Remember the “debanking scandal?” A new investigative report by the Office of the Comptroller of the Currency ordered by President Trump confirms it really happened.
Conservative groups and businesses were targeted and lost their banking privileges. That list of out-of-favor industries included oil and gas producers, coal companies, gun makers, tobacco firms and the crypto industry among others that were a suspect class, even though they were engaged in legal commerce.
The OCC also confirmed our suspicions that the real culprits in the debanking movement weren’t the big banks but leftist bureaucrats and overzealous bank regulators.
The bank examiners invented a concept called “reputation risk.” Banks got black marks for doing business with customers because of their political, religious, or social views, and were encouraged to restrict banking privileges for entire industries.
The FDIC admitted in 2018 that it used reputation risk reviews during Operation Choke Point. Even the OCC itself was guilty of encouraging banks to drop politically-controversial industries.
Banks don’t generally turn away customers – especially not depositors – but under this strict scrutiny by regulators, banks took the safe bet and turned away lawful businesses.
The Trump administration’s OCC and FDIC have banned reputation risk. But the next administration could reverse it. Congress should make the fix permanent by passing Senator Tim Scott’s FIRM Act, which prohibits regulators from using reputation risk to manipulate bank behavior.
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