Key Words: ‘It’s a trillion-dollar question’: Saule Omarova — Biden’s withdrawn banking nominee — ponders a ‘Fannie Mae’ for climate change
“‘It’s a trillion-dollar question. If I knew how to sell [this] effectively to politicians, I would have done it by now.’”
Saule Omarova, President Joe Biden’s onetime controversial pick to run the Office of the Comptroller of the Currency, a major watchdog of the banking system, is no longer be headed for that role, but she’s not shying away from progressive thinking for new-look financing needed to potentially save the world.
Omarova is a fellow at the Berggruen Institute and a Cornell law professor. On Thursday, she released a 100-plus-page proposal to create a new federal agency, the National Investment Authority.
Such an agency would, among other things, direct public money and cushion private money meant for renewable energy and climate-friendly infrastructure projects. These efforts are moving too slowly by conventional means, such as Department of Energy loans, or private-equity projects whose drivers are too profit-focused, by her judgement.
In many ways, Omarova wants to create — or at least further the discussion for — a “Fannie Mae” for climate change. Just like that quasi-governmental agency buys up private mortgages in order to cut the cost of such borrowing for qualifying homeowners, the National Investment Authority could scoop up private green investments and package them into securities, essentially deepening markets.
She’s essentially saying the Federal Reserve and the Treasury Department, for starters, are not designed to meet this unprecedented burden — climate change.
“The COVID-19 crisis brought into sharp relief many of our nation’s deepest and thorniest socio-economic and political problems. The pandemic made it impossible to continue ignoring the existential threat posed by global climate change, growing inequality, erosion of domestic industrial capacity, and other structural faults in the
foundation of American society,” she wrote in setting up the paper.
“It necessitates a strong institutional platform: a federal entity with democratic accountability, broad legal authority, and in-house capacity to identify long term economic development goals and to translate them into specific investments,” she wrote. “Congressional paralysis and partisan battles over federal budget deficits render the U.S. Treasury incapable of leading a real infrastructure reconstruction program. The Federal Reserve has not been able to step into the resulting gap,
primarily because of its legal mandate focused on conducting monetary
policy, and the lack of an institutional apparatus for direct capital allocation.”
She said reliance on these institutions put the United States as an outlier in industrialized economies, most of which have some form of development institution.
The paper has long been in the works but also hits at a time when concerns are heightened for the future of energy markets
after Russia’s invasion of Ukraine. In addition, post-COVID supply-chain bottlenecks have triggered a rethink of the merits of globalization by well-known market voices, including BlackRock’s Larry Fink, which could push the U.S. to raise its competitiveness domestically.
Read: Biden and allies expected to announce greater shipments of U.S. natural gas to Europe on Friday, in bid to reduce continent’s reliance on Russia
What’s more, the Securities and Exchange Commission just this week is drawing ever closer to demanding that companies reveal to investors the emissions their business creates, even indirectly.
“ ‘The pandemic made it impossible to continue ignoring the existential threat posed by global climate change, growing inequality, erosion of domestic industrial capacity, and other structural faults in the foundation of American society.’”
The thrust of Omarova’s thinking is similar to a proposal from the Bipartisan Policy Center. It has suggested creation of a Clean Energy Deployment Agency, independent of partisanship. CEDA is imagined as “a business-driven federal financing agency with access to a diverse set of tools [that] could better leverage private investment to accelerate the deployment of clean energy technologies developed in the United States.”
But Omarova is also keenly aware of how new thinking on energy, finance and most market institutions can divide the country.
Read: Banks are still working with oil and gas companies, despite joining climate pledge
“It’s a trillion-dollar question,” she told Axios. “If I knew how to sell [this] effectively to politicians, I would have done it by now.”
Late last year, she stood for early-round congressional questions for her nomination but ultimately withdrew from consideration for the banking regulator post amid pressure from lawmakers worried she’d dismantle the banking system.
Some of the attacks included outright suggestions that the Kazakhstan-born U.S. citizen held “communist” views. Moderate Democrats grew increasingly nervous that her progressive writings would make confirmation challenging in the closely-divided Senate.