Congressional hearings and calls from President Trump to address debanking concerns have reignited the debate on the topic in Washington. A common thread from lawmakers and experts as these conversations develop is the need to address the regulatory overreach at the heart of the problem.
During one of the hearings earlier this month on the topic, U.S. Sen. Tim Scott, Chairman of the Senate Banking Committee, remarked, “regulators have seriously overreached on issues from Basel III to debanking, and Congress must work to rein in the Biden administration’s burdensome and arbitrary regulations. No regulator and no financial institution is above the principles of fairness and market access.”
Experts like the Cato Institute’s Norbert Michael concur, noting that, “The federal regulatory framework gives regulators enormous discretion. They have so much discretion that they can warn banks about dealing with certain types of customers for almost any reason they choose to justify.” Cato’s Nicholas Anthony also warned about the risk of Congress overdoing their response to address debanking, stating, “Congress should resist the temptation to impose new market distortions in response to operational debanking. Instead, Congress should focus on reining in the laws and regulations that have fueled governmental debanking.”
We agree and recognize that the “real debanking problem has been the excessive powers concentrated among unaccountable bureaucrats,” as AFFM advisor and former U.S. Senator Pat Toomey wrote for Fox News.
Thankfully, as Senator Toomey went on to outline, there are potential solutions elected officials can work toward to reign in seemingly lawless regulators. Toomey writes, “Congress and the Trump administration must act to ensure that financial regulators never weaponize America’s banks against legitimate businesses again. They should significantly enhance accountability of banking regulators and supervisors by increasing transparency and modernize archaic laws like the Anti-Money Laundering Act.”
AFFM’s Executive Director John Wittman echoed these sentiments in a piece for RealClear Markets, saying, “federal regulators should provide clear and actionable guidance to banks, ensuring these institutions get what they need to serve their customers lawfully, while making sure the enforcement environment does not unnecessarily debank customers.”
As these experts outline, the administration and Congress seem dedicated to addressing debanking, and should prioritize reducing regulatory overreach at the roots of the issue to do so.
Read more about what’s at stake on debanking HERE.
