In late November, the Trump administration took its firmest action yet to counteract ongoing banking discrimination against businesses that serve America’s gun owners. The Office of the Comptroller of the Currency, a significant banking regulator, issued a proposed rule to prohibit politically-motivated service denials and to ensure large, nationwide banks would have to make offered products available to all law-abiding customers without ideological bias.
Of all the Obama/Biden administration’s attacks on the Second Amendment, Operation Choke Point (OCP) was one of the most insidious. Frequent readers of this page will recall how federal banking regulators, under the guise of shielding banks and the public from fraud, pressured financial service providers against doing business with lawful but politically-disfavored customers. These included sellers of firearms and ammunition, which were specifically singled out as “high risk” by the Federal Deposit Insurance Corporation in regulatory guidance provided to banks in 2011.
What made these firearm-related businesses high risk? In the circular reasoning of OCP, it wasn’t their creditworthiness or financial performance but the “reputation risk” they supposedly posed to banks that, so the story went, could anger third parties by serving the “high risk” clients. And the regulators made sure the banks understood that no one might be angrier than the regulators themselves: failing to heed their “risk-based” guidance could subject the banks to costly and embarrassing investigations. The simple solution was for the banks to avoid conducting business with “high risk” customers entirely.
The Obama/Biden administration retreated from OCP when Congressional investigators and other watchdogs revealed its obvious wrongdoing. The FDIC revised its infamous 2011 regulatory guidance in 2014, and issued further clarification in 2015, refocusing on case-by-case risk management, rather than debanking of entire industries. Nevertheless, the regulators portrayed the furor over OCP as a big misunderstanding, with banks supposedly overreacting to legitimate attempts to hinder scammers.
Subsequent events, however, confirmed that political activists were indeed deliberately trying to weaponize the financial services industry against the targets of their activism.
On February 18, 2018, the New York Times published an infamous essay by Andrew Ross Sorkin that called upon the financial services industry to adopt restrictions on relationships with gun companies to demonstrate its commitment to “moral responsibility.” The plan was for banks and payment processors to defund activities – like the making and sales of semiautomatic rifles – that anti-gun activists had unsuccessfully lobbied the political branches to ban.
Sorkin’s proposal, like OCP, recognized that financial services are the lifeblood of any successful business. But the pressure this time was to come from the social justice mob, not faceless government bureaucrats. The new OCC rulemaking actually cites Sorkin’s article as an example of how politics have infected the provision of financial services.
Even some in the government itself have retroactively embraced the tactics of OCP. After anti-gun Democrats took over control of the House Financial Services Committee following the 2018 midterms, the committee hauled a Wells Fargo Bank executive to a hearing to berate him for, among other things, the bank’s transactions with gun companies.
Other banks, Rep. Carolyn D. Maloney (D-NY) lectured, had forced their firearm-related customers to adopt “best practices” that limited the scope of their lawful activities. These practices just happened to mirror unsuccessful legislative proposals pushed by anti-gun Democrats, that included such constitutionally dubious measures as refusing to sell otherwise-legal long guns to otherwise-eligible adults of military age. To his credit, the executive stood his ground, asserting, “We just don’t believe that it is a good idea to encourage banks to enforce legislation that doesn’t exist.”
The tenor of the hearing, however, made it unmistakably clear that certain committee members were unabashedly trying to pressure the bank to curb its business with certain customers, not because those customers were behaving illegally, but because the committee members found them objectionable.
All the while, firearm-related businesses were finding their options for financial services shrinking.
For its part, the Trump administration explicitly repudiated OCP, with the U.S. Department of Justice (which had participated in OCP under the Obama/Biden administration) providing written assurance to the U.S. House Judiciary Committee that the program had been terminated and would not be revived. Characterizing OCP as a “misguided initiative conducted during the previous administration,” the DOJ’s Aug. 16, 2017, letter stated: “the Department will not discourage the provision of financial services to lawful industries, including businesses engaged in … firearms-related activities.”
Still, whether from lingering doubts left by OCP or in the vain hope of appeasing the social justice grievance lobby, some of America’s biggest banks have continued to shun lawful, creditworthy, and financially sound businesses within the firearm and ammunition sectors.
The proposed OCC rule aims to end politically-motivated manipulation of the financial service industry and to require large banks to provide fair access to all the products they offer to law-abiding customers who are able to satisfy predetermined “quantitative, impartial risk-based standards.” It reiterates that the Dodd–Frank Wall Street Reform and Consumer Protection Act requires “fair treatment of customers by . . . the institutions” subject to its jurisdiction. The rule would therefore establish enforceable standards of fairness for America’s largest banks. Those standards would prevent activists and banks from conspiring to deprive otherwise eligible customers of financial services for purely political reasons.
The rule, in other words, would refocus banks on doing their jobs of helping to promote lawful economic activity and managing financial risk while leaving policy decisions about what sorts of businesses are permissible in the first place to the political branches and the U.S. Constitution.
While some have questioned whether it is an appropriate role for government to tell private banks who they must provide financial services to, the major banks affected by the proposed rule have themselves been the beneficiary of support by American taxpayers. As Senator Kennedy (R-La.) pointed out last year, “[b]anks should not be able to discriminate against lawful customers on the basis of social policy. The banks should keep in mind that these lawful customers are the same hard-working taxpayers who bailed them out during the recession.”
Beyond bailouts during the recession, major banks regularly benefit from taxpayer dollars. We noted just this year that “[m]any of the same institutions that discriminate against lawful firearm activity are now the clearinghouses for the COVID-19 SBA loan programs, reportedly picking up billions of taxpayer dollars for processing fees along the way.”
If major banks get to benefit at the expense of the American taxpayer, especially at times when many Americans are struggling to make ends meet, then, at a minimum, they can be required to respect those same Americans’ constitutional rights.
The OCC is accepting comments on the rulemaking through the government’s online regulatory portals, (among other options) until Jan. 4, 2021. The NRA encourages all firearm-related businesses that have been harmed by political discrimination in the provision of financial services to provide their respectful and constructive feedback on the proposal.
We also thank the Trump Administration and acting Comptroller of the Currency Brian P. Brooks for their leadership in seeking to restore fairness and sanity to the nationwide market for the financial products. Ideological discrimination in the services businesses need to survive is a shameful, pernicious, and thoroughly un-American trend. The proposed OCC rule is a welcomed step toward eliminating it.