02 Oct 2023 Scott Shepard: JPM & BofA Choose Politics Over Fiduciary Duties

Last week Sen. Ted Cruz revealed that Intuit had been forced by its bankers – JPMorgan Chase and Bank of America– to deny services to gun manufacturers and sellers. How do these taxpayer-backed banks continue to get away with their debanking schemes?

In a commentary published at RealClearMarkets, Free Enterprise Director Scott Shepard says:

[T]here is not even a fig-leaf of a business justification here. This is simply two too-big-to-fail banks, backstopped by all of us taxpayers, not just the leftwing ones, forcing their CEOs’ and directors’ political wills on all of us.

Read the commentary in full below.

JPMorgan Chase CEO Jamie Dimon nattered to the Times of India earlier this week about the dangers of central-bank interest-rate increases. “We have to deal with all these serious issues over time, and your deficits can’t continue forever. So rates may go up more. But I hope and pray there is a soft landing.”

Scott Shepard

Well, whatever. Dimon went on to assert that such rates needed to rise further to fight current inflation, which – with the gold price having essentially hovered for years – so badly misunderstands basic reality that you, me or the dog have as much economic-prognostication credibility as Jamie.

Dimon should focus on his day job. On the same morning that American outlets reported on Dimon’s Times interview, JPMorgan settled the lawsuit against it for facilitating Jeffrey Epstein’s monstrous behavior. It paid $75 million a week before trial was to begin in Manhattan, suggesting that the company’s hands were not clean or that decision makers have something to hide.

Maybe Dimon should be cleaning up the rules for when Chase dumps a customer to save shareholders from huge c.y.a. (well, c. Chase executive a.) payments years later.

He should also clean up the rules for when his company does not interfere with client businesses or dump them altogether. Once again his too-big-to-fail bank has demonstrated that it is run to advance its executives’ politics, not to benefit shareholders or customers.

Senator Ted Cruz sent a letter to Intuit, the makers of QuickBooks, on Monday that revealed that before his intervention Intuit had been denying its services to “gun manufacturers and sellers,” even basic payment and payroll services. Cruz also revealed that Intuit had been forced into denying these services by its bankers – JPMorgan Chase and Bank of America. Chase admitted its role in proceedings; Bank of America continues to deny, which, given BoA’s track record, is almost certainly to lie.

This is astonishing, even for these two continually bad actors. There can be no legitimate, fiduciary duty-respecting explanation for the banks’ behavior. None. Bank clients are more creditworthy if they have more paying customers, not fewer. This move undermined Intuit as a client. It also could not improve the reputation of either the banks or of Intuit, as the banks didn’t make the move public (knowing how much trouble it would generate) – and BoA is still denying it, while Intuit knew that it was a bad move, and so had to be forced into it.

No, there is not even a fig-leaf of a business justification here. This is simply two too-big-to-fail banks, backstopped by all of us taxpayers, not just the leftwing ones, forcing their CEOs’ and directors’ political wills on all of us.

One of those political preferences is that we not be armed – though such a restriction no more applies to them, or to their banks’ or families’ guards, than do the carbon-reduction targets that they aim at us while traveling by limo from mansion to private jet.

In other words, this action unambiguously violated the fiduciary duties of these banks’ executives and directors – and is surely not a one off, but, thanks to Senator Cruz, a time they got caught.

Cruz’s revelations also cast a new and unsavory light on the companies’ debanking games. Each has told a series of lies about a series of politically motivated debankings, but consider in particular Chase’s debanking of Senator Brownback’s religious-liberty organization last fall. Chase went through four sets of lies before landing on the claim that federal regulation requires it to demand the donor and membership lists of certain voluntary organizations, or to shut down their accounts. Chase claims that the regulations do not require it to account for which organizations it demands such information from, nor to demonstrate that its acting in a neutral or apolitical manner.

A very convenient interpretation for Chase. The problem is that it’s unfettered nonsense. In NAACP v. Alabama (1958), the U.S. Supreme Court held that

[e]ffective advocacy of both public and private points of view, particularly controversial ones, is undeniably enhanced by group association, as this Court has more than once recognized by remarking upon the close nexus between the freedoms of speech and assembly. It is beyond debate that freedom to engage in association for the advancement of beliefs and ideas is an inseparable aspect of the “liberty” assured by the Due Process Clause of the Fourteenth Amendment, which embraces freedom of speech. Of course, it is immaterial whether the beliefs sought to be advanced by association pertain to political, economic, religious or cultural matters, and state action which may have the effect of curtailing the freedom to associate is subject to the closest scrutiny.

The court went on to decide that the governments of the United States cannot demand from private organizations information that would jeopardize freedom of association and expression unless they have demonstrated a “compelling interest.”

What governments cannot do governments cannot require private actors to do. And so Chase’s interpretation of the relevant regulation is knowing, willful nonsense – especially since Chase has not even attempted to articulate any compelling purpose for its demands and refuses to demonstrate that its actions are neutral with regard to content, as we know they are not.

Your bank is serially breaking, misrepresenting and falsely hiding behind the law, Jamie, and breaching the Constitution and a welter of fiduciary duties to do it – all to advance your personal policy preferences – or those of whomever is really minding the store at Chase. Maybe get back there and look into it.

Scott Shepard is a fellow at the National Center for Public Policy Research and Director of its Free Enterprise Project. This first appeared at RealClearMarkets.