The Office of the Comptroller of the Currency finalized a new banking rule on Thursday. It says that banks will now be barred from refusing to finance businesses solely because of perceived reputational risk.
“It is inconsistent with basic principles of prudent risk management to make decisions based solely on conclusory or categorical assertions of risk without actual analysis,” Brooks added, according to Gutowski. “Moreover, elected officials should determine what is legal and illegal in our country.”
Some have called it the “gun-makers and oil drillers rule,” in response to socially responsible investing that has become more widespread among consumers and among activist investors.
Known as Operation Choke Point, the Obama administration sought to force banks to stop lending or providing other services to industries President Barack Obama and his administration officials didn’t like, such as gun manufacturers and payday lenders. As the Washington Free Beacon’s Stephen Gutowski reported, “Operation Choke Point—coupled with public pressure from gun-control activists—led some of the biggest lenders in the country to drop their clients in the gun industry.
The Trump administration ended Operation Choke Point just months after President Donald Trump was inaugurated in 2017, but this new rule from the outgoing administration seeks to prevent future presidents from returning to the days of similar blacklists for legal companies just because a particular administration doesn’t like them.
Chris Odinet, a law professor at the University of Iowa, said he thinks this regulation is a response to the 2018 school shooting in Parkland, Florida, that killed 17 people.
“So in the wake of the shooting, a number of banks — large banks, Bank of America, Citigroup — said they would no longer finance companies that produced combat-style, semiautomatic rifles and attachments like bump stocks,” Odinet said.
Brian Knight, a senior fellow at the Mercatus Center at George Mason University, said banks argue that they’re private businesses and should be able to serve any company they want.