Ode to Saule
It sounded like a 1950s red scare moment, but it happened in November 2021. Republican Senator John Kennedy, in a southern twang, told a Biden nominee during her confirmation hearing "I don't know whether to call you colleague or comrade." He asked whether she'd formally left the Kosumol, a Soviet youth league.
Kennedy was trying to delegitimize Saule Omarova, a candidate for the Comptroller of the Currency in the Biden Administration. Indeed, she was born in Soviet Russia but gave up her citizenship decades ago. She has since worked in conservative administrations. But Kennedy couldn't help grilling her on her membership in the Communist Party.
Ryan Grim did a great summary of the moment and what was at stake in it. Omarova has actually been proposed some radical financial things during her time in the academy since she last worked in the Treasury Department under the second Bush Administration. The absurdity of Kennedy's comments even had his own party members shaking their heads and apologizing on his behalf. But like so many references to the US's Cold War history, this red baiting reference resonated in an outsized way. For a brief moment, communism was viral in the news cycle (like that time Bernie Sanders said it was true and good that Fidel Castro increased his people's literacy rate exponentially after the Cuban Revolution--which, btw, is true.)
And yet. The stuff Omarova worked on at Cornell as a professor, and its implications for school finance--specifically school building finance--is actually really interesting. Capitalists in both political parties had good reason to attack her. She has created a framework for infrastructure investment policy that any practical-minded communist now would most likely feel okay about.
Grim does a good job of showing how Kennedy's off the wall comment spoke to the larger opposition from arch-capitalists in both parties to Omarova. Our old friend Pat Toomey, for instance, couldn't believe some of the things that Omarova was proposing along with Tom Tillis and Tim Scott. Scott couldn't believe that she proposed having people's bank accounts at the Federal Reserve, calling it "the people's ledger." Grim summarizes her basic proposal: Why shouldn't there be more democratic power in finance, in this case personal banking?
When it came time to move her nomination forward, conservative Democrats told the Biden administration to drop her. She then backed out of her own accord. Omarova took to NPR and called out the politicians that abandoned her, saying that she was standing up to finance capitalists, specifically big banks, and they defeated her.
Her research does legitimately challenge neoliberal finance, particularly in how the federal government invests in its infrastructure like school buildings.
NIB and Nicky Mac
In the hearing, Tillis brought up another one of her ideas she's worked on recently: a national investment authority (NIA). According to a short memo she'd written on this proposal, the NIA:
would be a federal entity created by an Act of Congress. It would design, finance, and implement a national strategy of economic development with an emphasis on long-term sustainability and social inclusion. It would act as a direct financial market participant, channeling both public and private money into large-scale infrastructure projects that typically do not get funded in private capital markets. Such projects would include both physical infrastructure (such as energy, transport, broadband internet, water management) and critical social infrastructure (such as public education, affordable housing, and healthcare).
How would the NIA do this? First, by creating a National Investment Bank (NIB):
The NIB would be the NIA’s lender arm. It would focus on credit-based infrastructure finance, along the lines of the established “government-sponsored enterprise” (GSE) model. It would support and amplify the flow of credit into infrastructure projects through a combination of direct federal grants, loans, guarantees, insurance, securitization, and secondary market-making. For example, the NIB would purchase and pool revenue bonds and project bonds issued by municipalities, public utilities, and other government instrumentalities, as well as qualifying bonds issued by private entities for the purposes of financing publicly beneficial infrastructure projects.
Basically, the NIB is a public buyer in the municipal bond market that would incentivize private capital to finance public infrastructure. Run by a board of 5-7 people appointed for ten-year terms, this bank could finance big projects left behind in the various crises from 2008 to now.
A corresponding national capital management corporation (funnily nicknamed Nicky Mac) would "guarantee the return of the principal investment to passive investors in funds that prioritize commercially unprofitable projects like toll-free roads, adult education centers, or public parks." Omarova worked on this idea with Robert Hockett at Cornell, a former Federal Reserve gone rogue and supporting all kinds of initiatives like this (he even came to an event we organized on using the MLF to finance school building construction).
The proposal doesn't sound that radical. But strip away the discourse about private investment, etc., and you find a significant challenge to a powerful fraction of the capitalist ruling class. It'd be something like a public option for public finance, much like a public option in health insurance markets where the federal government can buy down the cost of healthcare for its people. These are non-reformist reforms. They break the first cracks in heavily commodified apparatuses, directing them towards more democratic and popular control. The NIA creates this crack in an even more precious region of capitalism: infrastructure finance.
The bondholder class struggle
Politicians like Pat Toomey and the editorial board of the Bond Buyer Magazine all have a keen interest in things like the NIA not existing. They want to have control over making tax-free profits from municipal bonds. They want to be the ones that control the market for public credit. They make a lot of money doing this.
Retired millionaires and billionaires, credit rating agencies, investment banks, corporate banks, bond insurance agencies, whole sectors of law firms, consultants, advisors--all these people make their parasitic living off privately controlled public finance. When school districts need money to fix up their buildings, they have to go to this bondholder class.
The NIA is a publicly-controlled public finance. School districts could go to the NIA instead of private bankers for resources. The bondholder class stands to lose their control if such an authority existed. This is the reason why Pat Toomey, who also opposed Omarova, killed off the Municipal Liquidity Facility and salted the earth after its burial too.
One of the reasons I focus so much on these kinds of proposals is that they are a direct challenge to the bondholder class. Getting democratic control of public finance would take power away from capital. But I'm not advocating this because I'm a socialist and want to see capital weaker for it's own sake. This is about education.
School districts could save billions nationally on the loans they need to fix up their buildings. In Philadelphia, this is a life or death issue. Students and teacher get sick from the deferred maintenance of its buildings, caused largely because of lack of reliable financing. A teacher friend of mine recently had a piece of their classroom's ceiling randomly break and fall during the school day. Luckily students weren't in the room, but if they were it would have killed someone.
The school buildings in Philly are falling apart. Trying to get the requisite capital to fix them is stuck in a morass of political, economic, and cultural gridlock. We need people like Omarova in government so we can hold them accountable to the ideas they've researched, like a national investment authority, that would break this gridlock. Unfortunately, Omarova didn't make it this time.
Maybe she will next time.