Congress sends FDIC a letter

Key House Republican leaders have sent the FDIC suggestions about policy changes to prevent debanking in the future.

Why it matters: The goal of the reforms is to prevent a case where regulators could shut a legal industry out of the financial system, thereby shutting it down.

Zoom in: The legislators sent a letter with five suggestions following hearings in the House and Senate on debanking legal businesses.

• The goal is to provide clarity to customers about why their accounts are getting shut down, remove subjective standards such as "reputational risk" from risk assessment by banking regulators and ensure uniform application of law.

What they're saying: "Even without being explicit, [regulators] can send out these signals that you really don't want to take on certain kinds of customers, and the institutions are going to respect that," Chester Spatt, a business school professor at Carnegie Mellon and former chief economist at the SEC, tells Axios.

• This letter, however, read to Spatt as a good-faith effort between legislators and executive branch staff to chart a path forward.
• "The way it works when an executive branch and part of the legislature are in the same party, they are a little bit trying to learn from each other," he says.

The bottom line: Letters like this are part of a larger process.

• Legislators may know the outcome they want, but they understand that agency staff have seen more edge cases and have a deeper understanding.