Economy & Business

A False Choice on Banks and Guns

A Bank of America logo in New York City (Stephanie Keith/Reuters)
Stopping financial institutions from imposing gun control isn’t intervening in the free market.

Conservatives hate it when the government intervenes in the free market. Conservatives also support the Second Amendment. What happens when those two beliefs are in conflict? That’s the dilemma dividing congressional Republicans regarding banks and guns.

Some banks have decided not only to refuse to lend money to weapons manufacturers, but also to impose restrictions on business clients who sell guns. Banks are even exploring ways to monitor card holders’ gun purchases, possibly a prelude to far more intrusive measures directed against individual customers rather than retail clients.

The choice between concocting a new regulation that would violate free-market principles and letting financial institutions destroy a legal industry has split the GOP. But the notion that what these banks are doing is merely the free market at work is a distortion of the truth. These restrictions are an attempt to use banks’ power to circumvent the normal legal and political process. For Congress to stand by and let bankers neutralize the Second Amendment would be a dereliction of duty, not a defense of the free market.

The attitude of some banks toward guns is similar to President Obama’s stance on immigration laws: If Congress chooses not to act, that gives them license to act on their own. The primary cheerleader for this movement is New York Times financial columnist Andrew Ross Sorkin. The writer, who doubles as one of the creators of Billions, the Showtime program about a United States Attorney and a billionaire hedge-fund owner who manipulate, exploit, and violate the law to advance their interests, has been urging the financial industry to put gun manufacturers out of business.

These efforts started with Citicorp saying it would forbid its retail clients — businesses that, for example, receive loans or offer store credit cards — to sell guns to anyone who didn’t pass a background check (which is already the law for licensed gun dealers). It also barred sales to customers under 21, as well as sales of bump stocks.

Bank of America followed, saying it would no longer lend money to manufacturers of “military style” weapons. (Bank of America was in a particularly interesting position since it was part of a group refinancing Remington Outdoor, a major manufacturer of assault weapons, as it emerged from bankruptcy.) BlackRock Funds, the world’s largest asset manager, said it would offer a new investment fund that excluded gun manufacturers and sellers.

In the resulting outcry, part of the problem was that the discussion mixed up two very different issues: the willingness of banks to lend money to weapons manufacturers and the ability of consumers to use credit cards to make purchases. While banks’ lending policies can have a devastating impact on the companies denied financing, there is no inherent right to a loan from any bank. But if the banks use their financial clout, which they maintain under federal oversight, to impose restrictions on companies’ sales practices, that is a significant step toward a bank-imposed gun-control regime — one that could ultimately choke off the right of consumers to purchase legal products.

When so-called socially responsible lending and investing crosses over into ordering companies to stop selling certain products or to curtail sales to certain buyers, banks begin assuming a power that no one voted to give them. And one needn’t be an alarmist to understand that once financial institutions are allowed to start down this road, they could end up curtailing the rights of businesses and consumers in a way that is incompatible with democracy.

Those who want to ban guns should make their case honestly, by seeking to repeal the Second Amendment.

However, pushing back against these policies goes against the grain for conservatives, who have spent the last few years trying to reverse the overzealous regulatory fervor of the Obama administration. (The bill recently passed by Congress to pull back on some of the Dodd-Frank restrictions on small banks is an example.) That’s made the efforts of the National Rifle Association and its sympathizers to mobilize the House and Senate GOP caucuses more difficult. Senator Pat Toomey (R., Pa.) spoke for most conservatives when he told the New York Times that, unlike liberals, “I generally don’t like to tell businesses how to conduct their business.”

The irony is that the NRA and its supporters are now sounding like the progressives of the late 19th and early 20th centuries, who complained about a few Wall Street figures, such as J. P. Morgan, making financial decisions for the nation without any legal authority or accountability to the people’s elected representatives. Yet while the Left is enjoying the agony of free-market conservatives, banks have likely pushed the envelope too far, even for latter-day advocates of laissez-faire economics.

As some Republicans have pointed out, the banks are not free agents. They rely on taxpayer bailouts when they get in trouble, and their use of credit cards is already highly regulated. If some of them are going to politicize their lending and make it harder to sell guns, that crosses over into territory where Washington is already deeply involved. In addition, of course, there is a long and dishonorable tradition of banks’ using their lending power to discriminate, and of government stepping in to require fair treatment.

Those who want to ban guns should make their case honestly, by seeking to repeal the Second Amendment, rather than leveraging their control of a few key banks. The free market works when consumers, not bankers or credit-card companies, decide what they purchase. Republicans should make it clear to the financial industry that they will protect that right.

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