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Wednesday, March 3, 2021

There’s a new bank regulation to bar discrimination in lending. The Biden administration will likely overturn it

Remember when it was the Left that wanted to regulate banks and prevent discrimination in lending? Now, the tables are turned.

The Trump administration issued a recent regulation aimed at limiting banks’ ability to cut off borrowers simply because they don’t like what the borrowers do. The banks obviously don’t like this rule, but neither do liberal activists. I expect the Biden administration will overturn Trump’s rule and free banks up to decide which proverbial cakes they won’t bake. To put it another way, Biden will give banks a license to discriminate.

Democrats’ 2010 Dodd-Frank financial regulation bill mandated “fair access to financial services and fair treatment of customers” and left it to the Office of the Comptroller of the Currency to implement that mandate. The Obama administration issued its own rules, and now, the outgoing Trump administration is beefing those rules up.

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Large banks (small banks aren’t covered by this rule) that want to cut off financing to entire lines of business must “show their work,” under this rule. As CNBC describes it: “The rule requires covered banks to make products and services available to all customers in the communities they serve, based on consideration of quantitative, impartial, risk-based standards established by the bank.”

So, JP Morgan could say, “We won’t fund microbreweries,” if they can show a rational basis, such as proving there is already way too many microbreweries for the market to maintain.

But if JP Morgan simply said, “We won’t fund microbreweries as a matter of policy, and you can’t make us,” Dodd-Frank says, “Sorry, pal. Bake the cake.” The new Trump administration rule puts teeth on that.

This isn’t about microbreweries, though. It’s about oil, gas, and guns — for now. Soon enough, it will be about publishers, tech platforms, and whatever else the Left’s culture warriors decide to cancel in the Great Deplatforming.

Activist investors have been pushing banks to divest from fossil fuels, gun-makers, and stores that sell guns. They are increasingly succeeding, and as Democrats take over government, you can bet that the banks will feel political pressure to cancel oil, gas, and guns.

The new rule places some hurdles before such deplatforming.

As acting Comptroller Brian Brooks put it, “Banks should not terminate services to entire categories of customers without conducting individual risk assessments.”

So, a rule passed in 2011 about “financial red-lining” and discrimination is now a rule about cancel culture.

In general, businesses should be free to decide where to dedicate their labor and capital. A caterer who doesn’t want to do weddings, a photographer who doesn’t want to do brisses, or a singer who doesn’t do bachelor parties shouldn’t be compelled to. Banks, however, have so much power in our economy, and they are so subsidized by the federal government, that the Office of the Comptroller of the Currency makes the case that they have a broader duty to the public and not merely their politically strident shareholders.

Bankers and liberals argue that the new regulation was sloppily thrown together, and, given the history of the Trump administration, that’s not hard to believe. This could endanger the rule when liberals and banks, which really make a great pair, sue in court. The Biden administration also will probably move right away to undo this rule.

It’s a fitting note to begin 2021: Democrats, liberal activists, and the biggest banks joining together to defend the right to discriminate against those unpopular with the elites.

Read More at Washingtonexaminer

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