Sen. Lummis Alleges Fed Pressures Banks Over Political Views

Senator Cynthia Lummis has stated that her office has uncovered documentation indicating that the Federal Reserve has instructed bank examiners to coerce banks into closing accounts based on customers’ political beliefs, which contradicts public claims from Fed leadership denying such practices.

“We have clear guidance from the Fed that if examiners encounter customers making political statements or holding assets they disapprove of—like those in oil and gas or digital assets—the Fed, via its Division of Banking Supervision, may suggest or even order banks to shut down these accounts,” Lummis revealed in an interview.

The Wyoming Republican emphasized that the guidance includes a specific definition of “reputational risk” that covers “statements of a political nature made by board members or officials.”

“Despite assurances from the Fed that they don’t cut off banking services for customers deemed risky based on reputation, that’s exactly what they’re doing,” she commented.

Operation Chokepoint 2.0

Lummis, who leads the country’s first digital assets subcommittee, referred to this federal initiative as “Operation Chokepoint 2.0,” noting its similarities to previous programs under the Obama administration that aimed at businesses that, while legal, were politically controversial, like payday lenders and firearm sellers.

“We’ve been in discussions with these banks and their customers who’ve had accounts closed,” she stated, adding, “We’re gearing up for hearings on bank closures that have taken place during the Biden administration.”

“Under Biden, businesses and individuals have lost their bank accounts solely based on their industries, such as oil, gas, and firearms, or even for being involved in digital currencies,” she added.

Lummis mentioned her growing interest in the debanking issue, especially as Wyoming developed regulations to attract digital asset firms.

“I’ve been working to assist some Wyoming businesses in obtaining what’s known as a Federal Reserve Master Account.” However, not only were these master accounts denied, but banks also terminated accounts for some related companies,” she recounted.

Ongoing Issues

Lummis voiced concerns that this troubling practice is likely to persist, even with a change in administration.

“The Trump family’s accounts have been closed—Eric, Donald Jr., Melania, and even Donald Trump himself have faced this issue. Digital asset companies are being cut off at an alarming rate,” she remarked.

She cited a specific instance of ongoing debanking, mentioning that the CEO of Strike, Jack Mullers, had his account closed by JPMorgan Chase as recently as September 2024.

Strike operates on the Bitcoin Lightning Network, which facilitates faster and cheaper transactions, aiming to make Bitcoin more accessible for everyday and international payments.

“This trend hasn’t stopped,” Lummis emphasized. “It continues today, and we need banks to understand that we will take action.”

Wyoming Businesses Affected

Lummis highlighted businesses in Wyoming impacted by these actions, including Kraken in Cheyenne and another known as Custodia.

She recalled Bank of the West’s 2018 decision to cease dealings with coal, oil, and gas companies, which angered Wyoming’s Governor Gordon.

Currently, Lummis is co-sponsoring two bills aimed at combating government-induced debanking.

The first, proposed by Senator Kevin Cramer, is the Fair Access to Banking Act. It demands that banks with over $10 billion in assets provide written reasons for denying services and imposes penalties for refusing to serve creditworthy individuals based on political considerations.

“This is serious. A failure to comply could jeopardize a bank’s insured status,” Lummis pointed out, adding that civil penalties of up to $10,000 per violation might also be levied.

The second piece of legislation, known as the FIRM Act, was co-sponsored by Lummis and Senate Banking Chairman Tim Scott. It seeks to eliminate the “reputational risk” term from regulatory discussions regarding lawful businesses.

“This legislation demands transparency from government agencies about how banking supervision relates to reputational risk,” Lummis stated, insisting on accountability.

Critics Voice Concerns

Some experts remain skeptical about the efficacy of the Fair Access Act. Thomas Kingsley, director of financial services policy at the American Action Forum, contended that while debanking does occur, the responses proposed may unfairly target the wrong entities.

“If there is demonetization, and the extent of it may be exaggerated, it arises from government intervention,” Kingsley critiqued, suggesting that making such practices illegal could be an overreach.

He voiced reservations about the severe penalties outlined in the Fair Access Act, questioning the rationale behind punishing banks that might comply with regulatory guidelines.

Furthermore, Kingsley noted, “It’s troubling for the government to dictate who banks should or shouldn’t serve, as that’s not part of its role.” Lummis anticipated resistance from bank representatives, who might claim congressional interference in their business operations.

“I want them to articulate why we shouldn’t get involved in this, especially when customers are losing their banking services due to political biases,” she retorted. Lummis hopes to advance the bill this year as part of a broader financial services initiative.

Insights from Experts

Julie Hill, a banking regulation expert from the University of Wyoming, previously testified on these issues. Her upcoming paper titled “Government Debanking” is set for publication in 2026.

Hill explained that the concept of “debanking” can vary significantly in interpretation, with some using it to indicate account closures that some customers wish to contest.

Her main concern revolves around what she describes as “government debanking,” where governmental pressure leads to the closure of accounts belonging to valid businesses for political reasons.

She pointed to reputational risk as a regulatory tool similar to what Lummis is addressing. Hill noted that regulators often raise reputational risk in conjunction with tangible concerns, primarily after illegal activities come to light.

“Reputational risk becomes problematic only when used in isolation for punitive measures without any legal basis,” she warned, suggesting that it could hinder banking safety by politicizing regulatory actions.

Hill also voiced the need for reforms that will not overly burden smaller financial institutions in Wyoming.

“With compliance costs disproportionately impacting small banks compared to larger ones, we must be cautious,” she advised, noting that a small community bank may lack the staff to navigate complex regulations like larger entities can manage.

In closing, Lummis asserted her commitment to ensuring fair banking access for all legitimate American businesses, stating, “I want to prevent Washington from having the power to arbitrarily decide who gets a bank account and who doesn’t.”