Banking committee hearing held earlier this year. Fed leaders said, “the Fed is not suited to offer direct accounts to consumers and is not legally permitted to do so.”
Omarova also proposes in her paper to eliminate the FDIC, which was founded during the Great Depression after a widespread banking collapse.
“To abolish the FDIC as deposit insurer and supervisor of state-chartered institutions,” the ABA adds, would “effectively end the dual banking system and break up regional and large banking organizations.”
On Thursday, ranking GOP member, U.S. Sen. Pat Toomey, R-Pennsylvania, said Omarova’s ideas would “devastate” community banks.
“Taken in their totality, her ideas amount to a socialist manifesto for American financial services,” he said.
Omarova said Thursday that her proposal was “purely theoretical.”
“If I am confirmed to lead the Office of the Comptroller of the Currency, my top 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,” she said in her opening remarks.
She later said that community banks would “know no better ally than they would find in me.”
Democrats who’ve also expressed concerns about Omarova include Sens. Jon Tester of Montana, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona.