One problem with journalists is that they generally don’t read much, and understand even less. So the controversy over Joe Biden’s nominee for Comptroller of the Currency, Saule Omarova, rapidly devolved into (unfortunately credible) accusations of communist sympathies, with liberals doing the obligatory wow-just-wow and mischaracterizing the substance of the smear job. In reality, her nomination is sunk, but for an even more banal reason. She managed to piss off one of the few chunks of kulaks that actually has some remaining political pull – community banks.
Why do “community banks” matter?
Patrick McKenzie, an internet-famous writer and executive at the payments company Stripe, has an excellent write-up on the role of community banking here. I have said many times that the default players in any random congressional or state legislative district are car dealers and property developers, and community banks provide financing for both (as well as increasingly capital-intensive farming operations). It is not generally worth the effort for JP Morgan to underwrite a farmer buying a $400K combine, or a local landlord’s second duplex, but that is the community banker’s bread and butter. The Comptroller of the Currency is the primary regulator for many of those small banks.
Why are they pissed off at Omarova?
Few can imagine the abject horror preventing even supposed business journalists from reading the article. “Oh my gawd it’s in a law review, dad always said I should have gone to law school instead, I’m having PTSD, the flashbacks, daddy I’m so sorry, can I borrow some money for rent?” This is just her most recent work, but the substance of her career points at the same strain of thought: take the banks with underwriting expertise and connections to their communities, kill them, and have the feds wear them as a skinsuit.
Start by gutting their depository role – why would you need your own bank account? Just keep a “ledger” at the Fed, at most have the locals just market them and run the ATMs. The feds can deposit welfare, UBI, stimulus payments, etc directly – very efficient. In rare circumstances you might make everyone take a 90 cent on the dollar haircut.
Very rare. Definitely, extenuating circumstances only.
Now that they have the deposits, no reason not to have the Fed manage the loans as well. The Fed was already buying municipal bonds at par to bail out public institutions like the NYC transit system during the brief financial turmoil associated with Covid. Eliminate the pretense – the Fed can underwrite loans for public-spirited projects on its own account. It’s called public-private capital allocation, we do a little public-private capital allocation. How are we going to fight the “climate crisis”, if we don’t dump money into Hunter Biden’s mining partnership du jour?
But we need not stop at loans – after all, the Fed is already in the habit of dumping cash into securities markets every time there is a possibility of a crash. Formalize it! They should target “systemically important prices” for “a broad range of securities” (the Dow, spot gold, Blackrock AUM, whatever you got), and trade to “reduce volatility”. “If a particular asset class—such as… technology stocks—rises in market value… the FRBNY trading desk will short these securities, thereby putting downward pressure on their prices.” Good luck doing that IPO when investors discover they’re trading against the Fed – but we can’t have all these randos getting rich anyway without paying their dues.
If this all starts to look like the federal government nationalizing essentially the entire banking sector and turning it into a kleptocratic free for all, that’s because it is, and thus why the community banking sector is opposed to her being installed as their regulator. Don’t worry though, “these concerns are rarely substantiated by reference to anything more specific than deeply internalized skepticism toward the government as an economic actor.” Covid has shown us that this skepticism is fundamentally fascist.
Omarova is very careful in interviews to qualify her clear policy advocacy as a mere “thought experiment”. That is ludicrous. “Shoulds” abound, and the desirability is always phrased in terms of goals she absolutely subscribes to, like “banking access”, or “stability”. Negative consequences are not seriously explored, they are, as above, dismissed out of hand. It would be possible to very lightly rewrite the entire work as a Swiftian satire that points out the banking sector is already such a “partner” of the federal government (for instance “dear colleague” letters being used by the feds to dictate which businesses can and cannot be lent to, or the banking sector supplying half the executives of the Treasury) that it’s not a far jump to outright Soviet state capitalism, but that is not what was going on here.
The fact that Omarova grew up in the Soviet Union is merely circumstantial, an easily digestible point of trivia to serve as shorthand for “godless commie” to the average Fox watcher, but her reputation of course derives mostly from her work. Nonetheless her biography has been glossed over. No one is accusing random ex-Soviet citizens of being communists (partially because no one wants to catalogue how many “from Russia” types are for some reason taken seriously as pundits of American policy), in the same way no one attacks Elon Musk as being a Baasskap proponent. However, Omarova did not just passively “grow up in the USSR”.
Omarova was on the elite track to Soviet leadership, with the rough Soviet equivalent to a Rhodes Scholarship and a degree from Harvard, and was granted a prestigious study-abroad fellowship to the United States in the expectation that she would use that education in the service of not just the Soviet Union as a national concern, but the broader institutional Communist economic project. She is not a high-powered tractor mechanic, she spent her formative years internalizing and developing Soviet political-economic theory. The idea that this was a ruse, and she was merely playing a sociopathic long game where she told everyone what they wanted to hear with her own goals in mind, is not a point in her favor! In no sense did she “flee communism”, she had every intention of pursuing her track to the Soviet elite until the USSR disintegrated and left her a stranded citizen of a sudden backwater, at which point she grafted onto the remaining superpower to climb the identical ladder.
If an American with a Rhodes Scholarship and a Harvard political science degree shows up in your country (or even your county), you should assume you are about to get hard-F Freedom one color revolution at a time, especially when they wrote their thesis on gay themes in the Jefferson-Adams letters. If you discover they then spent their later career writing about more effective ways of boosting trans visibility in the food processing sector, you need to pursue nuclear weapons and close your borders immediately.
Unfortunately, being a Nation of Immigrants and suffused with Omarova’s ideological compatriots already, the United States lacks such ideological antibodies – thus we have to rely on George Bailey solemnly punting her into a river out of pure self interest.