#FinCEN

In a recent interview, Zach Warmbrodt of Politico asked me the best big-picture question when it comes to federal preemption:  are banks now so petrified of state anti-ESG mandates that a federal law laying out with whom banks may do business is desirable?  Banks don’t want anyone telling them how to run their businesses, but workable federal rules are, so the thinking goes, better than high-risk state standards such as Florida’s new requirements.  Fears are heightened by the OCC’s hesitancy when it comes to preempting Florida, but the agency is now contending with new restrictions thanks to recent Supreme Court rulings and federal preemption still wouldn’t solve the state-bank predicament.  A federal bill might clear these legal issues away, but a sound bill would still have to reckon with complex policy decisions no prior effort to draft preemption bills has conquered.

Indeed, legislative and regulatory efforts to date have been far more ideological than operational.  The ESG battles first broke into open warfare during the Obama Administration when the banking agencies issued warnings about lending to payday companies, firearms-related businesses, and a couple of other targets.  This campaign came to be known as Operation Chokepoint and, even though all of the agencies quickly backed away, it lives on – see Donald Trump’s promise to end “chokepoint 2.0.”

Things heated up again late in the last decade after BlackRock issued a pro-climate edict when it came to casting its proxies and a few big banks curtailed lending to firearms manufacturers and …