/ world today news/ The Trump administration is trying to push through a last-minute rule that could force banks to offer loans to arms manufacturers and oil exploration and production companies or finance high-cost payday lenders.
The move follows announcements by major US banks that there are certain industries and activities they do not want to finance, such as drilling for oil in Alaska’s Arctic National Wildlife Refuge or lending to arms manufacturers that produce offensive weapons. Some major banks have vowed not to make such loans.
Now a Trump-appointed bank regulator is pushing for a rule that would deem that an unfair, discriminatory practice.
“It’s a very poorly constructed rule,” said John Court, head of regulatory affairs at the Bank Policy Institute, which represents the nation’s largest banks.
He felt that the rule was “obviously hastily conceived and hastily constructed”.
The rule was proposed in November after President Trump lost his re-election bid. Additionally, John Cort says it appears the Trump-appointed Acting Comptroller of the Currency is trying to enforce this rule before the Biden administration takes office next week.
John Cort says that many financial firms that are increasingly focusing on environmental, social governance and public policy issues, or ESG issues (Environmental, Social and Governance, note)
“They include racial equality, climate and other issues,” Cort says.
“This proposal would clearly undermine the ability of a banking organization to achieve or administer any so-called environmental, social and governance objectives it may have,” adds John Court.
The rule is based on the concept of fair access to credit, which is traditionally associated with the prevention of racial discrimination.
The OSS refused an interview. Acting Brian Brooks said in a press release that “fair access to financial services, credit and capital is essential to our economy.”
But critics say the rule will really force banks to finance firearms companies that make assault-style rifles, or even predatory lenders that charge 300 percent annual interest.
“Payday lenders not only disproportionately harm people of color, they target communities of color,” said Rebecca Borne, an attorney at the nonprofit Center for Responsible Lending.
“So the agency is really taking civil rights language to do something that is fundamentally inconsistent with the original intent of that language.” says Borne.
The result, she adds, would be to exacerbate discrimination in lending, “masking it with this civil rights language.”
The lenders’ main trade group, INFiN, said in a statement that it “supports the OCC’s steps to protect legitimate businesses from discrimination under the proposed fair access rule.”
If Donald Trump’s administration were to finalize the rule before President-elect Joe Biden takes office, Court says it would make it difficult, but not impossible, for the new administration to overturn it. It also said that if it came to such a thing, the banks would likely go to court to try to stop the rule.
“It takes the ability to make decisions, it takes that out of the bank and effectively puts it in a state mandate,” says John Court.
According to Court, the rule is so broadly and generally written that it would apply to both ordinary business decisions and broader ones based on what bank management thinks is good or bad for society, whether that includes climate change , assault rifles, payday lending, or anything else.
The rule could also be removed by Congress through an oversight tool called the Review Act, especially since Democrats will now control both the House and Senate.
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