President Donald Trump wants to punish banks that he considers biased against conservatives — including him. Trump reportedly will sign an executive order as early as this week that imposes steep penalties for financial institutions that discriminate based on political ideology.
A draft of the order, reviewed by The Wall Street Journal, says banks allegedly closed accounts of a Christian group and froze accounts of groups supporting defendants in the Jan. 6, 2021, assault on the U.S. Capitol.
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The order seeks to penalize financial institutions for these so-called debanking practices, in which services are denied to people because of their religious or political beliefs.
“Banks are private businesses,” Yahoo! Finance banking reporter David Hollerith told Straight Arrow News. “They are prohibited from discrimination in lending on the basis of race or gender but are generally allowed to deny customers deemed too risky according to guidance given by regulators. The issue boils down to whether or not liberties have been taken somewhere in the regulatory system that’s created this situation.”
Certain crypto companies and conservative groups have claimed for years they’ve been debanked. In February, the Senate Banking Committee held a hearing regarding this matter.
If Trump issues the order, banks would be slapped with fines, consent decrees or other disciplinary measures.
What is debanking?
“Debanking” refers to closing accounts or denying banking services to people or groups because they pose some sort of legal, financial or reputational risk to the bank. There are those, like Trump, who say this practice can be opaque and discriminatory and that banks need to face punishment when they deny for the wrong reason.
It’s uncertain to what extent banks are denying people accounts based on their beliefs.
“It’s not at all clear how systemically big of a problem debanking is,” Hollerith said. “What we do know is that even JP Morgan Chase CEO Jamie Dimon said on a podcast earlier this year that debanking does happen. But what the banks have been pretty clear on is saying they never deny customers services for political reasons.”
Risk or discrimination?
The reasons for denying banking services can be difficult to determine.
However, what is lacking is the amount of proof that banks are choosing to deny banking services based on ideological beliefs.
“It kind of comes down to people feeling like they’ve been debanked in certain industries — like crypto and firearms — in the past and having anecdotal accounts of that, and not a lot of concrete answers,” Hollerith said.
A congressional report from January describes ideologically based debanking as “a debate question.”
The controversy
Whether Trump should issue the executive order is also up for debate.
In his second term, the president has already signed 178 executive orders, according to the Federal Register. Critics say he has abused his authority, bypassing Congress with actions that benefit him and his supporters.
The banking order “would be a promise Trump has made to the crypto industry while on the campaign trail,” Hollerith said. “For crypto firms, it’s more assurance they could not be debanked, as they were during the Biden era.”
On April 28, the Department of Justice Civil Rights Division and the U.S. Attorney’s Office for the Eastern District of Virginia formed a task force to investigate claims from groups that alleged they were debanked because of their beliefs.
“Basically, it comes down to how much flexibility lawmakers and the Trump administration think that bank regulators should have in deciding who should be banked and who should not be banked,” Hollerith said.
“One important thing that’s been forgotten,” Hollerith said, “is that there is no legal right to a bank account in this country and so there’s nothing that really lays out if this can or can’t be done.”
