Let’s start by talking about Republican economic philosophy. To be sure, popular vote loser Donald Trump has not played a part in developing that philosophy, and likely does not understand it beyond the most simple level—i.e., do whatever possible to benefit people like himself. Nevertheless, that philosophy guides the decisions being made in his name.
Republican philosophy dictates that government should stay out of the way of business, because market forces will—thanks to the absurd notion of the “invisible hand”—produce the best possible results for everyone. Republicans also generally assume that businesses (cough, Wells Fargo, Takata, General Motors, Volkswagen—need I go on?) will act ethically and honestly. And so a light dose of regulation (rather than a heavy one) is all that is necessary.
Along these lines, the Trump administration has taken a series of steps to deregulate the financial industry—you remember them, don’t you? They’re the lovely people who brought us the Great Recession after free-market conservatives, aided by some centrist Democrats, “liberated” them from a series of regulations in the years before 2008. Both on his own and through his Republican minions on Capitol Hill, Trump has been working to defang the Dodd-Frank financial reform law, as well as rules set forth by the Consumer Financial Protection Bureau.
Going further, a recent New York Timesarticle detailed what Trump has done to another major watchdog of the financial industry, the Office of the Comptroller of the Currency (OCC), which “charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks.” The measures taken since Trump’s people took over the OCC have, unfortunately, largely flown under the radar until now. But Americans, in particular the economically vulnerable—people who are disproportionately black, Latino, and Native American—will feel their impact soon enough.
In keeping with Republican philosophy, all these changes will give banks greater leeway to operate, which is great if you think the interests of those banks are in line with those of the American people. And if you think that ... well, you probably already have a dinner reservation at Mar-a-Lago on your calendar.
So let’s talk specifics. Having been turned under President Obama into one of the “toughest” regulators of the financial industry, the OCC has now become a “vital player” in Trump’s deregulation plans. Among other changes, the Comptroller’s office has “softened a policy for punishing banks suspected of discriminatory lending.” Yes, you read that right. Trump has made it easier for banks get away with discrimination. He’d surely say that there are “some very fine people on both sides” of that discrimination.
The Community Reinvestment Act (CRA)—which was enacted in 1977 to combat the despicable racist practice known as redlining—“requires that each depository institution's record in helping meet the credit needs of its entire community be evaluated by the appropriate Federal financial supervisory agency periodically.” In other words, a bank that discriminates will face penalties. The CRA measures compliance through a scale that includes four levels: Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance. (On a related note, it is well-documented that Donald Trump and his family’s real estate company have a long history of discriminating against blacks and Latinos).
The agency had previously downgraded some banks two levels at a time, but a footnote in a new manual says the policy is not to lower a bank’s rating by “more than one rating level.” The new policy also suggested that downgrades could be avoided altogether, emphasizing that the agency must “fully consider the corrective actions taken by a bank.” If the bank has fixed its behavior, the manual said, “the ratings of the bank should not be lowered solely based on the existence of the practice.” [snip] This month, the agency issued another manual stating that a low Community Reinvestment Act rating should not inherently block a bank’s plans to merge or expand. A low rating, the manual said, “is not a bar to approval of an application.”
The second point means that if a bank discriminates, and then—to the satisfaction of this agency, headed by Trump appointees—stopped discriminating, it’s as if the discrimination never happened at all in terms of the bank’s official CRA rating. To clarify the last point, a low CRA rating is supposed to be enough to prevent a merger. That’s a powerful tool the law has to prevent banks from engaging in discriminatory behavior. Now, thanks to Trump, that tool essentially no longer exists.
And, for a real kick in the teeth, guess which company directly benefits from the first change listed above? Your favorite bank and mine, the thieving Wells Fargo. On March 28, when the OCC was still led by holdover Obama appointee Thomas J. Curry, Wells Fargo got downgraded by two levels. The report noted that Wells Fargo had carried out “an extensive and pervasive pattern and practice of violations across multiple lines of business within the bank, resulting in significant harm to large numbers of consumers.”
One wonders if Mr. Noreika at the OCC had Wells Fargo specifically in mind when he changed the policy on lowering ratings. One also wonders about the fact that the OCC is undertaking a separate effort to help get some bonus payments more quickly into the hands of Wells Fargo executives who recently left the company. The payments are being held up while regulators make sure there’s nothing fishy about them, given, you know, that Wells Fargo opened millions of fake accounts in their customers’ names without their permission. No reason to put that bank’s practices under any added scrutiny, right?
The thing is, this is what Republicans have always believed. Banks (and other corporations) don’t need strict regulations. It’s not like they—not to mention the federal government—engaged in decades-long, systematic, industry-wide discrimination when it comes to mortgages. Most people understand that the executives who run corporations are nothing more or less than human beings. Many of them are simply unable to resist taking advantage, cheating, lying, and stealing if the opportunity is there, and the risk of serious punishment is small. In every preschool classroom, there are always going to be kids who’ll take the toy from the unsuspecting kid sitting next to them. And in every industry, there are always going to be those same kids looking to screw their customers and their honest competitors any way they can, including by acting immorally and/or illegally.
Whether Republicans can’t see this, don’t want to see this, or simply don’t care is irrelevant. Their actions, as seen on this and countless other topics, make clear that they will always gut the rules that protect consumers—especially those who are vulnerable because of their race, their economic status, or both. They will always favor the rich and the powerful. Why Americans keep giving Republicans the power to do so is confounding.