White House Issues Order Targeting Banks Amid Trump's Discrimination Claims

White House Considers Executive Order to Address Alleged Political Debanking of Customers

The White House is reportedly preparing to take action against banks accused of dropping customers for political reasons, according to sources. This development comes after former President Donald Trump claimed that major financial institutions, including JPMorgan and Bank of America, discriminated against him and his supporters.

A draft of an executive order, reviewed by a news outlet, instructs regulators to investigate banks for "politicized or unlawful debanking" practices. The order could lead to financial penalties or other disciplinary actions against those found in violation. Industry sources suggest the order may be announced as early as this week.

The White House has not yet issued a statement on the reported executive order. However, Trump's accusations have intensified pressure on the nation’s largest lenders. Critics argue that these actions reflect the president’s personal grievances and business interests, which have influenced policies within his administration. Despite being placed in a trust, Trump’s business empire remains under his ownership.

Peter Ricchiuti, a senior professor at Tulane University’s Freeman School of Business, noted that while some policies, such as tariffs, stem from economic assessments, this issue appears more personal. He warned that if the executive order leads to retaliation against specific banks, it could create further challenges for financial markets.

Shares of Bank of America remained relatively stable, while JPMorgan saw a slight decline following previous losses. These market movements highlight the potential impact of the ongoing controversy.

Trump’s Claims About Banking Practices

During a recent interview with CNBC, Trump alleged that the country’s top two lenders had previously refused to accept his deposits. He claimed, without providing evidence, that this refusal suggested the Biden administration had encouraged regulators to "destroy" him. Trump stated that JPMorgan had rejected his accounts during his first term, claiming he had hundreds of millions in funds across multiple accounts.

“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 discriminated against him and other conservatives.

Trump also claimed he tried depositing funds with Bank of America but was turned away. He eventually distributed his money among smaller banks, making deposits ranging from $5 million to $12 million. However, he did not name the specific institutions involved.

JPMorgan responded by stating that it does not close accounts for political reasons and supports the need for regulatory reform. The bank commended the White House for addressing the issue and expressed willingness to collaborate on finding a solution. Similarly, Bank of America did not directly address Trump’s claims.

Reputational Risk and Regulatory Scrutiny

Under the Biden administration, regulators focused on evaluating banks’ decisions through the lens of reputational risk, which refers to the potential for negative publicity to harm a bank’s business or lead to costly litigation. Banks faced intense scrutiny when dealing with Trump due to his legal issues.

JPMorgan has maintained long-standing banking relationships with members of the Trump family and has handled 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 metric.

Mike Mayo, a bank analyst at Wells Fargo, commented that the White House’s approach aims to prevent banks from using regulations as an excuse to deny loans or banking relationships. He emphasized that banks can still use their standard underwriting processes to refuse services but should not rely on reputational risk as a justification.

Bank of America welcomed the administration’s efforts to clarify regulatory policies, stating it would continue working with officials to improve the framework.

Regulatory Concerns and Industry Response

Trump criticized the CEOs of JPMorgan and Bank of America in January for allegedly denying services to conservatives. At the time, both banks denied making decisions based on political considerations.

Banks have raised concerns about regulatory overreach, arguing that any issues related to debanking should target regulators rather than the institutions themselves. They claim that strict rules and aggressive supervision discourage them from engaging in certain activities.

The Bank Policy Institute, an industry group, stated that the core issue lies in regulatory overreach and supervisory discretion. Lenders have been discussing potential scenarios around the executive order and are hopeful the administration might revise outdated anti-money laundering laws that they find burdensome.

As the debate continues, the implications of the White House’s potential actions remain significant for both banks and the broader financial sector.