Last month, we wrote about several important developments to protect the firearms industry and America’s gun owners from discrimination in the provision of financial services. In June, for instance, the Wall Street Journal stated that representatives of several big banks were “trying to get out of the crosshairs of Republican states that are cracking down on companies for ‘woke’ policies that conservative policymakers say are illegal and discriminatory,” including refusal to do business with firearm or fossil fuel industries. The banks, it was said, were apprehensive about the Trump administration stepping in to more forcefully deal with politically-motivated service denials – “debanking” – of conservatives, Christians, and other entities.
President Donald Trump’s administration has now issued an Executive Order addressing those kinds of discrimination in access to banking. The order, Guaranteeing Fair Banking for All Americans, dated August 7th, targets “politicized or unlawful debanking” and the use of so-called “reputational risk” assessments that could result in such debanking.
The Order cites many examples as justification. Some financial institutions “participated in Government-directed surveillance programs targeting persons participating in activities and causes commonly associated with conservatism,” as in flagging customers who “made transactions related to companies like ‘Cabela’s’ and ‘Bass Pro Shop’ or who made peer-to-peer payments that involved terms like ‘Trump’ or ‘MAGA,’ even though there was no specific evidence tying those individuals to criminal conduct.” It refers to the notorious use of federal bank regulators’ authority and influence over regulated banks to “direct or otherwise encourage politicized or unlawful debanking activities” in “Operation Choke Point.”
Choke Point, implemented through then Attorney General Eric Holder’s Justice Department and the Federal Deposit Insurance Corporation (FDIC), weaponized “reputational risk” as a means of “choking out” certain disfavored but legitimate businesses from access to essential banking and financial services. Ostensibly aimed at curtailing consumer fraud, Choke Point used federal regulators to pressure banks into cutting off access to credit and bank services for businesses arbitrarily classified as “high risk” (including firearm and ammunition dealers), even those being operated without any evidence of fraud and in complete compliance with the law. A 2014 report by the U.S. House Committee on Oversight and Government Reform found that the Justice Department, in pursuit of Choke Point, lacked “adequate legal authority” and “radically and inappropriately expanded its own authority under FIRREA [Financial Institutions Reform, Recovery, and Enforcement Act of 1989].” The “operation” was predicated on the notion “that merely providing normal banking services to certain merchants creates a ‘reputational risk’ that is an actionable violation” of that law.
President Trump ended Operation Choke Point in 2017. The Justice Department later described it as a “misguided initiative” and made a commitment to future enforcement “without regard to political preferences,” but debanking never really disappeared.
A new article in the Daily Mail (Deep-State Biden-Obama plot to financially ruin conservative Americans) quotes a source alleging that “[r]egulators under Biden looked for ways to do [debanking] all over again.” An official for Alliance for Defending Freedom, a charity that advocates against debanking, claims the practice was “‘turbocharged’ under Biden’s watch” and noted that in 2021, his own charity was itself debanked.
The new Executive Order establishes, as formal government policy, the principle that “no American should be denied access to financial services because of their constitutionally or statutorily protected beliefs, affiliations, or political views, and [ensures] 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.”
The Order requires that within six months, federal banking regulators “remove the use of reputation risk or equivalent concepts that could result in politicized or unlawful debanking, as well as any other considerations that could be used to engage in such debanking” from their internal documents, and reorient their practices “to ensure that any regulated firm’s or individual’s reputation is considered for regulatory, supervisory, banking, or enforcement purposes solely to the extent necessary to reach a reasonable and apolitical risk-based assessment.” At the same time, the Secretary of the Treasury, in consultation with the Assistant to the President for Economic Policy, is to “develop a comprehensive strategy for further measures to combat politicized or unlawful debanking activities.”
Banking regulators must also conduct an audit or review to identify financial institutions that have had any past or current, formal or informal, policies or practices that “require, encourage, or otherwise influence such financial institution to engage in politicized or unlawful debanking” and take appropriate remedial action, including levying fines, issuing consent decrees, or imposing other disciplinary measures under laws like the Federal Trade Commission Act, the Consumer Financial Protection Act, and the Equal Credit Opportunity Act. Any financial institution that has engaged in unlawful debanking on the basis of religion and that does not come into compliance is to be referred to the Attorney General for an appropriate civil action.
Within 120 days of the Order, the Small Business Administration (SBA) is directed to have all financial institutions, with which it guarantees loans under SBA lending programs, identify and reinstate any previous clients of the institution or any subsidiaries that were unlawfully denied service through a politicized or unlawful debanking action. The same financial institutions are to identify and give notice to all potential clients that were denied access to financial services or payment processing services provided by the institution or its subsidiaries through an unlawful politicized or unlawful debanking action, and advise the client of “the renewed option to engage in such services previously denied.”
While much hinges on enforcement, the Order is a good step towards curtailing the inappropriate use of federal oversight powers, unjustified financial industry blacklists and “woke” banking, and the illegal surveillance of legitimate businesses and law-abiding individuals, including the gun industry and everyday Americans simply exercising their fundamental Second Amendment rights. “Such practices,” as the Order states, “are incompatible with a free society and the principle that the provision of banking services should be based on material, measurable, and justifiable risks.” They “undermine public trust in banking institutions and their regulators, discriminate against political beliefs and free expression of those beliefs, and weaponize a politicized regulatory state.”
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