


The Senate Banking Committee on Wednesday took on the trend of major financial institutions “debanking” customers because of their politics.
At a hearing exploring the trend, senators said new evidence suggested government regulators had leaned on financial institutions to cut off services to digital asset firms, political figures, conservative-aligned businesses and individuals.
Committee Chairman Tim Scott called it “alarming and disheartening.”
“Under the Biden administration, we’ve seen the rise of what many are calling operation Choke Point 2.0, where federal regulators exploited their power to pressure banks to cut off services to individuals and businesses with conservative dispositions — or folks aligned with industries they just didn’t like,” Mr. Scott said.
Sen. Jack Reed, Rhode Island Democrat, said banks often deal in reputational risk, which often is the justification for debanking either by the bank or under pressure from regulators.
He said Congress should come up with a “compromise that would allow reputational risk to be effective, but to put up some guardrails with regard to its application.”
Sen. Thom Tillis, North Carolina Republican, countered that reputational risk is too broad and can be abused by regulators and bank executives to shut out customers.
“I think you’ve got people going into the banks, saying, ’I don’t know [about] these gun people,’ or fill in the blank,” he said.
Just hours early, Acting FDIC Chairman Travis Hill released 175 documents that show the FDIC actively intervened in banks’ dealings with crypto companies, including directing banks to restrict U.S. dollar deposits in accounts for crypto firms.
The FDIC issued at least 24 “pause letters” to banks, instructing them to stop or lessen crypto-related services.
Mr. Scott said FDIC documents, which came to light as the Trump administration took over, “proved that Choke Point 2.0 was real.”
Nathan McCauley, CEO of Anchorage Digital, an institutional crypto platform that is the nation’s only federally chartered crypto bank, testified that his business was suddenly debanked similar to other crypto businesses.
“One day in June of 2023 we received an urgent email from the bank saying they need to speak with us. That day, on the call, they told us they were closing our account in 30 days because they were not comfortable with our crypto clients and their transactions,” Mr. McCauley said.
“They refused to provide any further explanation or allow us to speak with the risk management team. Needless to say, I was shocked,” he said.
Republicans said debanking occurs because inside the banking industry are partisan ideologues operating within banks, public affairs divisions controlling reputational risk committees that exert their influence to “choke off disfavored industries,” and external political activist groups pressure banks with shareholder proposals, particularly enabled by proxy advisory firms.
“Lastly, we’ve had activist regulators that have abused their supervisory authority. They’ve imposed their own policy agendas that were never authorized by actual banking statutes or by the Congress,” Sen. Bill Hagerty, Tennessee Republican, said.
The top Democrat on the committee, Sen. Elizabeth Warren of Massachusetts, agreed that financial institutions are debanking customers unfairly. She said the Consumer Financial Protection Bureau, which was her brainchild as a law professor in 2007, is necessary to protect Americans from suddenly losing their banking services.
“We know from the consumer complaint hotline that millions of Americans of all political stripes have had the same experience. Tens of millions of customers have been blacklisted by the banking industry because they over-drafted their account a few times,” Ms. Warren said.
• Kerry Picket can be reached at kpicket@washingtontimes.com.