Over the weekend a stunning image made the rounds online. The photo showed a letter from Chase Bank to Lori Flynn, the wife of Gen. Michael Flynn, informing her that her credit cards were being canceled due to the "reputational risk" she created for the company.
Some on the left initially suggested the letter might be a hoax, before concluding that Chase's decision was legitimate and something to celebrate.
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On Tuesday Chase confirmed that the cancellation was real and aimed at Flynn's wife, Lori. The company then tried to walk back the cancellation, claiming that it was all "mistake." If there was any "mistake" in targeting Flynn's family, it was in misjudging the PR backlash that would ensue from such an egregious display of political persecution.
Chase's "mistaken" letter to General Flynn's wife wasn't the first time an organization has used "reputational risk" as a pretext for political censorship. In fact, weaponizing claims of "reputational risk" has become a favored tactic for the institutional left to deny its enemies the right to organize or even live normal day-to-day lives.
Long before Gen. Flynn became a target, none other than disgraced New York Gov. Andrew Cuomo tried to use "reputational risk" as a means to topple the National Rifle Association.
The State of New York enjoys regulatory power over all banks and insurers chartered or registered in the state - a considerable power when one takes Wall Street into account. In the spring of 2018, Governor Cuomo invoked this regulatory authority in a thuggish attempt to make it impossible for the NRA to publicly campaign for gun rights.
It is typical for shared-interest groups, from the Habitat for Humanity to the New York Bar Association to the NRA, to partner with insurance companies to offer insurance policies to its members. The NRA insurance, known as Carry Guard, reimbursed policyholders for attorney fees and other legal expenses in the event that they used legally-owned guns in self-defense. The NRA's program was entirely legal, and used routine insurance templates and market practices. However, Cuomo's administration decided to target the Carry Guard program - and no other affinity-based insurance offerings - for supposed insurance-regulatory infirmities.
The objective was simple: Cut off a stream of revenue for the NRA, and increase the risk of financial ruin for future George Zimmermans who legally used guns in self-defense.
Soon, Cuomo's investigations turned into a broad-based offensive to deny the NRA access to basic services. Acting on Cuomo's orders, New York's bank regulatory authority sent a letter to all banks and insurers operating within the state with demands that can only be described as mafia-like in nature:
The tragic devastation caused by gun violence that we have regrettably been increasingly witnessing is a public safety and health issue that should no longer be tolerated by the public and there will undoubtedly be increasing public backlash against the NRA and like organizations.
Our insurers are key players in maintaining and improving public health and safety in the communities they serve. They are also in the business of managing risks, including their own reputational risks, by making risk management decisions on a regular basis regarding if and how they will do business with certain sectors or entities. In light of the above, and subject to compliance with applicable laws, the Department encourages its insurers to continue evaluating and managing their risks, including reputational risks, that may arise from their dealings with the NRA or similar gun promotion organizations, if any, as well as continued assessment of compliance with their own codes of social responsibility. The Department encourages regulated institutions to review any relationships they have with the NRAor similar gun promotion organizations, and to take prompt actions to managing these risks and promote public health and safety.
The whole episode reads like a scene out of The Godfather.
"The NRA is just bad and awful, the way they campaign against gun control. It'd be really terrible if any company suffered damage to their reputation by providing them banking or insurance services. New York would hate to see that happen."
Andrew Cuomo sharing his viewson gun control with the NRA.
The thuggery of the letter is even more sinister because it doesn't simply invent the concept of "reputational risk" from whole cloth. Reputational risk is a real thing that companies must account for. Traditionally, "reputational risk" for a company derives from that company's own practices. A company that makes shoddy products, piles up safety violations, or mishandles its finances to the point of insolvency will suffer reputational damage. Such damage can destroy a company.
All of these traditional reputational concerns, though, are either about matters of the law or politically-neutral quality-of-service. Gov. Cuomo's plot was to distend the concept of "reputational risk" to encompass pure political stigma. He used state regulators to bully institutions into "canceling" any customer who fell into disfavor with the ruling party.
Speaking "on the condition of anonymity," one community banker from Upstate New York told American Banker magazine that in light of the apparent "politically motivated" nature of the DFS guidance, "[i]t's hard to know what the rules are" or whom to do business with, because bankers must attempt to anticipate "who is going to come into disfavor with the New York State DFS" or other regulators. Other industry sources told American Banker that, "such regulatory guidelines are frustratingly vague, and can effectively compel institutions to cease catering to legal businesses."
