A new Trump administration proposal that could push more banks to finance fossil fuel activities is creating divisions in conservative circles as free market groups decry the move as government overreach.
The proposed rule, which would put limitations on banks that try to exclude entire industries like oil and gas from financing, has garnered support from a number of Republican lawmakers who back fossil fuels while sparking criticism from libertarian-oriented organizations.
Those groups argue the rule is inconsistent with free market principles and could backfire in the long run by forcing conservative bank owners to provide financing for abortion providers and other groups they don’t like.
The division among conservatives has also created unlikely bedfellows with libertarians and environmentalists both opposing the proposal. Green groups say banks should be allowed to choose whether they want to provide financing for fossil fuel companies.
The Office of the Comptroller of the Currency (OCC) put forth the rule last week, billing it as a measure to ensure fair access to financing while singling out the unwillingness of some banks to finance certain fossil activities.
“It is one thing for a bank not to lend to oil companies because it lacks the expertise to value or manage the associated collateral rights; it is another for a bank to make that decision because it believes the United States should abide by the standards set in an international climate treaty,” the rule states.
“Organizations involved in politically controversial but lawful businesses – whether family planning organizations, energy companies, or otherwise – are entitled to fair access to financial services under the law,” it continued.
After it was published, several Capitol Hill Republicans from oil-producing states lauded the proposal.
“This is particularly good news for America’s small and medium-sized energy producers, who for too long have been subject to discrimination from banks and lending facilities – under pressure from Green New Deal enthusiasts,” said Sen. Ted Cruz (Texas).
A joint statement from Alaska Republicans Sen. Lisa Murkowski, Sen. Dan Sullivan and Rep. Don Young thanked the OCC “for upholding the principle of free and fair access to capital.”
“Alaskans witnessed a deeply troubling trend of America’s big banks pledging to black-list energy development projects in the Arctic, without regard for the people who live here in some of the most economically-challenged parts of the country,” the lawmakers said.
Republicans like Sullivan had previously suggested that banks opposed to financing Arctic drilling were discriminating against both energy companies and Alaska.
But free market and libertarian-leaning groups argue the policy gets in the way of private businesses and goes in the opposite direction of limited government.
“If you believe in free markets, you should be consistent,” Norman Singleton, president of Campaign for Liberty, a group founded by former Rep. Ron Paul (R-Texas), told The Hill.
He added that it would be wrong to say businesses should have the option to not pay for birth control, but that banks should be forced to loan to gun stores.
While the proposal would help conservative-backed industries that have trouble getting financing, it’s not restricted to those types of companies. The language also cites difficulties incurred by family planning organizations, which could gain greater access to financing if the rule were finalized.
“If banks deny funding to everything from socialist websites to alternative energy… it could be used as a cudgel to force lending and other forms of financing to those groups,” John Berlau, a senior fellow at the Competitive Enterprise Institute, told The Hill.
That opposition is putting libertarian groups in the same camp with environmental organizations like the Sierra Club.
Ben Cushing, a campaigner with the Sierra Club who has been supportive of divesting from fossil fuels, said when the rule was proposed that it had the potential for backfiring against Republicans for the very reasons pointed out by libertarians.
He also took issue with the assertion from some that banks were discriminating against fossil fuels, saying “we’re not talking about a protected class of people … we’re talking about fossil fuel corporations.”
It’s unclear whether the rule will be finalized before President-elect Joe Biden takes office on Jan. 20.
The public has the opportunity to comment on the proposal until Jan. 4, giving the Trump administration a limited window to make the rule official.
“We’re going to be weighing in on the comments and asking them to withdraw the rule, “ said Berlau. “I’m hoping whoever is running OCC would see the wisdom of not doing this.”