At the height of the Cold War in the 1960s, then-controversial comedian Lenny Bruce offered a surprising boost to the defense of capitalism over communism. Bruce, who would inspire generations of comics (and who appears in a fictionalized version in “The Marvelous Mrs. Maisel”) was the furthest thing from a conservative. His routines—explicit for the time—even got him arrested a few times for violating obscenity ordinances.
But when he opined on the merits of capitalism vs. communism, he straightforwardly proclaimed that “capitalism is the best,” even in a business sector dominated by a few companies, such as retail department stores. He gave the example of arguing with the clerk at Gimbels, then one of the largest department stores: “If it really gets ridiculous, I go, ‘Frig it, man, I walk.’ What can this guy do at Gimbels, even if he was the president of Gimbels?” He added that even if he were banned from shopping at Gimbels, “I can always go to Macy’s.”
Bruce then noted that, by contrast, “Communism is like one big phone company.” Those were the days of the government-created “Ma Bell” monopoly, when the idea of competing carriers was as much a pipe dream as portable smart phones. “If I get too rank with that phone company, where can I go?” Bruce asked. “a Dixie cup on a thread.”
Bruce’s routine carries a strange relevance with President Biden’s recent nomination of Cornell Law Professor Saule Omarova to head the Office of the Comptroller of the Currency (OCC), which charters all national banks in the U.S and regulates them in conjunction with other agencies. Omarova grew up in Soviet Kazakhstan and graduated from Moscow State University in 1989 on the Lenin Personal Academic Scholarship. She was an exchange student in the U.S. in 1991 when the Soviet Union broke up into different countries, and decided to stay in the U.S, because she was, as she put it in an MSNBC interview, “a student without anywhere to go back.”
Omarova’s Soviet background in the Soviet Union is not the problem that has caused concern about her nomination from lawmakers on both sides on the aisle and from associations that represent America’s banks large and small, but that she seems to be taking a cue from the “old USSR,” as she refers to it, to effectively nationalize deposit banking in the U.S.
Many immigrants from Communist nations, witnessing firsthand the repression of an all-powerful government, have made valuable contributions to public policy by pursuing initiatives to curb red tape that blocks opportunities and by warning that expansions of the state could lead to abuses. Federal Deposit Insurance Corporation Chair Jelena McWilliams, who grew up in Serbia, then part of Yugoslavia, cites her background and rise from poverty in championing deregulatory policies that advance financial inclusion, such as streamlining the approval process for new banks and bank partnerships with innovative FinTech firms.
Omarova, by contrast, seems to have some nostalgia for the “old USSR.” “Say what you will about old USSR, there was no gender pay gap there,” she tweeted in 2019. “Market doesn’t always ‘know best.’” When Twitter users pointed out that women in fact did get paid less in the old USSR, and the obvious fact that there was much more material suffering of both sexes, Omarova replied that “people’s salaries were set (by the state) in a gender-blind manner. And all women got very generous maternity benefits.” As a Wall Street Journal editorial cogently stated in summing up Omarova’s casual dismissal in her tweets of the USSR’s human rights record, “Sure, there was a Gulag, and no private property, but maternity benefits!”
Another idea Omarova is pushing that seems to resemble old-USSR-style central planning is the nationalization of bank accounts by the Federal Reserve. That is not an exaggeration or overstatement. In her paper, “The People’s Ledger,” Omarova calls for an “ultimate ‘end-state’ whereby central bank accounts fully replace—rather than compete with— private bank deposits.”
Omarova would accomplish this “end state” through “Fed Accounts,” deposit accounts that consumers would hold directly at the Federal Reserve, and the issuance of central bank digital currency (CBDC). A number of progressives have proposed these measures, and critics such as CEI adjunct fellow Paul Jossey and I have warned that these could lead to devastating consequences, including a full or partial nationalization of financial services. But Omarova is one of the few proponents of CBDCs and Fed Accounts who explicitly endorses nationalization as an end result.
Progressives who have defended Omarova have invoked baseless accusations of sexism and xenophobia against her critics, yet nearly all of the Senate Republicans opposing Omarova voted to confirm McWillams (and, as another Journal editorial points out, some Democratic Senators defending Omarova, such as Sherrod Brown (D-OH) and Elizabeth Warren (D-MA), voted against McWilliams).
Some Omarova defenders have brought up the fact that she would not have the power to achieve many of her objectives while heading the OCC. Perhaps not, but to harken back to Lenny Bruce, even if she can’t nationalize bank deposits, she can still do a lot to make banking look more like the old “Ma Bell” phone monopoly. How willing, for instance, would someone who opposes the concept of private bank deposits be to approve applications for new banks, given her opinion that the private status of deposit banks is the main problem? In fact, last year, as law professor at Cornell, Omarova signed on to an amicus brief urging the courts to strike down the OCC’s chartering even of non-deposit FinTech banks.
The irony of Omarova’s nomination is that even though there is concern on both left and right about concentration in financial services, socialism ultimately means that the government becomes the monopoly provider. As the Journal editorial concludes, “Omarova is the wrong nominee for the wrong industry in the wrong country in the wrong century.”