Toomey Warns Against the Growing Politicization of Our Nation’s Banks
“If banks don’t cease and desist from weighing in on social and cultural issues, don’t be shocked if Republicans, once back in power nationally, seek to pressure banks to advance their goals.”
Washington, D.C. – In his opening statement at today’s U.S. Senate Banking Committee hearing, Ranking Member Pat Toomey (R-Pa.) raised concerns about the growing trend of banks inserting themselves into highly charged social and political issues unrelated to their business, including global warming, abortion, and gun control. Senator Toomey warned that if banks don’t reverse course and stick to the business of banking, they risk being treated as public utilities—by both parties—in the future.
Ranking Member Toomey’s opening remarks, as prepared for delivery:
Thank
you, Mr. Chairman.
Today’s
hearing presents an opportunity to discuss the role of the nation’s largest
banks. At the outset, let me acknowledge what should be obvious: banks are
essential for supporting the economy and advancing American competitiveness.
Their
core functions—taking deposits, making loans, and processing payments, and, in
several cases, underwriting and making markets in securities—help to safeguard
savings and provide credit, which enables economic growth. With nearly $13
trillion in combined assets and operations ranging from mortgage banking to
small business lending, the banks here today make vital contributions to the
nation’s prosperity.
But
where I see a system at the heart of free enterprise, I worry other
policymakers see opportunity for social engineering. Activist regulators and
some of my colleagues see banks as a tool by which they can advance their
social policy.
Unfortunately,
there’s a growing trend of banks—several of them are represented here
today—inserting themselves into highly charged social and political issues
unrelated to their businesses. Banks’ willingness to help liberal policymakers
achieve their liberal goals makes it very difficult to mount a principled
defense against such politicization.
Some
of my colleagues are pressuring banks to use both their balance sheets and
their influence to address issues wholly unrelated to banking, such as global
warming, gun control, voter rights, and abortion. Several large banks have been
far too willing to acquiesce to these demands by embracing a liberal ESG agenda
that harms America.
Nearly
every bank at this hearing has pledged to meet a “net zero” greenhouse gas
emission goal by 2050, with several making even more specific commitments.
Carrying through on such pledges will eventually lead these banks to
artificially restrict, reduce, or cut-off funding for traditional energy
projects.
Despite
statements to the contrary, none of this has much to do with borrowers’ credit
quality or so-called transition risk. It’s because activists have made the
traditional energy sector politically disfavored.
We’re
witnessing the folly of such policy right now in Europe, which strangled its
own fossil energy sector and now finds itself deeply reliant on Russian gas.
Does anyone really believe that as the U.S. experiences 40-year high inflation
we should exacerbate the problem by reducing oil and natural gas production and
increasing energy prices? But that’s exactly what will happen if banks follow
through with their “net zero” pledges and ESG agenda, as environmental activist
groups have urged.
When
combined with the SEC’s proposed climate disclosure rule, these “net zero”
pledges are setting up banks for lawsuits and legal liability. Apparently some
banks are starting to acknowledge this reality.
A
report in the Financial Times this week says some banks are considering leaving
the so-called “Net-Zero Banking Alliance”—a UN-sponsored group that intends to
name and shame banks that don’t meet net zero pledges. It was a mistake to join
this group in the first place, but, for the sake of shareholders and the U.S.
economy, banks distancing themselves now would be a welcome step.
In
addition, banks have inserted themselves into contentious social issues, and,
in some cases, even made business decisions based on these factors. For
example, several banks responded to pressure from Democrats in the wake of the
Supreme Court’s Dobbs’ decision by very publicly pledging to pay for the costs
of their employees to travel to have abortions. This decision is an individual
bank’s choice, but it raises a number of questions, such as: Have these same
banks also committed to pay the costs for their female employees facing
unplanned pregnancies to place their children for adoption?
Notably,
when it comes to the right to keep and bear arms—which is an actual
constitutional right—some banks have gone out of their way to make it harder
for law-abiding Americans to exercise this right, from stopping the financing
of manufacturers of so-called military-style firearms for civilian use, to
de-banking retailers that sell firearms to customers under 21 years of age,
even when such sales are lawful.
I
can’t help but observe that when banks do weigh-in on highly charged social and
political issues, they seem to always come down on the liberal side. Beyond the
examples I’ve already given, there are others.
Banks
have opined on abortion, but not religious liberty. Banks have expressed
support for voting access, but are silent on voting security. Banks have
expressed support for DACA, but I’ve heard nothing about border security.
My
view is it’s bad business to alienate roughly half the country, but you are
private companies and are free to opine as you see fit. However, it’s no wonder
there’s been a strong backlash from policymakers in states like Texas, West
Virginia, and Florida.
If
banks don’t cease and desist from weighing in on social and cultural issues,
don’t be shocked if Republicans, once back in power nationally, seek to
pressure banks to advance their goals. Could banks be forced to explicitly
de-bank corporate customers that engage in woke policy debates, like Disney did
in Florida? Or will banks be incentivized to subsidize oil and gas financing?
Or explicitly reject ESG?
I
would oppose such efforts, just as I oppose similar efforts by liberals. But
once the precedent is set, the potential for future abuse is limitless.
Throughout
this Congress, I’ve repeatedly warned about the politicization of our financial
regulators and our central bank. I’ve emphasized that addressing political
issues requires difficult decisions involving tradeoffs. In a democratic
society, those tradeoffs must be made by elected representatives, who are
accountable to the American people.
Today,
I’m raising similar concerns about the politicization of our nation’s banks.
Just as regulators and central bankers are not elected by the American people,
neither are bank CEOs.
Banks
are currently at a critical crossroads: Accept the role that some liberals
prefer which is to have your institutions implement social policy on behalf of
the State, or embrace your history as drivers and promoters of free enterprise
and stay out of highly charged social and political issues.
I
strongly suggest you choose the latter path. If you don’t, you risk being
treated as public utilities—by both parties—in the future.
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