Trump regulator rule would force banks to lend to gunmakers and oil drillers
The Polar Pioneer drilling rig is equipped for Arctic oil exploration in 2015. A proposed rule by the Trump administration would force banks to offer financing to oil companies, arms manufacturers and lenders payday at high cost, even if the banks do not want it. Image: Elaine Thompson / AP
The Trump administration is trying to push through a last-minute rule that could force banks to offer loans to gunmakers and oil exploration companies or fund expensive payday lenders.
The move follows announcements from America’s biggest banks that there are industries and businesses they don’t want to fund, such as drilling for oil in the Arctic National Wildlife Refuge in Alaska or providing loans. firearms manufacturers who manufacture assault weapons. Some large banks have sworn make these loans.
Now a Trump-appointed banking regulator is pushing for a ruler who considers it an unfair and discriminatory practice.
“It’s a very poorly constructed rule,” says John Court, head of regulatory affairs at the Bank Policy Institute, which represents the country’s largest banks. He says the rule is “clearly designed in a hurry and built in a hurry.”
The rule was proposed in November after President Trump lost his candidacy for re-election. And the court says it appears the Trump-appointed acting head of the Office of the Comptroller of the Currency is scrambling to enact it before the Biden administration begins next week.
According to the Court, many financial companies are focusing more on environmental, social and governance – or “ESG” – issues.
“Among these are racial equality, the climate, other issues,” said the court. “And this proposal would clearly compromise a banking organization’s ability to meet or administer any so-called ESG objectives it might have.”
The rule is based on the concept of equitable access to credit, which has traditionally had to do with preventing racial discrimination.
The BCC declined an interview. Acting Director Brian Brooks said in a press release that “equitable access to financial services, credit and capital is essential to our economy”.
But critics say the rule is actually to force banks to fund gun companies that make assault rifles, or even predatory payday lenders who charge 300% annual interest.
“Payday lenders not only disproportionately harm people of color, they target communities of color,” says Rebecca Borné, lawyer at the nonprofit Center for Responsible Lending.
“So the agency is really taking the language of civil rights to do something that is fundamentally inconsistent with the original intent of that language.” said Borne. The result, she adds, would be to exacerbate discrimination in lending, “hiding it in this civil rights language.”
The main trade group of payday lenders, INFiN, said in a statement that it “supports the steps taken by the OCC to protect legal businesses from discrimination under the proposed fair access rule.”
If the Trump administration finalizes the rule before President-elect Joe Biden takes office, the court says it would make it more difficult, but not impossible, for the new administration to overturn it. And he says if that happened, the banks would likely sue to try and stop the rule.
“It takes away the ability to make decisions, it takes that out of the bank and effectively puts it on a government mandate,” he says.
And the court says the rule is so broadly written that it would apply to mundane business decisions as well as broader decisions based on what bank management thinks is good or bad for the company – that it it’s climate change, assault rifles, payday loans, or whatever.
The rule could also be repealed by Congress through a monitoring tool called the Congressional Review Act, especially since Democrats will now control both the House and the Senate.
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