As Joe Biden’s policy failures dominate the headlines, one piece of his agenda hasn’t reached many mainstream news outlets. His nomination of Office of the Comptroller of the Currency, Saule Omarova, is critical yet was barely mentioned in last week’s news cycle. The nomination signals the likely direction of poor fiscal policy, even bleeding into the nominally non-political Federal Reserve, and the various ways the federal government could gain control of Americans’ banking and spending habits.
The Federal Reserve increasingly acts as a repository of the bad ideas of Washington. Bad housing debt? Have the Fed buy it back to shield big banks from responsibility. Need to prop up the economy? Buy bank bonds through quantitative easing. Pandemic threatens the status quo? Pump more than $4 trillion into the economy, sparking widespread inflation.
The supposed independence of the Fed was meant to shield it from the whims of a president or Congress desiring certain policy results. Instead, it increasingly has become a fourth branch of government, especially as politicians try to print their way out of recessions, the pandemic, and excessive government spending. President BidenJoe BidenManchin to vote to nix Biden's vaccine mandate for larger businesses Congress averts shutdown after vaccine mandate fight Senate cuts deal to clear government funding bill MORE is keen to continue inflationary policies, understanding correctly that the Fed’s balance sheet is double that of the federal budget. The crucial link between the White House’s bad policy and future Fed policy will run through Saule Omarova, assuming she is confirmed.
The immediate effects of Omarova’s confirmation could be dramatic. The Cornell Law School professor is sharply anti-Wall Street — in place of stricter oversight, she also desires private sector banking to be the purview of the Federal Reserve. Such a move would be not only catastrophic to the nation's economy but several major steps toward central planning and away from the free market. Taken to its extreme, this would mean that the Federal Reserve, acting on behalf of Washington, could become the only place citizens could deposit their money. Such a massive transformation would be accomplished by replacing consumer deposits into a new digital dollar, held by the Fed, and, in her own words, “radically reshaping the basic architecture and dynamics of modern finance.”
Omarova’s nomination signals the Biden White House's increasing willingness to bow to the left wing of the Democratic Party — it withdrew a previous nominee, Michael Barr, who was opposed by Rep. Alexandria Ocasio-CortezAlexandria Ocasio-CortezWar of words escalates in House McCarthy faces headaches from far-right House GOP Noncitizen voting doesn't pass this test MORE (D-N.Y.) and her followers.
The risks if the Federal Reserve takes over private banking are extreme. For starters, it could move to completely ban the use of funds related to cryptocurrency. The Fed’s control over all bank accounts would also allow sweeping powers over the average person’s wallet. A centrally-controlled digital dollar could be created instantly and distributed into wallets for welfare and Social Security payments. It also could bar people deemed “extremists” access to their money. Today, we might laugh off the notion of banking access being suspended for calling someone by the wrong pronoun, but actual analogues may not be that far off into the future.
By taking on the role of regular banking, the Fed also could repeat and magnify all of the worst errors of banks during the 1990s and 2000s. Under successive mandates and the Community Reinvestment Act, trillions of dollars were poured into subprime and other risky mortgages to balance racial and economic inequalities. In the near future, if Omarova’s desires come into force, the Fed’s much larger balance sheet, control over banking, and the increased desire for “equity” could all combine to create a financial crisis far worse than 2008. Prior to the financial crash, Washington forced banks into giving riskier and riskier loans to unqualified — subprime — borrowers. Imagine that process, turbocharged by woke rhetoric, far more money than a decade and a half ago, and all of the cash and cachet of the Federal Reserve. Too big to fail would meet national insolvency.
Omarova cannot put all of these policies into place by herself. But that President Biden would even nominate such a radical, who wishes to blur the line between central banking and Marxism, is a sharp turn to the left.
The increasing use of unilateral actions by the Federal Reserve and executive orders through the White House could, over the course of a decade or two, transform the role of the Fed from printing greenbacks to controlling whether you are locked out of your bank account for buying Bitcoin.
Biden is opening a proverbial Pandora’s Box. When the big banks were “too big to fail” in 2008, it was taxpayer money and Federal Reserve buybacks of toxic debt that was used as a one-size-fits-all approach. If the Fed gets this nation into another, even larger, version of the ’08 financial crisis, who on earth would bail us out? By that point, our democratic, capitalist system would already have been consumed by political appointees and lifelong bureaucrats. Your privacy and financial autonomy would be a relic of the past.
Think you hate the big banks now? Just wait until there’s only one of them.
Kristin Tate is a libertarian writer and an analyst for Young Americans for Liberty. She is an author whose latest book is “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.