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21 January 2021

We Don't Need the OCC's 'Political Discrimination' Rule - CoinDesk

We Don't Need the OCC's 'Political Discrimination' Rule - CoinDesk


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Should banks like Wells Fargo be allowed to stop lending to an industry because of its impact on the environment or their lack of commitment to social justice?

Brooks and OCC chief economist Charles Calamoris want to stop banks from “politically driven discrimination.” Their rule would prevent bankers from using anything other than regular credit and operational criteria for evaluating a company seeking financial services?

Wells Fargo would have to re-bank coal miners that practice mountaintop removal.

Banks would also be required to restart lending to oil companies involved in exploring Alaska’s North Slope, a practice that the likes of Wells Fargo, Citigroup, and JP Morgan Chase have all promised to avoid.

Operation Choke Point was an Obama-era program that tried to sever unfavored industries from the banking system.

But it would unnecessarily damage efforts by banks to shape their brands in ways that are designed to satisfy emerging consumer tastes.

The argument against allowing Fairtrade bank accounts is that “banking is special.” Brooks and Calomiris argue that government chartering and direct access to the Federal Reserve obligate  banks to provide services to all companies.

If Wells Fargo chooses to avoid making a profitable loan to an Alaskan oil explorer because it wants to greenify its deposits, then Bank of America, Regions Financial or any other bank that isn’t quite so concerned will swoop in, make the loan, and gobble up the forgone profits. .

Or perhaps some enterprising intermediary, say a private equity firm, will find a way to break the Alaskan oil embargo by borrowing from Wells Fargo and onlending the funds to the blacklisted entity.

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