Banks change their tack in navigating the culture war 

WASHINGTON — After years of mounting concern over the politicization of American finance, the banking industry appears to be making a quiet retreat from the culture war trenches. 

Not historically known for their social activism, prominent bankers had grown more comfortable taking political stands over the past decade. Since the mid-2010s, banks and their CEOs have waded into several high-profile political fights, ranging from firearm financing to immigration policy and climate change. 

But today, as several states pursue laws that will limit or ban medical procedures for women and the transgender community, crack down on classroom discussion of “woke” topics like racism and sexuality, and enact new restrictions of voting rights, few banks or bank advocates have had anything to say.

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Some observers say that a real transition is underway for banks and their relation to social issues. Julie A. Hill, a professor of law at the University of Alabama, said that some banks appear more hesitant to issue broad political statements today than they had been even a few years ago. 

“There's been something of a shift to, instead of saying, ‘We support Black Lives Matter,’ or, ‘We are concerned about climate change’ so that they're not completely accused of being hypocrites later. They’ll instead say, ‘We've invested hundreds of millions of dollars in a Black-owned bank,’ or, ‘We’re committed to raising the minimum wage,’ ” Hill said. 

“Rather than taking a position that is aspirational that they can later then be accused of not living up to,” Hill added, “they try to roll out specific initiatives that can be judged on their own merits.” 

Conservatives have long groused that too many large banks have embraced left-leaning politics.  Decisions made by some banks to limit business with certain firearm manufacturers or oil and gas firms, for instance, have resulted in fierce protest from Republicans. 

In 2018, one month after Citigroup announced new limits on doing business with certain firearm companies, former Senate Banking Chair Mike Crapo, R-Idaho, wrote a letter to then-CEO Michael Corbat chastising the bank for trying to “cut off financial services for lawful businesses.” “It is deeply concerning to me when large national banks like Citigroup, which receive significant forms of government support and benefits, use their market power to manage social policy by withholding access to credit to customers and companies they disfavor,” Crapo wrote. 

Late in the Trump administration, the acting comptroller of the currency went so far as to introduce and nearly finalize a rulemaking that would have punished large banks that withheld services to politically unpopular industries for nonfinancial reasons, citing fossil fuel firms as one of the primary beneficiaries. 

Banks have typically defended such moves as either straightforward business decisions or just another form of reputational risk management. Reputational risk has been loosely defined as the risks that could result from banks’ decisions that could undercut customer trust, whether through a phony-accounts scandal or less-than-savory business partnerships. 

But some political moves made by banks have gone beyond profit-based decision-making. In the wake of George Floyd’s murder in 2020, many of corporate America’s largest banks — including JPMorgan Chase, Bank of America, Wells Fargo and Citigroup — expressed support for the Black Lives Matter movement and unveiled billions in initiatives intended to address the nation’s racial wealth gap.

In another high-profile instance, Bank of America took a stand against Republican lawmakers in North Carolina in 2016 as they pushed for a “bathroom bill,” which would have banned transgender individuals from using public bathrooms that didn’t correspond with the sex listed on their birth certificate.  

The pursuit of social laws at the state level hasn’t let up since then. State legislatures controlled by Republicans have introduced hundreds of bills aimed at undercutting socially progressive causes at the expense of marginalized communities across the country, and some state legislatures controlled by Democrats have pushed almost as hard in affirming progressive stances.

Access to legal abortions is wavering in more than a dozen states today, with severe restrictions under consideration by lawmakers in states including Texas, Missouri, Oklahoma, Florida, Idaho and Arizona. In Florida and Georgia, state lawmakers have received national attention for pushing what activists have labelled "Don't Say Gay" legislation that would limit discussion of sexuality and gender in grade school classrooms.

Other laws limiting the ability of transgender children to receive gender affirming care — treatment supported by the American Medical Association, American Psychological Association and the American Academy of Pediatrics — have been introduced more than two dozen times in GOP-controlled legislatures, according to a legislative tracker hosted by Freedom for All Americans, a pro-LGBTQ+ advocacy group. 

The rush of regressive lawmaking since 2021 was described by the Human Rights Campaign earlier this year as “historic for all the wrong reasons” in its annual State Equality Index.

And some Democratic-led legislatures are pushing in the opposite direction. Colorado Gov. Jared Polis signed a bill into law on April 4 that affirms a woman’s right to an abortion, and a similar measure is being considered by Maryland’s General Assembly, which holds Democratic supermajorities in both chambers. 

But few banks have weighed in on these laws directly. Citigroup, for one, announced in mid-March that the company would cover any travel costs incurred by employees seeking an abortion. 

And on March 31, a handful of banks signed on to a statement drafted by the Human Rights Campaign and Freedom for All Americans that condemned anti-LGBTQ+ law making across the U.S., including Citi, Wells Fargo, BBVA, PNC and Capital One.

But that limited advocacy appears to be somewhat exceptional among peers, even — or especially — among banks with significant presences in states seeing the bulk of the backlash.

Bank of America — with the largest market share of customers deposits in the states of Missouri and Florida, second largest in Georgia, and third largest in Texas — has issued no statement on Republican “anti-woke” laws. The Charlotte, North Carolina, company did not respond to a request for comment for this story.

