I have a new draft article circulating, The Market for Ideas: Viewpoint Discrimination in Banking. The paper addresses both the positive claims that banks have engaged in viewpoint discrimination by “debanking” political conservatives and Christians and the normative claims from right and left that banks should be regulated as common carriers or public utilities. Basically, the evidence on debanking is remarkably weak; banks often have good reason to close accounts related to credit risk on charged-back payments and AML compliance burdens. On top of that, the normative case for common carrier or public utility regulation makes little sense: banks are not natural monopolies, the very nature of their business requires discrimination for credit risk, and if they are acting solely out of animus, the market will price against them for it.
At core, however, the real issue is that if the First Amendment means anything, then viewpoints cannot be treated as a protected class. Ideas have to sink or swim in the marketplace on their own without government subsidization.
The abstract is below:
May banks engage in viewpoint discrimination? That is, may a bank deny service to an anti-vaxxer or an antifa or an election denier? Concerns about viewpoint discrimination in banking have been a conservative cause for a decade, with “viewpoint debanking,” seen as an extension of progressive cancel culture. Yet there is scant evidence that banks, even in the face of regulatory pressure, have engaged in viewpoint discrimination, aside from a few cases related to the January 6 insurrection. To the contrary, bank account closings can often be explained by viewpoint-neutral concerns over credit and anti-money-laundering compliance risk.
Despite the dearth of evidence of an actual viewpoint discrimination problem, scholars on the right and left have argued for treating banks as either common carriers or public utilities, both of which are subject to a general duty of non-discrimination, not just in regard to personal status, such as race, sex, or religion, but also regarding customers’ lines of business, and political or religious views. Banks, however, have never historically been regulated as common carriers or public utilities and with good reason: they do not raise the concerns about monopoly power that animate common carrier and public utility regulation, and the very nature of the service they provide requires discrimination based on individualized counterparty credit and compliance risk. Moreover, prohibiting viewpoint discrimination forces a cross-subsidy among bank customers in which low-risk customers are forced to subsidize the high-risk ones, which just transposes the problem: viewpoint subsidization is itself viewpoint discrimination.
Allowing viewpoint discrimination means that all viewpoints are subject to market discipline: if a customer’s viewpoint imposes risk on a bank, then the bank should be allowed to price against it, while if a bank discriminates against a viewpoint solely from animus—that is, an expression of the bank’s own viewpoint—then market will price against the bank, which will lose market share to non-discriminating banks. Banks should be free to reject customers for any reason unrelated to personal status, including viewpoint. Doing so is a business decision that is best left to private actors and checked by the marketplace, not government.
