Trump regulator rule would force banks to lend to gunmakers and oil drillers


Polar Pioneer drilling rig equips for Arctic oil exploration in 2015. Rule proposed by Trump administration would require banks to offer financing to oil companies, arms manufacturers and lenders payday at high cost, even if the banks do not want it. // AP, Elaine Thompson

The Trump administration is trying to push through a last-minute rule that could force banks to offer loans to gunmakers and oil exploration companies or fund high-cost payday lenders.

The move follows announcements from America’s largest banks that certain industries and activities are unwilling to finance, such as oil drilling in the Arctic National Wildlife Refuge in Alaska or providing loans to gun manufacturers who craft assault-type weapons. Some large banks have given up on granting these loans.

Now a Trump-appointed banking regulator is pushing for a rule that considers it an unfair and discriminatory practice.

“It’s a very poorly constructed rule,” said John Court, head of regulatory affairs at the Bank Policy Institute, which represents the country’s largest banks. He says the rule is “clearly designed and built in a hurry.”

The rule was proposed in November after President Trump lost his candidacy for re-election. And the court says it appears the Trump-appointed acting head of the Office of the Comptroller of the Currency is scrambling to pass it ahead of the start of the Biden administration next week.

Court says many financial companies are focusing more on environmental, social and governance – or “ESG” – issues.

“Among those is racial equality, the climate, other issues,” Court said. “And this proposal would clearly undermine a banking organization’s ability to meet or administer any so-called ESG goals it might have.”

The rule is based on the concept of equitable access to credit, which has traditionally had to do with preventing racial discrimination.

The OCC declined an interview. Acting Director Brian Brooks said in a press release that “equitable access to financial services, credit and capital is essential for our economy”.

But critics say the rule is really to force banks to fund gun companies that make assault rifles, or even predatory payday lenders who charge 300% annual interest.

“Payday lenders not only disproportionately harm people of color, but they also target communities of color,” says Rebecca Borné, lawyer at the nonprofit Center for Responsible Lending.

“So the agency is really using the language of civil rights to do something that is fundamentally inconsistent with the original intent of that language.” said Borne. The result, she adds, would exacerbate discrimination in lending, “by masking it in this civil rights language.”

The leading trade group for payday lenders, INFiN, said in a statement that it “supports measures taken by the OCC to protect legal businesses from discrimination under the proposed fair access rule.”

If the Trump administration finalizes the rule before President-elect Joe Biden takes office, the court said it would be more difficult, but not impossible, for the new administration to overturn it. And he says if it is that, the banks would likely sue to try to stop the rule.

“It takes away the ability to make decisions, it takes it out of the bank and effectively puts it under a government mandate,” he says.

And the court says the rule is so broad that it would apply to mundane business decisions as well as broader decisions based on what the bank’s management thinks is good or bad for the company – whether it’s good or bad for the company. take action on climate change, assault rifles, payday loans, or whatever.

The rule could also be repealed by Congress through a monitoring tool called the Congressional Review Act, especially since Democrats will now control both the House and the Senate.

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