JPMorgan Chase, the top depositor holder in Arizona and second largest in Texas, declined a request for comment, and both Truist, the top bank by deposits in Georgia and third largest in Florida, and U.S. Bank, the second-largest holder of deposits in Georgia and third largest in Missouri, declined to comment.

‘Blending in with the crowd’

Some observers say that banks face fewer incentives today to react to or push back against Republican backlash politics, and that public pressure to act — while significant — has been diffused in part by the piecemeal nature of state lawmaking. 

“When we talk about the [North Carolina] bathroom bills of 2016 and 2017 compared to now, my first response is, well, they haven't felt that the public pressure that they would be feeling to do something is worth more than the financial benefit they have from doing nothing,” said Mandla Deskins, an advocacy manager for Take on Wall Street, an activist coalition that pushes for financial reform.

“That is the calculation that I would assume banks are always making,” Deskins added, “because it's not like they have some long-standing position against hate.” 

Others dispute the significance of banks’ prior political stands, particularly when they’ve taken place against the backdrop of broader corporate outrage. 

“At the peak of the George Floyd uprisings, lots of banks had their message with the black background and the white text that said that they stand in with Black Lives. But really, it was all corporations that were doing that,” said Maurice BP-Weeks, founder and co-executive director of the Action Center on Race and the Economy.  “It created this level of safety of sort of just blending in with the crowd.” 

Banks’ quiet retreat from controversial issues has also been reflected in part in the spending of the American Bankers Association, the industry’s leading trade group and one of Washington’s top political contributors for decades. 

According to the most recent data available from the Federal Election Commission, the ABA’s political action committee — otherwise known as BankPAC — has spent fewer dollars in the 2022 election cycle so far than any comparable period in the previous decade.

Between Jan. 1, 2021, and the end of February 2022, the ABA contributed $1.45 million to federal campaigns. That’s significantly less than what BankPAC distributed to political candidates in the same period in the 2020 general election  — $2.59 million — as well as the 2018 midterm’s total of $1.58 million, $1.65 million in 2016 from the same period. (None of the aforementioned figures have been adjusted for inflation, which has accelerated significantly over the past year.) 

On the other hand, Accountable.us, a nonpartisan group that tracks political contributions, says the ABA is the top political contributor to the so-called Sedition Caucus — the group of Republican lawmakers that voted not to certify the 2020 election, even in the direct aftermath of the Jan. 6 riot inside the U.S. Capitol Building.

The ABA has donated more than $327,000 to Republicans who voted against the results of a lawful election since Jan. 1, 2021, according to Accountable.US. That figure would represent one-fifth of BankPAC’s overall contribution in the 2022 cycle through the end of February.

Some of the Sedition Caucus’s highest-profile members have not received BankPAC funds in the current cycle despite previous donations from the trade group, including Sens. Ted Cruz, R-Tex., Josh Hawley, R-Mo., and Roger Marshall, R-Kansas, and Reps. Madison Cawthorn, R-N.C., Paul Gosar, R-Ariz., and Jim Jordan, R-Ohio. 

Representatives for the ABA declined to comment for this story.

‘Too eager to play regulator’?

There are a number of reasons banks are inching away from social activism stances. 

For one, reputational risk has long been among the most nebulous supervisory areas banks are expected to track, and its ambiguities have sometimes put financial institutions in the difficult position of managing the competing desires of dozens of stakeholders, including investors, activists, politicians and their own employees.

The principle of reputational risk management has come under particular scrutiny in the near-decade since the launch of Operation Choke Point, an Obama-era initiative that scrutinized banks’ business dealings with “risky” industries, including firearm companies and payday lenders. Republicans, particularly in Congress, still invoke Operation Choke Point as evidence that Democrats seek to politicize the banking industry and access to credit in general. 

“It sensitized voters, legal scholars, just a whole bunch of different people to this potential use of reputational risk as a tool that arguably goes beyond what it was originally designed to do,” said Brian Knight, a director of innovation and governance at the Mercatus Center. 

That growing conservative sensitivity to banks’ politics has helped fuel laws in Republican-controlled states punishing financial institutions that may be considering a pullback business with key industries. In Texas, for instance, lawmakers now require that banks that underwrite municipal bonds to “certify” they don’t discriminate against firearms manufacturers. A similar bill was introduced in Arizona in February.  

“You're starting to see, at the state level, more conservative states starting to actually impose commercial penalties on banks that are seen as being too eager to play regulator,” Knight said. 

But there are also significant operational difficulties that emerge any time a bank attempts to change its approach to business in response to shifting political winds. 

“It is hard to implement that,” Hill said. “Even if, in your heart of hearts, you really want to, these are behemoth organizations that have contractual commitments that require unwinding. They’re also behemoth companies that only act through thousands and thousands of employees that all make individual decisions.” 

At the same time, however, progressives say they don’t expect — or particularly want — banks to intervene in politics.  “I'm not looking to banks to make change,” said BP-Weeks. “In fact, we’re often looking at things that banks do as areas where we need to make change.” 

Part of that has to do with banks’ traditional relationship to the federal and state governments in general. “It's very difficult to find an industry … that is really so closely linked to lawmakers and policymakers,” BP-Weeks said. 

“Not to excuse our Democratic friends, but especially on the conservative side, they’re really, really close allies who ultimately make the rules that make [bankers’] jobs leading the financial industry easier,” he said. “So I’m not really expecting them to call out people by name or making a really strong ask of elected officials.”