A little more than a year ago, we waved a yellow flag about how the conservative, business-friendly Texas we rely on is creeping toward a big government social agenda that risks being just as bad as what businesses are fleeing on the coasts.
At the time, it was Attorney General Ken Paxton snooping around into banks’ internal practices in a fight against so-called environmental, social and corporate governance policies. Those policies can be foolhardy, but it should be up to shareholders and the corporate suite to decide what works and doesn’t work for a company.
Now, we’re back to sound the alarm again, this time over rumblings in the Legislature around what’s known as “debanking,”a reference to closing a client’s account without their involvement or authorization. This is a raging topic among the podcast crowd, but it’s tricky to actually sort out how real the debanking problem is.
The idea is that big banks have been targeting conservative clients for their political or religious views. President Donald Trump and first lady Melania Trump have claimed they have been targets. So has tech entrepreneur Marc Andreessen.
Now, a lot of state legislatures are taking on the issue, often clumsily, and that’s happening here in Texas, too.
No less a banker than JPMorganChase Chief Executive Jamie Dimon is worried where Texas might steer our ship. In a meeting with members of our editorial board and newsroom last week, Dimon raised concerns about bills before the Legislature that could signal a less friendly atmosphere toward banking.
In our eyes, the most worrisome is a bill involving debanking authored by state Sen. Tan Parker, R-Flower Mound.
Allegations of debanking are serious. But for banks, allegations represent a catch-22. Under the law, banks are legally limited in what they can disclose regarding closing any account based on suspicious activity, and banks often take a highly cautious approach to any disclosure. Meanwhile, banks can get in big trouble if they assess a potential risk in a client, especially one related to breaking the law, and continue to bank with them.
Parker’s bill would prohibit discrimination “in the provision of financial services” and require that banks provide people with a specific reason they were denied services upon that person’s request. It would also open the door for the attorney general to investigate any bank upon any suspicion of discrimination. And the bill lays out areas that would constitute discrimination against a person or business, defining actions like not adopting greenhouse gas emissions targets to refusing to do audits of racial and gender diversity.
Dimon was emphatic that JPMorganChase “does not, will not and has not kicked anyone out because of their political or religious leanings.” People do get debanked, and then blame it on their politics, he said.
Yes, there are people who are debanked who shouldn’t be, Dimon said. And that needs to be corrected, he said. But that often arises from bankers’ fears that the government will come after them if they do business with anyone who ends up being a bad guy.
Dimon wants federal clarity on how banks should operate when they have suspicion of activity that a client or potential client shouldn’t be banked. And he supports greater transparency with clients when they are debanked. He’d like a federal law that mirrors Chase’s internal policy prohibiting discrimination on religious or political grounds.
He’s right on this. People or businesses who are debanked deserve some explanation in many cases (plainly those under active investigation don’t). But a patchwork of state laws that could be used as political bludgeons against banks is going to hurt all of us.
That’s the nasty problem lurking in Parker’s bill. It could run against federal laws that banks have to follow. The bill’s demand for disclosure could require that banks violate the Bank Secrecy Act of 1970 that prohibits certain disclosures. And the involvement of the attorney general in investigating banks could run afoul of the National Bank Act, established under Abraham Lincoln, that puts the regulatory authority over national banks in the hands of the federal government.
Even with this worry about what’s going on in Austin, Dimon said he remains “very bullish on Texas,” where Chase has more employees than it does in any other state and where the company serves 8 million consumer banking customers.
But when it comes to changing rules for banks, “it should be very thoughtfully done,” Dimon said.
“Fix the problem, but don’t make it so that banks don’t want to bank here,” he said.
We agree. No one thinks banks are perfect. But problems in the banking system are, at their root, national problems best left to national regulatory reform.
We welcome your thoughts in a letter to the editor. See the guidelines and submit your letter here. If you have problems with the form, you can submit via email at letters@dallasnews.com
