Obama and Biden Regulatory Policies Drove the Debanking Scandal

A new report from the Office of the Comptroller of the Currency (OCC) found that the nation's nine largest national banks maintained policies that restricted financial services based on political or religious beliefs and lawful business activities. The findings provide new evidence of how debanking became a problem for Americans whose views or businesses fell out of favor with federal regulators.

Much of the criticism surrounding debanking has focused on the banks themselves. However, federal regulators helped create the conditions that encouraged financial institutions to turn away lawful customers. Banks operate under extensive federal supervision, and regulatory pressure can influence which customers they are willing to serve.

The federal government's role in debanking should be the focus of reform. Replacing regulatory pressure with new mandates forcing private banks to serve customers would expand government interference rather than address its source.

How Federal Regulators Encouraged Debanking

Federal banking regulators have long used a supervisory standard known as "reputational risk" to evaluate financial institutions. Unlike traditional financial risks involving credit losses, liquidity, or capital requirements, reputational risk allows regulators to consider whether a bank's association with certain customers or industries could damage its public standing.

The standard gave regulators broad discretion to scrutinize relationships with lawful businesses they considered controversial. Banks could face additional supervisory attention for serving those customers, even when the relationships presented no unusual financial risk.

That created a powerful incentive for banks to avoid customers who might attract unwanted regulatory scrutiny. Financial institutions depend on federal regulators for examinations, approvals, and other supervisory decisions. Even informal pressure can carry considerable weight when it comes from an agency with that much authority.

The issue dates back to Operation Choke Point under the Obama administration, when federal agencies scrutinized banks' relationships with certain lawful industries. Similar concerns emerged during the Biden administration, particularly involving firearms businesses, digital asset companies, and politically conservative organizations.

The resulting account closures and restrictions have often been described as decisions made by private banks. That overlooks the role federal regulators played in shaping the environment in which those decisions occurred.

OCC Report Documents Widespread Restrictions

The OCC's review examined debanking practices at JPMorgan Chase, Bank of America, Citibank, Wells Fargo, U.S. Bank, Capital One, PNC Bank, TD Bank, and BMO Bank between 2020 and September 2025.

The agency found that all nine banks maintained policies that restricted access to financial services based on political or religious beliefs or lawful business activities.

The report identified restrictions affecting conservative and religious organizations, along with businesses in industries that had attracted political or regulatory scrutiny. It also documented instances in which banks considered the possibility of government opposition when evaluating customer relationships.

For example, Wells Fargo considered the prospect of increased regulatory pressure against lending to firearms businesses during the Biden administration.

The findings do not mean every account closure was ordered by a federal regulator. They do show that political considerations and concerns about regulatory treatment influenced banking policies that should primarily reflect financial risk, legal requirements, and ordinary business judgment.

Banks have legitimate reasons to close accounts or decline customers, including fraud concerns, financial exposure, and compliance obligations. Political or religious beliefs and participation in lawful industries should not become additional sources of risk simply because federal regulators disapprove of them.

Forcing Banks to Serve Customers Is Not the Answer

Some responses to debanking have focused on requiring banks to provide services to customers regardless of political beliefs or lawful business activities. Several states have pursued restrictions intended to prevent financial institutions from discriminating against certain customers.

While these measures seek to address a legitimate concern, they risk creating another form of government interference in private banking decisions.

Banks should remain free to decide which customers they serve based on their own business considerations. A financial institution may decline a relationship because of financial exposure, operational costs, compliance concerns, or other legitimate reasons. Government mandates requiring banks to maintain particular customer relationships would limit that freedom.

State restrictions can also create conflicting obligations for financial institutions operating across the country. Banks could face different standards depending on where they operate, adding compliance costs without addressing the federal supervisory practices that contributed to debanking.

The more effective approach is to remove government pressure from the decision-making process. Banks should neither be pushed by regulators to reject lawful customers nor compelled by government mandates to accept them.

Congress Can Address the Source of Debanking

The Trump administration has taken steps to reverse federal policies associated with debanking, including removing reputational risk from OCC supervisory examinations and reviewing banking practices that may have restricted access to financial services.

Those administrative changes can help restore appropriate boundaries between regulators and financial institutions, but they can also be reversed by a future administration.

Congress has an opportunity to make the reforms permanent.

Rep. Andy Barr's H.R. 2702, the "Financial Integrity and Regulation Management Act" (FIRM Act), would prohibit federal banking regulators from using reputational risk as a basis for supervisory decisions. Removing that subjective standard would help ensure that regulators concentrate on the financial condition and legal compliance of the institutions they oversee.

Rep. Dan Meuser's H.R. 4460, the "SAFE Guidance Act," would address another source of regulatory pressure by restricting the use of informal supervisory guidance to influence banks' decisions. Federal agencies should not be able to accomplish through unofficial pressure what they lack the authority to require through formal regulation.

Together, these proposals would place clearer limits on federal supervisory authority while preserving banks' ability to make independent business decisions.

The objective should be a banking system in which regulators enforce financial laws and safety standards without directing private institutions toward politically preferred customers or industries.

CFE Takeaway

The OCC's findings reinforce the need to address the federal government's role in debanking. Regulatory pressure and subjective reputational risk standards can encourage banks to deny services to lawful customers for reasons unrelated to their financial condition or business practices.

Congress should establish permanent restrictions on the use of reputational risk and informal supervisory pressure. At the same time, policymakers should avoid imposing new mandates that force private banks to maintain customer relationships against their business judgment.

The solution to government-driven debanking is to limit the government's ability to interfere in banking decisions. Financial institutions should be accountable for managing financial risks and complying with the law, not for satisfying the political preferences of federal regulators.