Conservatives are getting a little fed up with Big Business. Tech overlords are at the top of the you-know-what list — especially after they worked together to kick our deranged president off the major social-media sites and sideline the fringe alternative Parler. For the past several years, major corporations have made a big show of supporting woke causes in one insufferable commercial after another, while subjecting their employees to tedious, insulting, and ineffective bias training. There have even been calls for banks and credit-card companies to monitor and police Americans’ gun purchases.
We on the right do need to rethink our relationships with the huge corporations that hate us even after all those sweet tax cuts we gave them. But we need to do so carefully, especially when making government policies that could fail, backfire, or violate basic conservative principles in the name of knocking liberals down a peg.
A case in point: The Trump administration’s Office of the Comptroller of the Currency (OCC), in a blitz to finish work before Biden and his minions arrive, is busy finalizing a rule that would force banks to take on customers they do not wish to be associated with, such as by lending to oil and gun companies. The move is legally dubious, unsound as a matter of policy, and a little odd coming from an administration that prides itself on deregulation. It’s what happens when conservatives succumb to that age-old urge of “Why, there oughta be a law!”
The problem the rule seeks to address is that some banks have turned away certain categories of customers, either out of genuine moral conviction (ha) or from a calculation that the decision would produce good public relations. As the OCC summarizes,
The pressure on banks has come from both the for-profit and nonprofit sectors of the economy and targeted a wide and varied range of individuals, companies, organizations, and industries. For example, there have been calls for boycotts of banks that support certain health care and social service providers, including family planning organizations, and some banks have reportedly denied financial services to customers in these industries. Some banks have reportedly ceased to provide financial services to owners of privately owned correctional facilities that operate under contracts with the Federal Government and various state governments. Makers of shotguns and hunting rifles have reportedly been debanked in recent years.
Banks have also refused to support energy projects in the Arctic, out of a concern for the environment and the “reputational risk” that comes with funding such things.
The proposal’s remedy is simply to ban big banks — generally, those with over $100 billion in assets — from doing this. These banks would have to evaluate customers on a case-by-case basis, rather than refusing entire categories, and they would have to rely on objective measures of financial risk when denying services. They would still be allowed to turn away business, however, on the grounds that they lack the expertise required to evaluate those risks in a given market. (As the OCC puts it, “It is one thing for a bank not to lend to oil companies because it lacks the expertise to value or manage the associated collateral rights; it is another for a bank to make that decision because it believes the United States should abide by the standards set in an international climate treaty.”)
The legal problem here is that the OCC quite arguably does not have the authority to do this. The statute books do contain this line, as the agency notes:
There is established in the Department of the Treasury a bureau to be known as the “Office of the Comptroller of the Currency” which is charged with assuring the safety and soundness of, and compliance with laws and regulations, fair access to financial services, and fair treatment of customers by, the institutions and other persons subject to its jurisdiction.
At first blush, this seems like one of those broad grants of authority that I’m always complaining about, where Congress didn’t feel like doing its job and turned over the real work to the executive branch. But this is just prefatory language to the rest of the law, a mission statement of sorts. Other provisions lay out how the OCC is supposed to regulate banks, granting the agency specific authorities. As the Bank Policy Institute (a lobbying group) articulates in its letter opposing the regulation, all those rules would be redundant if the agency simply had the power to enforce “fair access to financial services” any way it wanted to.
And what about the policy justifications? Broadly speaking, the OCC and its supporters have laid out two ways of thinking about this issue — one that resembles an antitrust approach and the other an anti-discrimination one.
The antitrust argument is that huge banks, which receive numerous government protections, shouldn’t be able to use their market power to undermine legal businesses they don’t like. I’m more friendly to antitrust law than most of my fellow conservatives, so I agree in principle. If one or two banks controlled a market, and the crazy leftists who ran them decided to end gun sales (or what have you), I’d want the government to step in. But that’s not what the overall situation looks like, as the OCC itself makes clear:
The dominant market position of the large bank population is clear when all OCC-regulated institutions with assets of $100 billion or more are considered. Together, these banks account for approximately 55 percent of the total assets and deposits of all U.S. banks and hold approximately 50 percent of the dollar value of outstanding loans and leases in the United States. In light of this market position, a decision by one or more of these banks not to provide a person with fair access to financial services could have a significant effect on that person, the nation’s financial and economic systems, and the global economy. This effect is all the more likely if the financial service at issue is not available on reasonable terms elsewhere.
Note that the claim here is about the “large bank population,” which in reality comprises about 20 banks that compete with each other. Even if you combine all these banks, you still have only about half the banking market, and that doesn’t include non-bank lenders. If some of these banks refuse on principle to make profitable investments in a given area, others can step in and reap the rewards.
Now, it’s possible that certain banks have market power in some business areas or regions of the country, or that they sometimes effectively collude with each other. But if that’s the problem, it can be addressed with solutions far more targeted than this rule.
The anti-discrimination argument doesn’t fare much better. American law gives citizens serious protections against discrimination based on certain characteristics, such as sex and race, that have historically formed the basis for horrifying abuses. But generally, individuals and businesses alike are free to associate with whomever they choose, and exceptions to that rule should require strong justifications. A bank not wanting to lend to oil drillers or gunmakers — or abortion providers, or pornographers — simply does not rise to that level.
There’s also the matter of how hard this regulation would be to enforce in practice. Currently, some banks are openly refusing to finance endeavors they think are socially harmful, and that would certainly end. But discrimination need not be so blatant. As John Berlau of the Competitive Enterprise Institute puts it:
In many cases, bank officials could have a low personal opinion of an industry as well as valid business reasons for denying a loan to a specific firm. . . . In the case of an abortion clinic, does the OCC query whether any of the bank’s employees or directors were members of pro-life groups? In the case of a loan rejection for a socialist website, do OCC regulators look at whether bank personnel donated to conservative or libertarian think tanks?
The whole thing is sort of a funhouse-mirror version of Operation Choke Point. Instead of an Obama-era effort that discouraged banks from serving socially disfavored but legal businesses, it’s a Trump-era effort to require them to. It’s better to let each bank do what it thinks best, and respond to liberal pressure campaigns with our own voices and wallets.
There are several ways the rule might die. Rumors are swirling that the acting head of the OCC will leave this week, so maybe it won’t even be finalized amid the chaos. Biden could install new people at the OCC and have them undo it. The courts could strike it down. Or Congress could repeal it using the Congressional Review Act.
I’m no fan of Joe Biden or congressional Democrats, but I’m rooting for them here. Clumsy, legally dubious displays of government power are not the way to fight what’s happening in the woke corporate world.