Partha Chakraborty is an Indian-born immigrant; a naturalized US Citizen since 2018. Educated in India and at Cornell University, Partha is currently an entrepreneur in water technologies, Blockchain, and wealth management in the US and in India. The views expressed are his own.
“Far above the busy humming
Of the bustling town,
Reared against the arch of heaven,
Looks she proudly down”
Thus reads the second verse of Alma Mater of Cornell University. On-campus rises Myron Taylor Hall, a Collegiate Gothic beauty built-in 1932, home of the Cornell Law School. I earned a Ph.D. in Economics at the Arts & Sciences College and I have distinct and fond memories of the law library – lights petering out through multi-storied windows into the arched study area. Somewhere in its caverns is the office of Saule T. Omarova, Beth & Marc Goldberg Professor of Law; depending on its location she may actually look down the slopes, possibly looking down over Cayuga Lake on a good day.
Gorgeous views from her office that she may, or not, have, her recent thought pieces make it appear she does look down on people’s agency over their own monies as she waxes eloquent about a “People’s Ledger” or a “National Investment Authority”.
In a 70-page monologue, Prof. Omarova published last month, “The People’s Ledger: How to Democratize Money and Finance the Economy” (Vanderbilt Law Review, Vol. 74, Number 5, Oct. 2021). Prof. Omarova is upfront about what she aims as a “synthesizing and agenda-setting exercise”. She writes “(F)ocusing on the U.S. Federal Reserve System (“the Fed”), the Article outlines a series of structural reforms that would radically redefine the role of a central bank as the ultimate public platform for generating, modulating, and allocating financial resources in a democratic economy—the People’s Ledger. On the liability side of the ledger, the Article envisions the complete migration of demand deposit accounts to the Fed’s balance sheet and explores the full range of new, more direct and more flexible, monetary policy tools enabled by this shift. On the asset side, it advocates a comprehensive qualitative restructuring of the Fed’s investment portfolio, which would maximize its capacity to channel credit to productive uses in the nation’s economy. This compositional overhaul of the Fed’s balance sheet would fundamentally alter the operations and systemic footprints of private banks, funds, derivatives dealers, and other financial institutions and markets.”
Functional elements of her proposal include an end of bank deposits as we know it and replacing them with “universally held FedAccounts”. She writes, “(O)n the liability side, the Article envisions the ultimate “end-state” whereby central bank accounts fully replace—rather than compete with—private bank deposits”. On the other side of the ledger, her proposals are as radical. “Under this proposal, the Fed’s principal asset holdings would fall into three categories: (1) redesigned “discount window” loans to qualifying lenders; (2) securities issued by existing and newly created public instrumentalities for purposes of financing large-scale public infrastructure projects; and (3) an expanded portfolio of trading assets maintained for purposes of financial-market stabilization.”
Prof. Omarova concedes that “it takes a system to beat a system” and that is what she is looking to do in “the broader quest for more equitable and inclusive modes of finance.” Further, she contends that a radical approach is the way to go because it “is especially important to recognize that taking a more limited, piecemeal approach to reform is not necessarily the most prudent or practically feasible option.”
In Spring of 2018, she proposed a similar idea in the form of “National Investment Authority”. In “Private Wealth and Public Goods: A Case for a National Investment Authority”, a paper she co-wrote with Professor Robert C. Hockett, also of Cornell Law School, she advocated for a “new public instrumentality-a National Investment Authority (“NIA’) – charged with the critical task of devising and implementing a comprehensive long-term development strategy for the United States”. NIA is deemed to be a “public-private entity that combines the unique strengths of public instrumentalities-4heir vast scale, lengthy investment horizons, and explicit backing by the public’s full faith and credit-with the micro-informational advantages of private market actors… By channeling presently speculative private capital back into the real economy, moreover, the NIA plays an important role in enhancing the resilience and stability of the U.S. and global financial systems”.
Combined, by the authors’ own admission, FedAccounts will end private bank accounts, NIA will decide where the money goes ending up on the asset side of the People’s Ledger. This is exactly what defines a Socialistic economic system – consolidated allocation of pooled economic resources. If somebody claims the end of the USA as a result, they are not being funny.
Early in my Cornell days, I imbibed a lesson that I hold golden to this day. US Capitalistic system is exceptionally efficient in allocating resources and better than anything else that has ever been dreamed of. Yes, individual decisions are often wrong, a fact I know all too well as an entrepreneur. The frailty of individual decision making is exactly what makes the system collectively so resilient. The speculation that she derides so contemptuously is exactly what fills the gap, even with all warts and insufficiencies. What she is proposing has been tried repeatedly, and most famously in her country of origin, where self-appointed know-it-alls put an economy to the ground and killed hundreds of millions with impunity in seven decades’ reign of terror.
As an Economist by training, and as a Financial Analyst in my previous avatar, I am aware of the possibility of a systemic risk when decisions are consolidated. Small mistakes, errors and frictions are exactly what keeps the blood flowing through a capitalistic system, and keeps it ready for all challenges. Moreover, market capitalism is the only economic framework that seamlessly weds democracy, free speech and individual freedom. Why Prof. misses this essence of our existence is a question far above my pay grade.
The fact that such heresy is coming from a nominee for the position of Comptroller in the Office of the Comptroller of the Currency rings alarm bells. If confirmed, she will have a five-year term where she will have the final say in insuring success of the banking system, all of its products, services and innovations, including those not yet dreamed of. To wit, she will have all the freedom to set agendas as she set out to do in People’s Ledger. No wonder reasonable people are crying themselves hoarse.
I hope I speak for all immigrants when I claim this country, the United States of America, have a moral duty to uphold the values that brought us here, even when we were wretched refuse of the teeming shores we left behind. Among others, it is the pledge to defend against tyrannies. That includes the tyranny of the few, the few who decide how our meager resources put to use. Prof. Omarova’s conceptual frameworks almost literally snatches them away from us, and makes us quench thirst with the drivels that drip, and that only. No more agency over our own finance, no more the freedom to make mistakes, fall to the ground only to fly again.
Prof. Omarova can say and think of anything within the premises of the Big Red, and debate all she wants in graduate seminars under advisement. But when her ideas, and ideals, are so radical that results in the fundamental promise of America as the bulwark against autocratic, socialistic and communistic regimes, she loses her credence for the high, and functionally critical, position of head of OCC. No Professor Omarova, you shall not ascend to the chair, not if we say No in unison.