The ongoing appetite for "debanking"—pressuring financial institutions to cut off customers because of who they are, what they believe, or with whom they associate—should concern everyone. Why? Because in the end, anyone can become an easy target.
One pressure point has been protests against private banks whose customers are companies who build or operate immigration detention facilities under contracts with the Trump administration. The Boston area saw such protests earlier this year, and there have been others.
Critiquing debanking efforts does not mean accepting the catalyst driving those protests. There are certainly plenty of reasons for Americans to oppose the increasingly authoritarian approach that the Trump administration is using against immigrants and American citizens alike.
The administration itself is showing how treacherous the debanking mindset is by taking it to its logical conclusion—abusing government power to go after financial institutions serving those who they want to target politically, like nonprofit organizations whose opinions they dislike, and immigrants themselves.
The foundation for debanking is not new. For too long, government regulators have exerted pressure on banks, leaning on vague notions of "reputational risk" to force banks away from lawful but disfavored customers.
Banks are required by law to make decisions based on objective, individualized, risk-based assessments—legal risk, credit risk, market risk, regulatory exposure. Personal beliefs and political affiliations should have no place on that list.
Federal banking regulators have begun stripping subjective "reputation risk" criteria from their supervisory guidance and move toward ensuring that banking decisions rest on individualized, objective analysis—one positive development.
A recent report from the Office of the Comptroller of the Currency, the federal bureau that manages the regulatory framework for the banking system, bolstered this position. In recent years, more frequent pressure from regulators drove banks to give weight to a decision to a slew of outside opinions, resulting in “increased
subjectivity in banking supervision, was susceptible to abuse, and distracted institutions” from core functions.
Those now demanding that banks blacklist customers for political reasons should think carefully about the ramifications. A financial system that can be weaponized against one group today can be weaponized against another tomorrow. If we normalize ideological objections as determining who gets to participate in the economy, no community is safe from exclusion.
Reports that President Trump wants to install political operatives at the criminal-investigative division of the IRS to go after left-leaning groups and their donors shows the other side of the coin. Those who cheer him on seem unwilling to consider what might happen when a different partisan government uses the same coercive tactics and abuses state power to go after them for their views.
History teaches us that those who will be hit the hardest when access to finance becomes conditional: those with the least influence and most to lose. Immigrant families, minority-owned small businesses, and working-class communities who have long sought a foothold in the financial mainstream are certainly on that list.
For example, nearly 40 percent of Hispanic small-business owners already report that access to financing is a major barrier, more than double the rate of their white counterparts. Sadly, going back to the Irish, Italian, Jewish, Eastern European and others, immigrant communities and entrepreneurs have known this struggle all too well.
Targeting immigrants access to financial institutions is playing out again now, with indications that President Trump has been weighing how to “turn your local bank into a government spy” to ostensibly harm immigrants but which would carry “unforeseen costs imposed on people who are already complying with the law,” as explained by his former chief economist in the White House’s Office of Management and Budget.
Overreaches and abuses of power show precisely why the debanking trend should concern everyone, regardless of where they sit on the political spectrum.
Few things are as basic to participating in the American economy as a bank account. It is how workers get paid, how families save for a home, and how small businesses make payroll. From the neighborhood corner store to a fledgling food truck to a home garage startup, accessing banking is essential to opportunity.
A bank account is not an endorsement. Banks do not bless their customers’ politics any more than the electric company or the post office does. The politicization and weaponizing of government bodies to oppress political opposition is a natural extension of the debanking mindset and inflicts long-term damage on the country.
Disagreements over policy and politics belong in the public square, in legislatures, in courtrooms, and at the ballot box. They should not be settled by conscripting financial institutions into political fights.
If we want an economy that works for everyone, we must defend a simple rule: no government official, no politician, and no pressure campaign should push banks to close accounts for their own political ends or preferences.
Mario H. Lopez is president of the Hispanic Leadership Fund, a public policy advocacy organization that promotes liberty, opportunity, and prosperity for all.
