Debate on the new model of the American banking system


By Tolga Dişçi

Saule Omarova is a professor born in the Soviet Union who completed her undergraduate studies at Moscow State University. His dissertation was titled “The Economic Analysis of Karl Marx and the Theory of Revolution in ‘Capital’”.

She immigrated to the United States after the disintegration of the Soviet Union. Omarova, who previously worked as an adviser to the Undersecretary for Internal Finance affiliated with the U.S. Treasury Department, in a study she conducted in 2020 made suggestions for radically changing the current financial system. Omarova criticized the US central bank Fed’s style of working as the ledger of financial intermediary franchisor institutions. So, she came up with a method she named “People’s Ledger”. These criticisms and suggestions have been collected in the study entitled “A People’s Big Book: How to Democratize Money and Finance the Economy”.

Omarova’s study, beyond being an academic study, is significant because it represents a breaking point in the direction of US economic policy. We will explain here why it represents a breaking point and how American political authority responded to it during the fall of dollar hegemony. Before that, we’ll look at Omarova’s suggestions for the central bank.

“After decades of growing inequality, systemic instability, and relentless concentration of economic power, ordinary Americans are demanding a greater voice in the distribution and use of financial resources”; it is the first determination of the study which emphasizes its foundation. Stating that the public is excluded from the use of financial resources, Omarova points to the contrast between the basis of money and the way it is used. A currency is accepted as currency depending on the state that underlies it and acquires the transaction function. However, although the currency is based on the reputation of the state and is supplied to the market by the central bank, the distribution of the currency is organized by intermediary financial organizations such as banks, and not by the state itself. . Therefore, the characteristics of being a currency are given by a public institution, but the use of the money is entrusted to a limited number of non-public foundations which do not act according to the will of the public. This forms the basis of an anti-democratic tension in the financial system. On the other hand, this system also decreases the effectiveness of monetary policy as it restricts the authority of money providers over the distribution of money according to supply. Second, in Omarova’s words, “private banks and other financial institutions distribute sovereign credit money throughout the economy, effectively collecting ‘privatized seigniorage’ for their services.”

Two radical proposals

In this regard, Omarova recommends two important and radical changes. The first is that the accounts are offered directly by the Fed to ordinary American citizens. She supports the idea that, arguing that the application of “FedAccounts”, monetary policy will work more precisely and more efficiently. Opening bank accounts would also redefine the domains of other banks. She determines that the primary objective is to ensure that banks focus on promoting the “real economy” and do not make outsized profits through speculative trading. She said the launch of a central bank digital currency (CBDC), alongside FedAccounts, will serve to revamp the relationship between the central bank and other financial institutions. In this FedAccounts system, not only the quantity of money and the supply of credit will be provided by the Fed, but also the quality of it.

Second, Omarova recommends the creation of a new public institution called the National Investment Authority (NIA). “To fill the critical institutional void between the Fed and the Treasury, the NIA would be tasked with designing and implementing a comprehensive national development strategy.” Omarova said he “will also transact directly in private capital markets, proactively channeling public and private financial resources into large-scale, transformative public infrastructure projects.” Here, Omarova suggests a model that combines monetary and fiscal policies using private sector resources rather than the popular “independent central bank” mentality represented by today’s US economic outlook. This system, according to Omarova, will reverse the familiar pattern of the “public capital, private management” model of “public-private partnership” in favor of the “mixed public and private capital, public management” model. In this system, the NIA will provide productive, non-speculative, and non-inflationary investment opportunities for private capital entrepreneurship. On the other hand, it will use the information-producing capacity of private markets, such as price signals, to make public investment decisions.

Target: real economy productivity

On this basis, the “people’s ledger” will ensure that socially harmful speculative exchanges will be hindered, the financial system will become less complicated and more efficient, and it will be better able to fulfill its essential function of supporting a productive economy. In this regard, the financial system should operate in a more inclusive, efficient and stable manner.

Although it was written in the United States, it is not very surprising that a scholar wrote these suggestions. US President Joe Biden has nominated Saule Omarova to head the Office of the Comptroller of the Currency, the institution responsible for regulating and supervising all domestic banks, thrift institutions and foreign banks that operate in the United States. United States: An offer that would make Omarova one of the most important authorized persons in the American banking system was treated negatively by banking organizations, lobbies and their representatives in the senate. Eventually, the offer was withdrawn. Critics against Omarova have pointed out that the ideas are “extremely leftist” and that she is against free market capitalism. Also, the idea of ​​ending today’s widespread banking system has been criticized on the grounds that it would displace many private banks and other financial institutions.


While there have been overblown criticisms referring to Omarova’s background, that of course doesn’t show us that Biden is a socialist or opposed to free-market capitalism. The same cannot be said for Omarova. What is significant here is that Biden’s attempt to place Omarova in one of the most important positions in the American banking system while proposing to combine monetary authority with fiscal authority, eliminate trade speculative in financial transactions and to channel transactions to increase the productivity of the real economy. These proposals do not include an objection to the international hegemony of the United States and FedAccounts. However, the “people’s ledger” system aims to increase the productivity of the real economy and determines that financial intermediaries act against social benefits and undermine the effectiveness of economic policies. It also aims to increase the government’s effect on monetary policy with a model in which policymakers have greater responsibilities. At these points, Omarova’s recommendation for the bureau chief is an indicator of the separation between the new and the old understanding. In light of the United States’ numerous military defeats and the long-term international depreciation of the dollar, these improvements imply a clearer view of the country’s potential breaking point.


● Omarova, Saule T. “The People’s Ledger: How to Democratize Money and Finance the

Economics.” Vanderbilt Law Review, no. 74, 2020, pp. 1231 – 1300.


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