Debanking is happening, and it’s worse than people realize.
Though often misunderstood, this phenomenon – whereby financial institutions, under federal regulatory pressure, deny services to individuals or groups for ideological reasons – has become a flashpoint for conservatives.
Fortunately, just this year, both JPMorgan Chase and Citigroup announced they would halt their respective debanking practices relating to religious and political reasons. Yet Regions Bank – headquartered right here in Alabama – hasn’t expressed that commitment.
Meanwhile, when legislation addressing debanking was introduced in the Alabama Legislature – of all places – it went nowhere. That’s likely due to a widespread and dangerous misconception: that addressing debanking through legislation amounts to government meddling in private business.
A new white paper from the America First Policy Institute (AFPI) exposes the flaw in that misunderstanding. It refers to “government-driven debanking,” underscoring that it’s primarily public-sector coercion – not free markets – pushing banks to target conservative individuals and organizations.
Before diving into the details of the white paper, let’s acknowledge that the banking industry does not operate in anything resembling a true free market. Major financial institutions benefit from federal deposit insurance, privileged access to the Federal Reserve as favored lenders, and the ever-lurking promise of taxpayer-funded bailouts for those deemed “too big to fail.”
These protections amount to a government backstop, one that fundamentally distorts the competitive landscape and undermines the argument that banks are merely private actors operating independently of state influence.
Back to the white paper.
“Debanking,” it avers, “can be understood as federal regulators taking advantage of vague and overly broad regulations to advance their political agenda by trying to direct capital to and from certain businesses and individuals.” It notes that banking regulations are often broad and vague, allowing regulators to make decisions based on political rather than financial criteria.
Banks, in return, receive informal, ambiguous guidance but must aggressively comply to avoid severe penalties, including billion-dollar fines and criminal charges.
AFPI traces the roots of debanking to the Obama administration, when federal regulators began treating reputational risk – based on negative public opinion – as a factor in regulatory oversight, a shift that ultimately led to banks targeting conservatives.
The Department of Justice under President Obama notoriously launched Operation Choke Point, a program that effectively undermined Second Amendment rights by pressuring banks to sever ties with lawful firearm dealers.
Framed as a crackdown on fraud and money laundering, this initiative targeted entire industries – such as payday lenders, gun retailers, and others deemed…
Read More: Public privileges demand public responsibility in banking
