Fair Access and Debanking

To get to the heart of this problem, Congress should help expose how widespread debanking has become and cut out the tools that the government has used to pressure banks.

With Operation Choke Point (1.0 and 2.0) on everyone’s minds as we step into the new year and the new Congress, I’ve published a new working paper breaking down one of the approaches likely being considered. Specifically, this paper considers the approach taken in the Fair Access to Banking Act.

As explained at length in the paper, the approach in the Fair Access to Banking Act would chart a troubling course for financial services. Rather than go after the government for pressuring financial institutions to cut ties with certain groups, the bill would set further restrictions on what those institutions may do. In doing so, the bill threatens to punish financial institutions by abruptly cutting off their access to services provided by the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, and even the National Automated Clearing House Association (a private business).

The issue of debanking has rightly generated significant concern in the halls of Congress, but the approach taken in the Fair Access to Banking Act is not the right solution. To get to the heart of this problem, Congress should help expose how widespread debanking has become and cut out the tools that the government has used to pressure banks and other financial institutions.

That means repealing the confidentiality requirements that have left so many customers in the dark, reining in the discretion of regulators, and reforming the Bank Secrecy Act. These measures would greatly decrease the chances of an Operation Choke Point 3.0 while still respecting the freedoms of all parties involved.