America’s ‘cancel culture’ should not decide business and banking regulation

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A growing symptom of the extreme political polarization in America is the rise of “cancel culture,” where even the slightest mix-up or perceived transgression is cause for a boycott of public figures or businesses.

This can be extreme enough in the public sphere, where activists — usually on the left, but increasingly, no “side” is immune — and everyday people declare that they will never again see a movie with Actor X, because the actor did or said something against their preferred orthodoxy. 

This mentality is even more pernicious when government officials and bureaucrats enshrine it in public policy. Thankfully, some lawmakers say they will examine these practices at an upcoming House Financial Services Committee hearing. 

Banks often have been pulled into these controversies — the most egregious example being what the Obama administration termed “Operation Choke Point,” an overt attempt in late 2010 or early 2011 to forcefully attempt to weaponize banks against entire segments of the economy.

The goal of Operation Choke Point was to prevent banks from lending to certain businesses by having the Federal Deposit Insurance Corporation (FDIC) label them high risk. These were businesses, mind you, that were completely legitimate and offering legal services 

Their “crime” was simply that they were offering services that liberal Democrats did not like.  Firearms manufacturers, cash advance services, fireworks corporations and others were simply unable to gain capital from financial institutions insured by the FDIC.

And naturally, instead of attempting to regulate these enterprises the old-fashioned way — through the legislative process — they chose to bypass even established executive branch practices, going so far as to threaten career government officials. 

While President Trump put a stop to Operation Choke Point, the self-proclaimed “woke” left moved to use another way to stop private industries with which they disagree from obtaining capital in the private market: public shame. The plan is to target banking institutions with smear campaigns until they simply stop lending to “undesirable” industries. This recently happened when major lending institutions ceased loaning money and doing business with companies that operate detention facilities that were contracted by our own government.

In an effort to keep the practice of weaponizing our banks for political purposes from ever happening again, the Comptroller of the Currency proposed changes last month to measure compliance and increase accountability within the framework of the Community Reinvestment Act (CRA), which requires FDIC-insured banks to meet the credit needs of all individuals in low- and moderate-income communities in which they operate.

But purported loopholes in the proposed assessment criteria could leave room for banks to skimp their responsibilities. The coming committee hearing is expected to address the issue of financial discrimination, for example.

A group of 15 U.S. Senators recently called for the Office of the Comptroller of the Currency (OCC), the FDIC, and the Federal Reserve Board of Governors to further review the financial injustices occurring daily in rural regions. The House committee announced it will also examine OCC practices in terms of the intent of the CRA. 

With the growing decline in farming, mining and manufacturing, there has been a rise in demand for building prisons near rural communities as a path for job creation and economic growth in those communities. Separately, numerous rural regions rely on hunting tourism to keep their lights on. For example, as of 2018, hunting and fishing alone generated $11.2 billion a year for the state of Michigan. If banks are able to skirt the rules through lax assessments, without any form of concrete accountability, it could prove devastating for many rural communities. 

The whims of popular culture are just not a justifiable method for influencing the business of banks. If the CRA is designed to encourage commercial banks to meet the needs of borrowers in all segments of their communities, it should certainly protect against discrimination of legal businesses.

This is a dangerous slippery slope that needs to be addressed. While individuals acting alone or in groups should always be free to conduct boycotts, targeting a corporation’s ability to access credit through, at best, questionable use of the levers of government, is a power play more suitable for corrupt authoritarian governments than to democracy.

The reasons liberals are upset by the business practices of private industry are endless, which is why it is important for our government to re-establish and codify that discrimination against one company or the other based on their legal products and practices should be forbidden. 

Banks are neither regulators nor legislators. If there are valid claims about practices of certain businesses, our system allows for those businesses to be regulated by the government in legitimate ways. But having the mob decide which corporations or industries are worthy of credit is a troublesome new reality that needs to stop now.

Mario H. Lopez is president of the Hispanic Leadership Fund, a public policy advocacy organization that promotes liberty, opportunity and prosperity for all Americans. Follow him on Twitter @MarioHLopez.

Tags American business Banking Barack Obama Donald Trump Federal Deposit Insurance Corporation Operation Choke Point progressives

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