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Along with the Federal Reserve, the OCC is one of the nation’s top financial regulators, with direct authority over national banks.
An epic fight between the progressive wing of the Democratic coalition and the Wall Street wing is playing out over the appointment of who will run the Office of the Comptroller of the Currency (OCC). While it sounds obscure, along with the Federal Reserve, the OCC is one of the nation’s top financial regulators, with direct authority over national banks.
Last week, the Biden transition leaked the name of Michael Barr as the imminent appointee. Barr, now a dean at the Ford School of Public Policy at the University of Michigan, is a former subcabinet Treasury official under Tim Geithner. Veterans of the Dodd-Frank battles remember Barr as distinctly unhelpful and committed to watering down proposed reforms.
The apparent choice of Barr produced immediate and public pushback from Senate Banking Committee Chair Sherrod Brown. It was rather unusual to see Brown make a public objection before the nomination was finalized, especially one from a president of his own party. This was followed with similar objections behind the scenes from Brown’s House counterpart, Rep. Maxine Waters (D-CA), according to a source close to the situation. So Barr has been left twisting in the wind while the Biden people decide what to do.
Meanwhile, progressives have united behind the candidacy of Mehrsa Baradaran, a law professor, author, and champion of financial reform. She is also the preferred candidate of Sherrod Brown (and disclosure: she serves on the Prospect board). She has been an outspoken supporter of racial equity through financial-inclusion measures like postal banking.
Opponents of Baradaran object to her tough regulatory stance, and contend that she has no practical experience as a bank regulator. This, however, has been solved in other agencies by appointing a strong deputy familiar with the mechanics, leaving major policy questions to the top appointee. When you scratch beneath the surface of these objections, they come down to opposing the very concept of the national bank regulator aggressively regulating national banks.
According to sources who have told the Prospect about internal deliberations, some in the Biden camp want to resolve this standoff by denying the job to either Baradaran or Barr, and finding a third candidate. The Congressional Hispanic Caucus has been promoting Manuel Alvarez, commissioner of the California Department of Financial Protection and Innovation.
But watch out for the innovation part. One of the counts raised by Barr’s critics is that he is too indulgent of financial technology (fintech) firms that engage in online lending, payment processing, and digital currencies. This is particularly important for the next OCC leader, because they will be in a position to determine the fate of a special fintech bank charter initiated during the Trump administration, which would legitimize these firms and, more important, put them under control of a national bank regulator, thereby evading state-level consumer protection laws. Barr has advised a fintech industry–backed trade group and sat on the boards of some fintech firms that were put under federal investigations.
Alvarez is said to be worse on fintech than Barr. He was general counsel and chief compliance officer of a fintech company called Affirm that issues high-interest microloans and has been accused by some of predatory practices. Peter Thiel is a backer in Affirm, and the founder is a close associate of his. We even hear that Alvarez is the preferred candidate of Donald Trump’s departing acting OCC head, Brian Brooks.
Two other people who have been mentioned are Charles Yi, who has served as a senior Senate staffer on financial issues and as general counsel of the FDIC; and Dan Berkovitz, a longtime senior staffer of former Sen. Carl Levin, who also was general counsel at the Commodity Futures Trading Commission under its progressive chair Gary Gensler, who was recently named to head the Securities and Exchange Commission.
One other possibility might be Martin Gruenberg, a longtime FDIC official, who is expected to return to his old job chairing that agency. Gruenberg is a widely admired progressive regulator.
Progressives tracking the nomination believe it’s premature to talk about any alternative, given what they view as a strong candidate in Baradaran. But the relatively short list of plausible alternatives is a testament to the weakness of the progressive bench when it comes to financial regulation. That paucity, in turn, reflects Wall Street dominance of the regulatory process under both parties. All the more reason, say the progressive reformers, to not play the game of settling for an elusive consensus choice.
Despite the temptation of a third way, don’t count out Baradaran yet, or for that matter Barr. This battle is an emblematic case of who will have more influence in the Biden administration—financial reformers or throwbacks to the Wall Street–friendly Geithner era.
