Sharply divergent views about how to define debanking — a topic that has generated buzz in the finance and tech industries in recent months — will be on display Wednesday at a Senate Banking Committee hearing.
The hearing, titled "Investigating the Real Impacts of Debanking in America," is slated
Mike Ring, who will testify at the hearing, co-founded Old Glory Bank in Elmore, Oklahoma to battle what he saw as
"We knew it was real because we live in the community in which real, law-abiding citizens were being debanked for no reason other than positions they took either about vaccines, or about COVID, or about the violence in this country, or about politics," Ring said in an interview. "We had to create a market solution, and our market solution was Old Glory Bank."
But Aaron Klein, a senior fellow at the Brookings Institution who was also asked to testify at the Tuesday hearing, said in a separate interview that he's focused on the debanking of low-income people and other marginalized groups. Klein said he thinks the main reason people are blocked out of financial institutions is that banking services, like checking accounts and credit cards, are too expensive.
"I think of debanking as the process by which people go out of the banking system," Klein said. "People are being debanked because they don't have enough money, or they're put on a [credit reporting system] that drives them to a low-quality, high-cost account."
Discussions about debanking have gained momentum among decision-makers recently as Trump and venture capitalist Marc Andreessen, among others, have banged the drum about its prevalence and negative impact — specifically referring to customers allegedly losing access to their banks due to their conservative beliefs or connections to cryptocurrencies.
Sen. Tim Scott, R-S.C., chairman of the Senate Banking Committee, said in a prepared statement a few weeks ago that regulators in the Biden administration "abused their power and forced financial institutions to cut off services to digital asset firms, political figures, and conservative-aligned businesses and individuals."
"Debanking is un-American — every legal business deserves to be treated the same regardless of their political beliefs," Scott said.
The House Financial Services Committee is also holding a crypto-focused hearing on Thursday titled "Operation Choke Point 2.0: The Biden Administration's Efforts to Put Crypto in the Crosshairs."
While different witnesses at Wednesday's Senate hearing are pointing to different concerns about debanking, calls for changes to the regulatory regime seem to be coming from across the ideological spectrum.
Part of the problem, Klein said, is an anti-money-laundering system that's lost sight of its priorities, instead becoming a "form-filing machine."
Klein thinks that moving more people into the banking system will take a package of reforms, including to anti-money-laundering systems, and that the industry and Congress should "fundamentally rethink our basic banking system, to provide high-quality, low-cost accounts for working people."
A major chunk of bank account closures are tied to the Bank Secrecy Act from 1970, which
Nicholas Anthony, a policy analyst at the libertarian-leaning Cato Institute, said regulations that leave consumers "in the dark" could be fueling allegations of political debanking.
"There's definitely a strong line of truth where banks are saying they're not broadly closing accounts for political reasons, because if they were closing the accounts of all conservatives, then I would imagine half the country would be without a bank account," Anthony said. "I do imagine that there are a lot of people out there [for whom] it certainly feels like that's the cause, because they're not allowed to know anything else."
Greg Baer, head of the Bank Policy Institute, echoed the president's assertion that unchecked supervisors are urging banks to drop risky clients .
Old Glory CEO Ring said that, as a response to debanking people for political reasons, more regulation is "the last thing banks need." But it shouldn't be a crime to debank conservatives, he said, adding that the government shouldn't make banks "pick and choose" who they want to do business with.
Anthony, who isn't testifying on Wednesday, said that the conflation of what he calls "operational debanking" and "governmental debanking" is making it harder to fix the problem.
"With operational debanking, we're facing private business decisions about how to operate an institution," Anthony said. "With governmental debanking, we're talking about what is government overreach into the decisions of those banks. The policy prescriptions to stop both of those are vastly different."
