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Illustration: Sarah Grillo/Axios
Big banks are no longer allowed to reject business loan applicants because of the industry in which they operate, according to a new rule finalized on Thursday by the Trump administration.
Why it matters: Wall Street has curtailed its exposure to industries like guns, oil and private prisons, driven by both public and shareholder pressures. This new rule could reverse that trend.
Details: The Office of the Comptroller of the Currency finalized a rule it first proposed last November, arguing that industry-driven decisions violated its fair access policy.
- It only relates to banks with more than $100 billion in assets, which OCC says "may exert significant pricing power or influence over sectors of the national economy."
- That would include Citi, Goldman Sachs and JPMorgan Chase — each of which has limited lending to certain types of new energy projects. It also includes Bank of America, which in 2018 said it would stop financing the makers of military-style firearms.
What they're saying:
Brian Brooks, who stepped down as Acting Comptroller of the Currency just hours after the rule was finalized:
"When a large bank decides to cut off access to charities or even embassies serving dangerous parts of the world or companies conducting legal businesses in the United States that support local jobs and the national economy, they need to show their work and the legitimate business reasons for doing so... Moreover, elected officials should determine what is legal and illegal in our country."
Greg Baer, president and CEO of the Bank Policy Institute:
"The rule lacks both logic and legal basis, it ignores basic facts about how banking works, and it will undermine the safety and soundness of the banks to which it applies. Its substantive problems are outweighed only by the egregious procedural failings of the rulemaking process, and for these reasons it is unlikely to withstand scrutiny."
Between the lines: The Trump administration is rushing to finalize a rash of rulemaking before next Wednesday's transition of power, including a controversial Treasury effort to apply many traditional banking standards to self-hosted cryptocurrency wallets. Much of it may be overturned by the incoming Biden administration.
Looking ahead: OCC is expected to have a difficult time enforcing this rule, even if it remains on the books.