Throughout this week, the Washington Examiner’s Restoring America project will feature its latest series, “Reforming the Deep State: Reining in the Federal Bureaucracy.” We invited some of the best policy minds in the conservative movement to speak to the issues of what waste, fraud, abuse, and unaccountability exist throughout the federal government and what still needs to be done. To read more from this series, click here.

Banks are legally prohibited from discriminating in lending based on race and gender. But what stops them or their regulators from making politically biased decisions to drop an individual, family, or company in the name of reducing “reputational” risk? 

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As it turns out, the answer is not much. Welcome to the world of debanking. 

Over the past several years, we have seen a growing trend of federal regulators taking advantage of vague and overly broad regulations to advance an agenda, rooting their regulatory guidance in political ideological motivations instead of quantitative financial terms. When banks operationalize this guidance, rightly unwilling to risk the steep penalties that come with a lack of compliance, the perfect conditions are created for those on the “wrong” side of the aisle to find themselves wrongly classified as a “reputational risk” and suddenly unable to access financial services — debanked. 

Debanking is not a hypothetical threat. It’s already happening. The Consumer Financial Protection Bureau has reportedly received more than 15,000 complaints since 2016, representing thousands of stories like that of Indigenous Advanced Ministries, a Tennessee religious nonprofit group that found itself facing account closure when Bank of America deemed them “a business type we have chosen not to service.” Other reports include instances of federal regulators encouraging banks to flag individuals for transactions with merchants such as Bass Pro Shops, Cabela’s, or for using terms like “MAGA” in online payments, without evidence of criminal activity. 

THE LEFT’S REAL POWER IS CONTROLLING THE BUREAUCRACY

President Donald Trump understands the risk of debanking and the role that regulators play: “The regulators control the banks,” he said in June. “It’s not the president of the bank. … A regulator can put that bank out of business.” This gross government overreach means that federal regulators have nearly supreme power to weaponize the American banking system as they see fit. 

The first Trump administration sought to end debanking through the Fair Access to Financial Services rulemaking. The rule prohibited denying banking services to individuals based on factors such as reputational risks. Unfortunately, the Biden administration wasted no time reversing this rule in 2021, enabling regulators to reimplement discriminatory guidelines focused on factors such as “reputational risk.” 

But for all the focus on “reputational risk”, regulators missed what mattered most — stopping bank failures. 

In a mid-May speech, then-Deputy Treasury Secretary Michael Faulkender explained: “Our financial regulatory agenda must include a fundamental refocusing of supervisors’ priorities … That focuses on material risk taking, rather than box checking or subjective reputational issues. There is perhaps no better recent case study for this point than the bank failures in spring 2023. A careful review of those bank failures underscores how centering supervision on management and other governance matters can distract examiners and banks’ risk managers from the real risks to safety and soundness. The associated mission drift can lend itself to political ends, as we saw with the focus on climate risk and the debanking of disfavored industries.” 

Now, Washington is taking action. 

To refocus the banking regulator decisions, in early August, Trump issued an executive order on Guaranteeing Fair Banking for All Americans. It directs federal regulators to ensure banks can’t discriminate against customers for their political or religious beliefs, lawful business activities, or industry affiliations. It requires banks to provide clear reasons for account closures, rather than vague references to “reputational risk.” And it restores the proper role of financial oversight — ensuring safety and soundness — without letting politics dictate who gets a bank account. 

As we outline in America First Policy Institute’s report on debanking, Congress should follow the president’s lead and end debanking once and for all. The Financial Integrity and Regulation Management Act would remove the subjective criteria of reputational risk. It awaits a full vote in the Senate and should be passed. 

CLICK HERE TO READ MORE FROM THE ‘REFORMING THE DEEP STATE’ SERIES

Additionally, federal policymakers should establish a federal fair access standard prohibiting financial institutions from making business decisions for political reasons. This would also stop states from developing separate debanking legislation that complicates national banking operations with a patchwork of inconsistent and conflicting laws. 

Balance sheets and capital safety are the proper domains of banks. Political bias has no place in the teller’s line, and no one should be denied access to a bank account or financial services because of their political beliefs. We can ensure that federal regulators can no longer weaponize America’s banks. The time for Congress to act is now.

Jill Homan serves as deputy director for economy & trade and campaign director for American Revival at the America First Policy Institute.