Federal Reserve Chairman Jerome Powell confirmed Tuesday that the central bank is officially removing “reputational risk” as a factor in banking supervision—an overdue victory for conservatives fighting against ideological discrimination in the financial system. Powell declared that “debanking” has become a “serious problem,” especially for industries and individuals targeted for their political or commercial associations.
During a House Financial Services Committee hearing, Powell explained the shift: “Over the course of 2024, we came to the view that this is a serious problem… now we’re doing this, and so are the other agencies.” The Fed’s Board has removed reputational risk from its examination criteria, aligning with recent decisions by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
“Debanking” refers to financial institutions cutting off services to lawful businesses and individuals based on political pressure or ESG ideology. Sectors hit hardest include firearms manufacturers, energy producers, and cryptocurrency firms. Conservatives have long argued that this practice is a backdoor form of censorship that violates First Amendment rights and undermines economic freedom.
Lawmakers like Rep. Bryan Steil (R-WI) and Rep. Tim Moore (R-NC) pushed Powell for answers about how the Fed plans to ensure politically neutral banking going forward. Powell noted that Vice Chair Michelle Bowman is leading efforts to implement further reforms to eliminate informal pressure on banks to drop customers without written justification.
Sen. Cynthia Lummis (R-WY) cautioned that the Fed must go further, calling attention to a policy still labeling digital assets as unsafe. Lummis criticized lingering effects of “Operation Choke Point 2.0,” a Biden-era continuation of Obama’s controversial campaign to push banks away from politically disfavored industries.
Industry leaders welcomed the Fed’s reversal. Will Hild, executive director of Consumers’ Research, called it “a huge win for consumers,” adding that reputational risk was weaponized “to punish those who don’t align with radical ESG objectives.” OJ Oleka, CEO of the State Financial Officers’ Foundation, said the move was “a plain recognition of reality” and urged Congress to pass legislation ending political debanking permanently.
By scrapping reputational risk, the Fed is taking a significant step toward restoring ideological neutrality in financial services and shielding lawful industries from politically motivated exclusion.
