UPDATE: Wells Fargo disputes that decision was industry driven — Wells Fargo, Firearms, and Florida (TL;DR edition)
Update (2–22–2023): I spoke with someone from Wells Fargo who provided this statement:
Wells Fargo does not have a policy against doing business with firearms companies, and provides financial services to firearms businesses. Based on our analysis of the risk associated with this customer, we made a decision to close the accounts. Our decision is not based on the industry.
There is now a material dispute about what drove the bank’s decision. Which side is right is unlikely to be known concretely absent some sort of investigation or law suit. If there are further developments I will update.
Stephen Gutowski reported today in the Reload that Wells Fargo has closed the personal and business accounts of a Florida gun store owner, citing risk management, as well as a line of credit, citing guidelines excluding lending to certain businesses. There are of course concerns that this reflects a broader exclusion of lawful but disfavored businesses, potentially due to private or public political pressure and a desire to de facto regulate. This topic is one I spend a lot of time thinking about, and began writing an analysis of what this might mean, whether Florida intervening, either in this case or future cases might be justified, and what a response might look like. 4500 words later I realized I wasn’t going to be able to put it up as one blog post but would need to break it up. While I am working on that (which my be delayed due to travel) here is a quick reaction. I withhold the right to change my mind, more facts might develop, etc. etc. I will update and link to the longer piece(s) as appropriate.
First, let me acknowledge that there isn’t much in the way of detail reported. The bank didn’t elaborate when asked and we only have the customer’s statement to go by. As such, it is possible that facts will develop that fundamentally change the analysis. (See update above.) That said, I am going to assume that the customer is both law abiding and a good credit risk. Why? Because if not the bank is more likely to have non-controversial reasons for cutting ties and would presumably be able to articulate those reasons to the customer. It also allows to this to serve as a hypothetical template for future questions of how states should respond to politicized finance.
With that said, the question of whether Florida, whose governor is explicitly hostile to “woke” capitalism and has strong Republican majorities on both houses of its legislature and therefore could pass legislation, should respond to this type of issue is an important one. To analyze this, I think the most relevant questions are:
1. What is motivating the banks decision? Is it pure economics where the bank feels it could use its resources more effectively with other customers? Is the bank being used or pressured by some private constituency, such as its management, employees, or other customers, as a tool to cut off legal but disfavored industries as a tool to curtail those industries? Is the bank responding to pressure from regulators?
2. What legitimate interest would Florida be seeking to vindicate by intervening in this or future decisions? Is Florida trying to protect the ability of its citizens to exercise an explicit constitutional right? A more general value of political equality or not being de facto regulated by the wealthy and powerful? Would Florida be trying to hold banks to their obligations given the “Regime of Privilege” they enjoy thanks to public policy? Are they trying to protect Florida investors in banks who may not be engaging in profitable business with disfavored companies? Or are they trying to protect Florida industry and the jobs and taxes that come with them? How much should we care about intent versus practical effect?
3. If intervention is justified, what form should it take? Would Florida follow Georgia and Wyoming by prohibiting banks using being a firearms business as a criteria for extending services or would they follow Texas and exclude banks who refused to do business with firearms businesses from doing business with the state. Is there another option?
To lay my cards on the table — I do think there are scenarios where state intervention could be justified. Especially if the bank’s actions are intended to frustrate people engaging in lawful and constitutionally protected activity. This could be the result of the bank management’s desire or that of another constituency, but regardless, the more the desire to use banking as a tool of de facto regulation is in play, the more suspect the bank’s actions are.
Likewise, the more the state is motivated by protecting its citizens from said de facto regulation the more likely I think it is to be legitimate. Conversely, the more the state’s actions are driven by protecting Florida businesses from true market forces, the less likely intervention will be justifiable.
Finally, all else equal I think the anti-discrimination path is the preferable one. This is because it enjoys a moral clarity, a simplicity of enforcement, and poses less risk that taxpayers will be disadvantaged by reducing options for things like placing municipal debt. That said, strong argument can potentially be made both for non-intervention and for the exclusion path.
This is just a quick reaction, and clearly doesn’t cover all the potential issues or nuances. As I go through the longer piece, I will update this with links and revisions as appropriate.
