Opinion Congress Can Help End Debanking - Codifying Trump’s executive orders into law will protect the financial system from political bias.

By William M. Isaac and Stephen T. Gannon
April 9, 2025 3:06 pm ET


President Donald Trump before signing an executive order at the White House in Washington, March 31. Photo: leah millis/Reuters

The Trump administration is trying to reform bank regulation. Many of its executive orders restore due process, fairness and transparency to the banking rules, but like all executive orders they can be reversed by the next administration. To sustain these improvements, Congress should codify them into legislation.

In March, Sen. Tim Scott (R., S.C.) led the way by introducing the Financial Integrity and Regulation Management, or FIRM, Act. It would eliminate the vague term “reputational risk” as an element by which regulators might prevent banks from offering accounts to disfavored, though legal, businesses or people. Congressional action is needed because debanking has been resistant to reform. The Justice Department’s Operation Choke Point, initiated in 2013, aimed to investigate risky practices by financial institutions—and ended up debanking people and entities the Obama administration didn’t like. Last month, President Trump condemned the practice as “lawless” and “a disgrace.”

We have criticized this ugly practice in testimony before congressional committees. Operation Choke Point was a dangerous program that led to debanking of legitimate small businesses. Having the government decide which businesses and people a bank may serve has a chilling effect on the financial services industry. Debanking deprives lawful businesses of the financial oxygen they need to survive. If passed, the FIRM Act will eliminate the practice, we hope permanently.

But there is a bigger problem at the root of the issues the FIRM Act addresses: bank regulation generally has fallen victim to excess subjectivity and regulators’ personal views. That can be fixed by thoughtful legislation. Here is where to begin:

First, substantially reform or eliminate the management (“M”) part of the non-statutory Camels rating system for banks. (The acronym stands for capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk.) Much like “reputational risk,” the M rating has become subjective and lost its coherence. The management component of Camels evaluates a bank’s leadership unconnected to any financial risk and is therefore prone to flaws arising from excess subjectivity. Evaluating management as a standalone component distracts examiners from their core work of analyzing a bank’s objective safety, soundness and stability.

The Federal Reserve reported last year that two-thirds of America’s large banks aren’t well-managed in one or more key areas of risk and governance. However, those same banks enjoy record levels of capital and liquidity and are making billions from investments in new technology. That can’t all be luck. Clearly, the “not well managed” rating has become a largely meaningless statement of opinion.

Second, introduce legislation implementing the administration’s executive orders. Notably, the underlying policy for Executive Order 13892 is to require that regulatory agencies provide procedural safeguards “above and beyond those that the courts have interpreted the Due Process Clause of the Fifth Amendment to the Constitution to impose.” Adding more due process to bank supervision would create certainty, clarity and—most important—fairness.

Third, amend the Congressional Review Act to punish agencies that don’t submit rules to Congress as mandated by statute. The law clearly says that rules not submitted Congressional review and analysis can’t take effect. Today, however, the law is only enforceable by Congress, and not by those who are regulated, and therefore the most affected. Regulated parties should be empowered to raise the absence of a Congressional Review Act submission as a complete defense for noncompliance. This would create an incentive for agency compliance with the law.

The Trump administration has shown a stronger commitment to expanding due process in bank supervision than any White House in recent history. We urge Congress to give these reforms a strong and enduring legislative foundation.

Mr. Isaac, chairman of Secura/Isaac Group, is former chairman of the FDIC. Mr. Gannon is a partner at Davis Wright Tremaine LLP.

Source (Archive)

 

[LifeAlert]

give null his platforms back or stfu

 

[Return of the Freaker]

I see no mention of banker pork rinds 0/10

 

[Angry Alt Right Nerd]

Poor Null, he's repeatedly explained that the problem is with payment processors rather than banks but no one listens to him

 

[Seething Troon Collector]

Literally nobody gives a fuck about banks. The real method to put people’s balls in a vice grip are the companies that facilitate these transactions and have near-monopolized the market of processing payments.

It happened under everyone’s noses and now the entire industry is in collusion with governments and shady NGOs to facilitate locking people out of the banking system by regulating who can interact with the banks, all the while, banks can play coy and act like they don’t do anything nefarious.

The entire system should be gutted, people imprisoned forever and hopefully worse, and laws should be put into place to ensure that no one group of companies and the ghouls that control them ever seize this type of power ever again.

If it wasn’t for cryptocurrency networks, they’d have unlimited power, fortunately a medium of exchange exists that is completely decentralized and everyone with an IQ over room temperature should at least be able to use it whenever it’s needed.

Fuck banks, but fuck companies like Visa and Stripe even more.

 

[The Connected Nose]

Congress can end debanking, and also the abuse by payment processors. But they won't.

 

[Harvey Danger]

Poor Null, he's repeatedly explained that the problem is with payment processors rather than banks but no one listens to him

Null is right, but banks themselves are still a problem and a chokepoint. They were cutting off conservatives and alt-right people before the payment processors in 2015-16. (That was for politics, Null is on the wrongthink naughty blacklist.)

When Null was talking about FedNOW, the interbank payment clearing system, that relied on having a bank account. There's several other funding avenues available to Null and USIPS that depend on his bank account, not a payment processor directly. The payment processors are a huge blocker for a lot of ecommerce, and should be gutted or nationalized; but even if that happened, you'd still need banking protection to stop the next level of attacks.

As far as protections go, the ones listed in the article are good, but not comprehensive enough. I'd like to see every dollar-accepting institution be forced to act as a dumb utility for both bank accounts and transfers/payment processing. The things listed here move in that direction but still leave too much discretion with financial institutions.

Adding more due process to bank supervision would create certainty, clarity and—most important—fairness.

Yes, but it's not enough. Going from "you can deny for any reason" to "if you deny someone, they can make a due process claim to force you to explain it" isn't much better. It still places an unequal burden on the customer to prove a violation, making the process the punishment. And it doesn't provide the strongest due process protection: automatic rejection of an institution using its power against an individual, until it proactively assembles evidence that clears a strong rights-based hurdle. The presumption of banking should be that you get the service automatically, and the banks need a strong reason to reject you.

So this is the right direction, but doesn't go far enough, just like the FIRM Act they were talking about at the start. I hope Congress doesn't just pass that tiny bill and declare victory before getting to the harder stuff.