White House Issues Order Targeting Banks as Trump Accuses Them of Discrimination

White House Considers Action Against Banks for Alleged Political Debanking

The White House is reportedly preparing to take action against banks that are accused of terminating customers based on political reasons. This move comes as former President Donald Trump has publicly criticized major financial institutions, including JPMorgan and Bank of America, for allegedly discriminating against him and his supporters.

A draft of the executive order, which was reviewed by a news outlet, instructs regulators to examine banks for "politicized or unlawful debanking" practices. The order could potentially authorize monetary penalties or other disciplinary actions against banks found in violation of these guidelines. Industry sources suggest that the executive order may be announced as early as this week.

Despite the report, the White House has not yet issued a public statement regarding the potential order. However, Trump's remarks have placed significant pressure on the country’s largest lenders. His criticisms highlight how personal grievances and business interests can influence policy decisions within the administration, raising concerns about potential conflicts of interest. Although Trump's business empire has been placed into a trust, it remains under his ownership.

Trump's Claims of Discrimination

Trump recently stated during an interview with CNBC that the top two lenders in the country had previously rejected his deposits. He claimed, without providing evidence, that the Biden administration had encouraged regulators to "destroy Trump." According to Trump, JPMorgan had discriminated against him after his first term in office. He described how he had hundreds of millions in accounts that were suddenly closed, with the bank informing him that he needed to leave within 20 days.

"I had hundreds of millions, I had many, many accounts loaded up with cash ... and they told me, 'I'm sorry sir, we can't have you. You have 20 days to get out,'" Trump said. He added that the banks were not only targeting him but also many conservatives.

Trump also claimed that he attempted to deposit funds with Bank of America, but was again refused. As a result, he split his money across multiple smaller banks, depositing amounts ranging from $10 million to $12 million at different institutions.

JPMorgan did not directly address Trump's specific claims about his account. In a statement, the bank emphasized that it does not close accounts for political reasons and supported the need for regulatory reform. It also expressed willingness to work with the White House to improve the situation.

Bank of America also did not comment on Trump’s allegations. However, both banks have indicated support for the administration’s efforts to clarify policies related to banking practices.

Reputational Risk and Regulatory Scrutiny

During the Biden administration, regulators focused on assessing banks' decisions based on reputational risks. This scrutiny intensified due to Trump's legal challenges. Despite this, JPMorgan continues to maintain long-standing relationships with members of the Trump family and handles campaign accounts linked to the former president.

After Trump took office, the Federal Reserve directed its supervisors to stop considering reputational risk when examining banks. This change came after industry complaints about the burden of such metrics.

Mike Mayo, a bank analyst at Wells Fargo, commented that the White House is urging banks not to use regulations as an excuse to deny loans or banking relationships. He noted that banks can apply their standard underwriting criteria to refuse services, but should not use reputational risk as a justification.

Bank of America welcomed the administration’s efforts to clarify regulatory frameworks and stated that it would continue to work with officials to improve the system.

Regulatory Overreach Concerns

Banks have consistently argued that any issues related to "debanking" should be addressed with regulators rather than the institutions themselves. They claim that strict rules and overly aggressive supervision can discourage certain banking activities.

The Bank Policy Institute, an industry group, stated that the core issue lies in regulatory overreach and supervisory discretion. Lenders have engaged in discussions about debanking and considered various scenarios related to potential executive orders.

Additionally, banks hope that the administration may revise outdated anti-money laundering laws that they say impose unnecessary burdens. These discussions reflect ongoing tensions between financial institutions and regulatory bodies.

As the debate continues, the White House’s potential actions against banks for alleged political bias could mark a significant shift in the relationship between financial institutions and government regulators.