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Reprinted with permission Mises Institute Ryan McMaken
Last year, Paypal corporation announced that it was going to "fine" users (i.e., steal their money) to the tune of $2,500 for "the sending, posting, or publication of any messages, content, or materials” which “promote misinformation.” Well, Paypal didn't "announce" the policy so much as try to sneak it into the fine print. When the company was caught in the act, however, management then claimed it was all just a big mistake.
Sure it was.
Unfortunately, Paypal is not the only financial organization that has shown an interest in punishing or "debanking" customers for political or ideological reasons. In 2021, The Hill reported on how the banking sector was showing a willingness to cut off entire industries from financial services to appease certain activists. These industries include fossil fuel extraction firms and gun manufacturers.
Big banks have been shown to attack certain non-profits in this fashion as well. Earlier this year, Former US Senator Sam Brownback explained that JP Morgan Chase had shut down, without explanation, its account with Brownback's organization The National Committee for Religious Freedom. The bank demanded a list of the organization's donors before it would reinstate the account, although no such thing is required by law. JP Morgan's senior management is now fighting stockholder efforts to investigate why the bank shut down the account.
These debanking efforts by activist bankers pose an enormous threat to ordinary people. Activist bankers could simply cut off dissident organizations from their money should these organizations sponsor the "wrong" event or publish the "wrong" opinion.
This is a type of discrimination. Yet, the usual "answer" to discrimination pushed by social democrats—i.e., employing the Equal Protection Clause—is not something we can support. After all, a truly private organization ought to be free to discriminate against whomever it wishes. No respect for basic human rights (i.e., property rights) is compatible with claiming that the federal government can sue and shut down businesses for "discrimination." And yes, a truly private college should be free to discriminate in favor of non-whites if it wants.
Some aspects of anti-discrimination law are exactly right, however, and these we can support. For example, Title VI of the Civil Rights Act, for instance, protects people from discrimination (based on race, color or national origin) in programs or activities that receive federal money. Or, put another way, this prevents organizations from stealing from taxpayers and then denying those taxpayers the use of services taxpayers were forced to pay for.
This is applicable to the problem of "debanking" because much of the banking sector is heavily reliant on federal assistance, and many of today's major banks likely wouldn't even exist if it weren't for federal banking bailouts and easy money from the central bank (a de facto federal agency). Federal largesse for America's big banks has become nearly constant, in fact. These banks' portfolios are propped up by Federal Reserve purchases of mortgage-backed securities and Treasurys. In recent months, the federal government has also helped shore up banks' solvency by effectively guaranteeing all deposits, far in excess of the statutory limit of $250,000. The claim that the FDIC is an "insurance" program makes less sense than ever. It's now simply a mechanism for helping big banks hold on to depositors. And then there are the bailouts. In the wake of the 2008 financial crisis, the federal government granted enormous loans to virtually all of the nation's big banks while buying up bank stock to bail out the industry. Since then, bankers have also received (from the Federal Reserve) enormous sums in interest payments on bank reserves. This has created larger tax bills for taxpayers and higher inflation rates.
Without these bailouts, many of these banks would have ceased to exist altogether. Their assets would have been auctioned off, and housing prices would have fallen. First-time homebuyers would not now be looking as astronomical housing prices so that billionaire bankers can keep collecting a handsome return on housing securities propped up by federal spending. To this day, however, bankers will peddle their official propaganda line that this wasn't a bailout because the banks paid back these special sweetheart loans. This is a dishonest way of spinning it, however. The purpose of the loans was to keep the current crop of incompetent bankers in business so that their firms would not go bankrupt. That would have allowed smaller, more efficient entrepreneurs to take over the failed bank's assets at lower prices. This would have benefited all consumers by reducing prices and cleaning out the old crop of failed bankers. Instead, the bailouts ensured the same cronies remained in power even as their firms failed. Those same people (or their friends) continue to be in charge today.
What this all means is that bankers at the big banks have been protecting their riches on the backs on taxpayers. Yet, these same bankers have the chutzpah to also think they ought to be able to discriminate against their own customers should those customers engage in politically "objectionable" activities.
Since many bankers believe it's perfectly fine to steal from taxpayers while also attacking taxpayers who won't toe the regime party line, Congress should make it clear that discrimination under Title VI includes discriminating against people or organizations based on their political or ideological views. Thus, organizations like the big banks that are on the dole and benefit from taxpayer exploitation can no longer refuse service to any customer because that customer makes guns, or questions the official covid narrative, or owns an oil well. The same would apply to the major airlines the auto companies, AIG, Fannie Mae, and any other organization that sucks the taxpayer dry every time there is a recession or financial crisis.
Of course, an even better solution would be to end the entire federal and financial apparatus that keeps today's plutocratic banker class in power. Federal banking regulations overwhelmingly favor huge banks at the expense of smaller community banks. The total number of banks in the US is shrinking as banks like JP Morgan Chase gain ever-greater monopoly power. Banks that try to introduce more sound banking practices, like Custodia bank, are denied federal approval while large federally-favored banks enjoy fast-tracked access to federal policymakers. The feds' too-big-to-fail doctrine ensures ever more capital flows to only the largest banks.
The result is less market competition and less choice for consumers, which allows woke bankers to more effectively silence those with "incorrect" ideological views.
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