On The Matter Of So-Called ‘Debanking,’ Follow The Regulators

Sign for a private banking branch of Chase Bank on the Upper East Side of Manhattan, New York City, New York, September 14, 2017. (Photo by Smith Collection/Gado/Getty Images)

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It turns out Republicans buy beer, which is something basketball and brand great Michael Jordan could have told the executives at AB InBev ahead of any influencer agreement with Dylan Mulvaney. In a politically divided country, it’s best to keep business out of politics.

Banks arguably know this more intimately than any other business sector. Precisely because they’re asking individuals to entrust their savings to them, politics and talk of same is the path to losing some of the most hard-won business of all.

It’s important to think about in consideration of President Trump’s assertion on CNBC that “The banks discriminated against me very badly.” Trump was talking about J.P. Morgan Chase and Bank of America, but to focus on specific banks is to miss the point. And that’s not because Chase has banking relationships with Trump and family going back decades, Trump campaign accounts, and looking ahead, the eventual Trump presidential library.

The crucial truth is that banks are in the business of carefully matching the wealth of savers with credible individuals, businesses and governments in need of savings. Which means they’re not in the business of turning their noses up to half of the U.S. population of savers, or closing the accounts of savers with wealth to put to work.

Some call account refusal or closure “debanking,” which realistically wasn’t even a word until 2023-2024. With good reason. Banks exist to open accounts, not close them. Which requires a pivot.

To focus on banks allegedly turning away business for political reasons, or closing accounts similarly for reasons of politics, is for pundits, politicians and even presidents to avert their gaze from the real problem: regulators. On the matter of closed or refused accounts, criticism of banks is a non sequitur.

Banks are overseen by regulators that can make life miserable for them via the imposition of “asset caps,” excessive capital requirements, or worst of all, closure. With the latter and much more well in mind, banks are studious about not finding themselves on the wrong side of regulators.

Which is a long or short way of saying that depending on the Party in control in Washington, and by extension the Party that is appointing regulators, banks must at times choose their customers wisely. Regulators will say the choosing is rooted in banks protecting their reputations, but as evidenced by the business that banks are in, no such regulation is needed.

More realistically, regulators have too often substituted their politics for sound oversight. Cryptocurrency and crypto adjacent businesses were unpopular during the Biden years, gun and gun manufacturers when Barack Obama occupied the White House, while in Republican leaning U.S. locales like Texas, banks have experienced trouble if viewed as unfriendly to oil & gas interests.

The main thing is that debanking has nothing to do with business, and everything to do with the politics that banks studiously try to avoid. See above.

Which is why President Trump’s broad focus on regulation as the source of so-called “debanking” is so important. Banks open accounts, regulators force their refusal, closure, or both.

With his executive order meant to end the practice of debanking, Trump is correctly making this about overly politicized regulators, not banks attempting to mix politics and business. Which means banks can get back to doing what they do best, all free of the politics that they’ve long avoided based on a clear-eyed grasp of what Michael Jordan intuited decades ago.