We heard a good deal from you on our in-depth analysis of new GOP legislation blocking banks, credit unions, and payment-card networks from engaging in what the measure calls “social lending” – i.e., not making loans to legal businesses a bank doesn’t like such as a bump-stock manufacturer.  As our analysis points out, the legislation is grandly drafted to cover any denial of credit or other services even if the bank thinks the customer is totally toxic.  This takes the bill beyond the gun-control battle into the broader sphere of corporate social purpose.  Most of you said that the bill’s effort to supersede a bank’s social – maybe even moral – judgment is inappropriate because companies should be allowed to make “legitimate” decisions about with whom they wish to do business.  The tricky bit is, though, what’s a “legitimate” reason to say no and who gets to make it.  In this note, I assess the double-sided dilemma of social lending; next week, I’ll do my best to offer a solution.

The dilemma?  Take the principle that banks can deny credit to anyone they don’t cotton to and one goes quickly from throttling firearms manufacturers – fine with me – to not lending to Planned Parenthood because a bank’s management opposes abortion.  Are all of us right-thinkers in the Northeast Corridor also fine with that?  This debate thus isn’t about guns – it’s about what corporations are for.  Are they solely about making money as Milton Friedman would have it?  Or, may companies allocate shareholder resources to further the social-welfare or political objectives they like the most?  Going farther, should corporations be the “public” companies Sen. Warren (D-MA) seeks in terms of a direct social-welfare mandate?  And, if companies are to be “public corporations,” then which or whose public must they serve? 

At the House Financial Services hearing earlier this week, progressive Democrats laid out their answer, lauding several banks for their stand against firearms and certain private-prison companies.  But, the reason companies with broad public ownership get to make these choices, at least arguably, is that companies are “persons” under the law.  So the Supreme Court said when it found in favor of corporate political contributions in Citizens United.  But, much as Democrats might like companies to be persons when they don’t lend to firearms companies, it’s not quite as comfortable when companies as persons open their checkbooks for the GOP.  So, one party wants companies to be persons for desired purposes, but not persons when they prefer the other party.

Are Republicans pristine in the “social-lending” debate?  No indeed.  The GOP loves Citizens United – who wouldn’t, given all the money that flows their way?  But if companies are persons when it comes to their political checkbooks, then why aren’t they persons when it comes to other corporate assets such as the funds with which to make loans or provide other financial services? 

According to this legislation and much conservative commentary, companies are to do no more than maximize the bottom line and distribute as much of it as they want to whomever they like as long as the recipient is a shareholder.  Do conservatives really believe that companies should do nothing more than maximize profitability in Milton Friedman’s name? 

Some do.  I know this personally as the recipient of opprobrium in a recent op-ed by a Heritage Foundation Director castigating my recent memo arguing that the Financial Stability Oversight Council should consider the inequality impact of post-crisis regulation.

Leaving aside that I was speaking about what public officials should do to maximize public good – not about what private companies may do for whom – the conservative ideal seems to be that no financial institution should do anything but mint as much money as it can even as, assuming its cloak of personhood, it then gives lots of it away to Republicans and conservative causes. 

Sorry, but neither Democrats and liberals nor Republicans and conservatives can personify companies as both financiers for their own goals and mechanical money-making machines when funds might flow a different direction.  The GOP anti-social-lending legislation won’t pass and Democrats are unlikely to get many more banks to shun far more companies, but the die is cast:  now that we’re debating what banks may do as lenders, we need a broader understanding of what companies can do as private-sector enterprises entrusted with shareholder funds but often also vested with far-reaching economic power.  Next week, a suggestion.