By Patricia Patnode, The Daily Signal | February 25, 2025
The government shouldn’t pressure banks and other financial institutions to avoid doing business with politically controversial people and businesses, just as bakers should not be compelled to bake cakes with messages they disagree with. Instead, they ought to be empowered to make their own decisions, taking a pass on would-be customers who are at odds with the banks’ own values or business interests.
So, when Sen. Ron Johnson, R-Wis., and Sen. Kevin Cramer, R-N.D., reintroduced the Fair Access to Banking Act, which aims to protect businesses’ and individual consumers’ access to financial services, they might not have considered the impact on banks and firms with religious values or particular moral codes, including those such as “green banks” that might prefer not to back fossil fuel projects.
The legislation requires that lending and services decisions must be based on impartial, risk-based analysis, not political or reputational favoritism. This bill responds to a genuine concern about “debanking” of groups based on political ideology, but it creates too much opportunity for the religious freedom and freedom of association in general of financial institutions to be trampled upon.
The Daily Signal depends on the support of readers like you. Donate now
Banks, like the baker in Colorado who was asked to make a wedding cake decorated to celebrate a gay marriage, also need the option to “not bake that cake.”
In 2012, a Colorado bakery, Masterpiece Cakeshop, refused to make a custom wedding cake for a same-sex couple due to the owner’s religious beliefs. The Colorado Civil Rights Commission found this to be discriminatory under state law. The case eventually reached the U.S. Supreme Court, which ruled in 2018 that the commission had not acted with religious neutrality, thus violating the baker’s First Amendment rights.
Although most financial firms don’t have explicitly religious affiliation, some do. For example, the Christian financial institution AdelFi was recently named in S&P Global Market Intelligence’s annual list of top-performing credit unions. A smaller firm, Christian Community Credit Union is a faith-based, purpose-driven financial cooperative whose mission is to serve Christ’s followers to live and give more abundantly. Although both firms are under the $10 billion assets under management threshold in the bill, if they were to grow their business, or if the threshold were to be lowered, the firms would run into serious issues.
Many banks, especially regional banks, have been able to stay profitable in a time of banking consolidation and mergers because of their ability to specialize and discern carefully which person and what type of industry they want to do business with. There are thousands of banks and community credit unions that specialize in agricultural loans, finance the construction of apartment buildings, work with firms that do international business in certain regions of the world, or simply have a values preference.
Looking at some of the names of banks with assets under management over $10 billion shows that the bill will indeed harm specialized banks far away from Wall Street. Bank of Hope ($17.3 billion in assets) serves the largest Korean American community in the nation, and Merchants Bank of Indiana ($18.7 billion in assets) has specialized in operating loans for crop and livestock production for American farmers.
Banks are like a patchwork quilt that covers America, with each piece being important and unique. Removing the ability for banks to maintain their uniqueness would interfere with a bank’s ability to offer specialized services.
Johnson and Cramer are rightly concerned about the bullying of banks by the Federal Deposit Insurance Corporation, the Department of Justice, and other regulatory arms of the government. That’s why the bill would require more disclosure of why a customer wasn’t accepted at the bank, which would necessitate more communication and documentation. However, the best solution to concerns over government bullying is not to require every bank in America to file more paperwork every time they decide that a business or individual isn’t the right fit.
Instead, we should increase transparency to help people understand regulations and to reform the avenues that allowed federal regulators to shut out what they felt were politically undesirable businesses from doing business with financial institutions, an initiative referred to as Operation Choke Point (and now, Operation Choke Point 2.0.)
Sen. Mike Lee’s Saving Privacy Act, introduced but not passed in the last Congress, listed practical changes toward that end. Among other reforms, the bill proposed establishing a private right of action for Americans and financial institutions harmed by illicit federal agency activity to sue the government.
As my colleague Iain Murray wrote in a 2014 study on Choke Point 1.0, the judgment of whether to provide financial services to certain industries that may pose a “reputational risk” to the financial institution due to the controversy they may generate “is best left up to individual banks, which have a much better idea of the risks involved in their client relationships.”
America’s greatness is founded on association, as Alexis de Tocqueville recognized in the 19th century. Freedom of association is the value that underlies that, and federal regulation should recognize and reinforce that value.
Patricia Patnode is a research fellow with the Competitive Enterprise Institute, a free market public policy organization based in Washington, D.C.
Original article link
