"Professor Omarova," she said, "I know that the giant banks object to your willingness to enforce the law to keep our system safe and that you may cut into big bank profits. So the giant banks and their Republican buddies have declared war on you. The attacks on your nomination have been vicious and personal — we've just seen it. Sexism, racism, pages straight out of Joe McCarthy's 1950s red scare tactics — it is all there on full display. Welcome to Washington in 2021."
Let's examine what really has the bankers in a dither about Omarova. Unlike their congressional henchpersons, they've focused on policy.
On Sept. 24, the day after Omarova's nomination, American Bankers Association CEO Rob Nichols expressed concerns about "her ideas for fundamentally restructuring the nation's banking system." He accused her of proposing "to effectively nationalize America's community banks."
Nichols' complaint derives from a paper Omarova published in October titled "The People's Ledger." There she posited the stimulating idea of transferring conventional savings accounts out of the hands of commercial banks and to the Federal Reserve.
In practical terms, the transfer would be voluntary on the part of depositors, though as Omarova observed, it would be more effective to simply transfer all such accounts to the Fed. In her view, this would solve, or at least ameliorate, numerous problems resulting from banks' control of individual deposits.
One is that a scandalously high percentage of Americans are "unbanked" — lacking access to bank savings and checking accounts and to bank credit. According to the Federal Deposit Insurance Corp., about 14.1 million adult Americans are unbanked, and another 40 million are "underbanked," meaning that they have to resort to nonbank institutions such as payroll lenders for financial transactions.
That's 22% of all households. It's a direct artifact of banks' profit-seeking, which places those accounts out of the reach of a population that is disproportionately low-income, Black or Latino. The Fed says that 85% of white households are fully banked, but only 55% of Black families and 66% of Latino families are.
In her paper, Omarova cited the "unacceptably high human cost of being 'unbanked' in the United States," which has included delays in receiving COVID-19 relief checks from the government, excessive fees charged by nonbank firms, and exclusions from credit.
She pointed to the implicit subsidy that taxpayers give banks for savings, which she argued has been "a crucial driver of the unprecedented consolidation and concentration in the U.S. financial industry since the 1990."
That trend, she properly observed, morphed into the "too big to fail" phenomenon that tied the hands of financial regulators trying to deal with the last recession.