Biden's choice for bank regulator spurs climate debate
A little-known bureau inside the Treasury Department has become the latest flashpoint in the debate over how to best safeguard the U.S. financial system from future risk, including climate change. The battle over the bureau known officially as the Office of the Comptroller of the Currency - began last month when President Biden nominated Saule Omarova, a well-known Wall Street critic, to lead the agency.
Omarova, a Cornell University law professor since 2014, has warned of the long-term financial risk of fossil fuel companies. She also has called for a new federal authority to invest in projects that would support "socially inclusive and sustainable economic growth," according to a paper she wrote last year.
Several elements of Omarova's approach to financial regulation have elicited a sharp reaction from some corners. Republican lawmakers and industry groups say Omarova has championed "radical" policy ideas that would fundamentally - and dangerously - overhaul the banking system. Many oppose her nomination.
The stakes are significant. The Office of the Comptroller of the
Currency polices the U.S. banking system and helps ensure the largest U.S. banks are operating in a "safe and sound manner." That responsibility takes a number of forms. Among them: supervising the largest lenders to ensure they're actively addressing emerging threats to the financial sector.
Right now, it's unclear whether the closely divided Senate will consent to Omarova's new role as chief of the Office of the Comptroller of the Currency. But one expert said Omarova's approach is well-suited to the position.
"Saule Omarova is very attuned to systemic risk generally, she's very wellversed in how risks that permeate through the entire financial system can tank the entire financial system," said Hilary Allen, a law professor at American University who specializes in financial regulation.
"So I expect her to be very attuned to any threat to the financial system as a whole," Allen added, "and I think climate change is one of them.
So what exactly is the Office of the Comptroller of the Currency? And what does it have to do with global warming? Established in the mid1800s, the agency is an independent bureau of the Treasury Department that - together with the Federal Reserve and the Federal Deposit Insurance Corp. is charged with overseeing the U.S. banking sector.
"The OCC has the slice of the industry that comprises national banks and federal savings associations that have their charters - their license to operate - granted by the federal government," said Karen Solomon, a former senior official at the Office of the Comptroller of the Currency and current chief of counsel at Covington & Burling LLP, a law firm.
Fulfilling that role entails carrying out a range of regulatory activities, many of which take place in coordination with the Fed and FDIC, as well as international standard setters.
They include bank supervision, regulating lending portfolios and helping administer stress tests that gauge firms' ability to stay afloat amid unanticipated economic shocks. Also critical is the agency's role in identifying and developing policies to ensure banks have enough capital on hand to shield them from losses that could stem from emerging risks.
Many of those activities, a growing coalition of advocates and experts say, could and eventually should account for climate-related risks such as extreme weather events and the transition away from fossil-based energy.