Opinion: Taking politics out of banking

You can cash that check now.

On Aug. 7, President Donald Trump delivered a federal solution to remove the regulations that result in politicized or unlawful debanking.

The executive order, “Guaranteeing Fair Banking for All Americans," states, “It is the policy of the United States that no American should be denied access to financial services because of their constitutionally or statutorily protected beliefs, affiliations, or political views, and to ensure that politicized or unlawful debanking is not used as a tool to inhibit such beliefs, affiliations, or political views. Banking decisions must instead be made on the basis of individualized, objective, and risk-based analyses.”

Debanking is the process where a bank customer is returned their money and told their accounts are closed without reason and no access to an appeals process. Customers are cut off from basic economic activities. For criminals utilizing the banking system, this is a great tool to cut off financial access and aid law enforcement. But for law-abiding citizens debanking can victimize them for their political beliefs.

For example, under the Obama administration, banks were discouraged from conducting business with firearm retailers and manufacturers and payday lenders. The Biden administration exploited this practice to cut off financial services to political opponents.

In a Feb. 5, Senate Banking Committee Hearing, Chair Tim Scott, R-S.C., said: “It is incredibly alarming and disheartening to hear stories about financial institutions cutting off services to digital asset firms, political figures, and conservative-aligned businesses and individuals. Under the Biden administration, we’ve seen the rise of what many are calling Operation Chokepoint 2.0, where federal regulators exploited their power, pressuring banks to cut off services to individuals and businesses with conservative disposition, or folks aligned with industries they just didn’t like – like the color of one’s skin in my family’s history. The message is crystal clear: no regulator, and no bank, is above the principles of fairness and market access.”

The new executive order focuses on the use of reputational risk, which is the risk banks take when serving certain customers. An undisclosed banking policy expert said, “You had regulators coming in and saying, ‘We determined this industry to be riskier than this one, and so, therefore, you should have to do all these additional requirements in order to do business with this company.'”

"Increase the $10,000 threshold that triggers the creation of a Currency Transaction Report, which has not been updated since it was implemented when Richard Nixon was in the White House."

"Update requirements for when and how often banks have to file Suspicious Activity Reports."

"Bring accountability and transparency to how agencies issue guidance and conduct examinations of financial institutions."

The real solution for debanking has always been ensuring that federal changes protect customers from discriminatory practices, not add to the complexity of existing banking regulations. This new executive order is a positive step forward. MSPC will continue to support national efforts to remove politicization from the banking process.

Madi Clark is a Senior Policy Analyst for the Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org.