By Pam Martens: November 3, 2021 ~
Yesterday, President Biden stunned moderates in his party by formally sending his nomination of Cornell Law Professor Saule Omarova to head the Office of the Comptroller of the Currency (OCC) to the Senate. The OCC regulates national banks, those operating across state lines, which include some of the largest banks in the nation, such as JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup’s Citibank.
Many folks believed that after Omarova’s recent law journal article became widely analyzed, she would remove herself from consideration or Biden would quietly ask her to step aside. As Wall Street On Parade revealed last week, Omarova’s 69-page paper published in the Vanderbilt Law Review in October, proposed the following:
(1) Moving all commercial bank deposits from commercial banks to so-called FedAccounts at the Federal Reserve;
(2) Allowing the Fed, in “extreme and rare circumstances, when the Fed is unable to control inflation by raising interest rates,” to confiscate deposits from these FedAccounts in order to tighten monetary policy;
(3) Allowing the most Wall Street-conflicted regional Fed bank in the country, the New York Fed, when there are “rises in market value at rates suggestive of a bubble trend,” such as with technology stocks today, to “short these securities, thereby putting downward pressure on their prices”;
(4) Eliminate the Federal Deposit Insurance Corporation (FDIC) that insures bank deposits at commercial banks across the United States;
(5) Consolidate all bank regulatory functions at the OCC – which Omarova has been nominated to head.
Omarova is now facing a new brouhaha for calling the very industry that she would supervise the “quintessential a**hole industry” in a 2019 Canadian feature documentary.
The documentary, A**holes: A Theory, was directed by John Walker and based on the 2012 non-fiction book by the same name, which was written by philosopher Aaron James. (Both the documentary and the book fully spell out the word “a**holes.”) The documentary was released to theatres in 2019 and had its television premiere on the Canadian Broadcasting Corporation’s Documentary Channel in 2020.
The documentary explores the so-called “a**hole” culture that brought men like Donald Trump to power in America and Silvio Berlusconi in Italy. The narcissism, rapacious greed and gratuitous vulgar language on Wall Street are singled out as key elements in America’s escalating a**hole culture.
In the film, the soft-spoken Omarova says this:
“The financial services industry, in my view, and I don’t think I’m alone here, is a quintessential a**hole industry. But when you think about the pervasiveness of systematically type a**hole behavior in a particular social venue, for example, financial services industry, then the problem of managing a**holes becomes a structural problem in which law can potentially have a lot of say. So if we make certain types of a**hole behavior systemically unprofitable, for example, irrational, something that is not rewarding, then that behavior will naturally kind of fall away. And, overall, the system will become less prone to being overtaken by a bunch of a**holes that continue to pursue their own private goals, their own insatiable appetites for private gain at the expense of the rest of us, the rest of the society.”
Omarova fully enunciates the word “a**hole” multiple times without wincing. You can listen to her full set of comments at 34:16 minutes on the live stream of the documentary. (Viewing is free but there are commercial breaks.)
Let’s pause here for one moment. This is a law professor from New York who doesn’t seem to have even a modest grip on how massive fines and felony counts from law enforcement have utterly failed to make a dent in the crime wave of mega banks on Wall Street – the very banks she would be supervising. Take JPMorgan Chase’s rap sheet as a prime example. After years of paying out tens of billions of dollars in fines and being charged by the criminal division of the U.S. Department of Justice with multiple felonies, it ratcheted up, not down, its crime wave.
For the first time that anyone on Wall Street could remember, on September 16, 2019, the U.S. Department of Justice used the RICO statute to indict two current and one former precious metals traders at JPMorgan Chase for turning the precious metals desk at the bank into a “racketeering” enterprise. The RICO statute is typically used to charge organized crime members. JPMorgan Chase, the largest bank in the United States, now has a total of five felony counts in the past seven years, admitting to all of them.
The Chairman and CEO of JPMorgan Chase, Jamie Dimon, was at the helm of the bank throughout this crime wave. He remains at the helm of the bank. Rather than removing this man who has failed to inspire ethical conduct at the bank, the JPMorgan Chase Board of Directors (itself a study in conflicts and hubris) awarded Dimon a $50 million bonus in July.
To put it bluntly, the last thing Americans need at this juncture in time is a person at the helm of a mega bank federal regulator who thinks that law enforcement holds the key to reining in the serial crime wave at the mega banks. What Omarova is forgetting about is the revolving door between law enforcement and the lawyers representing those banks. What her plan to move all of the banks’ savings deposits to the Federal Reserve forgets about is that the Federal Reserve is the quintessential captured regulator, with two of its own former Fed Bank Presidents under investigation for their own trading abuses.
The U.S. doesn’t need some untested, fringe plan to restructure Wall Street. The U.S. already has a plan that worked exceptionally well for 66 years, from its legislative enactment in 1933 to its repeal in 1999 under the Wall Street-friendly Bill Clinton presidency. That plan is called the Glass-Steagall Act. It would simply prohibit Wall Street trading casinos from being associated with, merging with, or being owned by federally-insured, deposit-taking banks. It is the only meaningful and workable solution to restoring financial stability to the U.S. financial system. Senator Elizabeth Warren at one time understood this and repeatedly introduced the 21st Century Glass-Steagall Act with bipartisan support.
Biden and other Democrats have now apparently caved in support for Omarova, despite her ludicrous proposals for financial reform, because more than 60 progressive groups and watchdog organizations admire her positions on racial justice and climate. The groups jointly sent a letter yesterday to Senator Sherrod Brown, the Chair of the Senate Banking Committee that would hold Omarova’s confirmation hearing. The letter said that the groups are in “strong support of the nomination of Professor Saule Omarova.”
British actor, John Cleese, also appears in the Canadian documentary and he seems to have a better grip than Omarova on how Wall Street is able to churn out a limitless supply of new a**holes to replace those indicted by the Justice Department. Cleese says this in the film:
“The most foul-mouthed people are the investment bankers and I’m sure that when you go see things like The Wolf of Wall Street, that language is typical of the language that they actually use all the time. Very vulgar, very harsh, very assertive. I would describe a hedge fund as an a**hole factory. They’re just churning them out in large numbers because once you’ve got a horrible group of people together then all they want to do is choose other horrible people to join them.”
As someone who worked for a decade at Sandy Weill’s white-male hunting band known variously as Shearon Lehman and then Salomon Smith Barney, I can assure you that the vulgar language in The Wolf of Wall Street is not exaggerated. It functions as a conquest language that bonds the members of the white-male predatory hunting band while serving in the dual role of disgusting civilized people to the point that they flee the industry, attempting to purge their memory banks of the degradations they had to endure to work there. (I successfully survived by viewing myself as an embedded researcher with a front-row seat to observe and de-code the activities and language of the hunting band. Then I made those activities and language public in federal court for five years, attempting to overturn Wall Street’s private justice system that enshrines and protects this entrenched system.)
Those of us who genuinely want progressive change on Wall Street, who have worked there and understand it, know that Omarova is wrong for this job. You can’t call the people you plan to regulate “a**holes” and expect to engage in an ongoing dialogue with them for change. You can’t publish a treatise that recommends stripping 5,000 banks in the country of their deposits. You can’t recommend eliminating the Federal Deposit Insurance Corporation, the FDIC, which stands at the very core of preventing banking panics and bank runs in the United States.
Senator Elizabeth Warren, who recently showed great courage and boldness in calling Fed Chair Jerome Powell “a dangerous man,” needs to show the same courage and boldness and ask Omarova to step aside. Otherwise, Republicans are going to make an embarrassing circus out of her confirmation hearing. Omarova has given them lots of material to work with.