The Bureaucracy Enabled Debanking. Now it Can Stop it

Originally published by the Washington Examiner

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?

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.

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