The Trump administration continues to commit acts of regulatory vandalism on its way out the door, and this time the banking industry is the victim.
Outgoing Acting Comptroller of the Currency Brian Brooks took a page from former Comptroller Joseph Otting and issued a partisan, controversial banking regulation on his last day in office last week after a perfunctory regulatory period.
This time, instead of gutting the nation’s premier anti-redlining statute, the OCC is saddling banks with a dubious requirement to do business with firms in polarizing industries based on a false notion that lenders were blackballing all gunmakers and oil companies for political reasons.
In addition to its spurious premise – banks make lending decisions based on sound business judgement, not on the basis of social media comments from the right or the left – the over-broad regulation makes a mockery of the regulatory process.
In essence the rule, dubbed “Fair Access to Financial Services,” dictates risk-management practices to industry. It seemingly closes the door to lenders’ attempts to manage near-term reputational risk and long-term credit risks.
This latter threat is particularly important as the nation and the world seek to avert catastrophic climate change by rapidly shifting away from fossil fuels. And the lack of adequate data or explanation for the OCC’s decision to propose the law in the first place raises the specter of regulators invoking the rule to please a future president in the mold of Donald Trump, intent on punishing individual lenders for business decisions unpopular with their base.
To say Brooks jammed the new rule through is no exaggeration – it was approved it a mere 10 days after the comment period closed and only 55 days after it was first proposed. Neither length of time was sufficient for industry and politicians to evaluate the proposal, nor for Brooks to convincingly claim his agency had reviewed the 35,000 comments it received.
Too many voters are increasingly isolated in their own informational universe – including a frightening number who are more acquainted with bizarre conspiracy theories about pedophilia and electoral fraud than reality, and others who think bankrupting small landlords will create more affordable housing. With politicians increasingly rewarded for posturing rather than tangible policy achievements, Brooks’ action in this context hints at the potential for a dark future for American businesses should future administrations tread the same road.
Luckily, the incoming Congress has the power to overturn this regulation and, failing that, the rule is so plainly lacking that it may well fall to a court challenge. Let’s hope either of these come to pass.
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