Cuomo wasn't acting alone. While on the campaign trail in 2018, future New York attorney general Letitia James bragged that she would launch politically-motivated investigations of any bank that did business with the NRA... for endangering its "reputation," of course.
"Gun manufacturers may have special protections against legal liability for the catastrophic toll caused by their products, but those protections do not extend to the banks that fund them," James boasted. "Banks have a fiduciary duty to their shareholders to disclose the risks associated with funding the gun trade, both legal and reputational."
Letitia James is from the government and she's here to help.
This is a dimension of "woke capital" that conservatives often do not appreciate. It's not simply a matter of die-hard ideologues infesting every company. It's also about radical liberals seizing control of key chokepoints and powerful regulators in government, and then using them to force even politically-neutral actors to submit.
This warping of "reputational risk" is the perfect weapon for steadily-escalating globalist dominance and cultural hegemony. There doesn't need to be any pretense of illegality, nor any sham scare-mongering about "coups" and "insurrections." All that is necessary is a vague, amorphous threat to one's "reputation"... and that "reputational threat" is entirely under the control of the left itself. The left's own intolerance becomes a self-reinforcing cycle, perpetually justifying the removal of more rights from its enemies.
But Gov. Cuomo was never one for original thoughts, so unsurprisingly, he didn't come up with this tactic himself. He based it on lessons learned from the Obama administration just a few years prior.
In 2011, the Federal Deposit Insurance Corp. warned banks to carefully scrutinize any "high-risk" clients who used payment processors like PayPal to manage credit card transactions. Alongside businesses like escort companies or pyramid schemes, Obama's FDIC also conveniently lumped in gun and ammunition sellers. Then, in 2013, the Obama Department of Justice launched "Operation Choke Point," a campaign to intimidate financial firms working with companies that the administration didn't like. And any company involved with the U.S. gun industry was a top target.
The government has gone after two dozen businesses including ammunition dealers, check-cashers, payday lenders, telemarketers, firearms and fireworks vendors, raffles, pharmaceutical sellers, surveillance-equipment firms and home-based charities. The Justice Department and several regulators have pressured banks to close accounts with these businesses-on a sweeping, industry-wide basis-without any proof of wrongdoing. By choking off their access to bank services, the government is attempting to shut these industries down or drive them underground. Internal Justice Department papers released by the House Oversight and Government Reform Committee make it clear that Justice prefers coercing banks to drop customers through Operation Choke Point rather than prosecuting illegal or fraudulent businesses directly because it's easier, faster and requires fewer resources. [WSJ]
With President Donald Trump in office, the American people enjoyed a brief hiatus from these governmental mafioso-style activities at the federal level. But with the Biden Administration in power, the feds are ready to roll again, and at the state level, liberal governments are now acting more aggressively than ever before. And as General Flynn's experience shows, individual Americans can and will be targeted alongside companies and non-profits.
By distending the concept of "reputational risk" to encompass political stigma rather than classic considerations bearing on reputation for institutional solvency and soundness, these regulators appear poised to mandate that financial institutions "cancel" any customer who falls into disfavor with the ruling party.
The good news about such tactics is that they immediately suggest an obvious and plausible solution.
Generally speaking, while the crusade to ban critical race theory is admirable, it suffers from a fundamental shortcoming. No matter what laws are passed, America's classrooms will still be dominated by political radicals, and they will either ignore the law, or find a way to sneak in radicalism under another label. State-level CRT bans are an attempt to apply a narrow solution to a broad problem.
But politically-motivated lending by banks is the opposite. It is relatively easy to check, by simply banning the politically-motivated denial of basic services.
In the final days of the Trump Administration, the Office of the Comptroller of the Currency proposed a regulation which would have banned politically-motivated decisions on loans from major banks:
A Wall Street regulator appointed by President Donald Trump wants to force banks to finance unpopular businesses the industry has been known to shun - a list that includes oil companies, gun manufacturers and private prisons.
Acting Comptroller of the Currency Brian Brooks on Friday proposed a rule that would require banks to extend services and credit to any customers that pass their risk assessments. The move addresses a concern raised by Republicans that lenders including Citigroup Inc. and Bank of America Corp. have engaged in discrimination due to public pressure or their own distaste for certain industries.
"There is a creeping politicization of the banking industry that has the propensity to be very, very dangerous," Brooks told reporters Friday in a call about the rule, which would affect lenders with more than $100 billion in assets. [Bloomberg]
The OCC rule was swiftly retracted by the Biden Administration upon taking office. But there is no reason it could not be revived the moment Republicans hold office again, and made more powerful and all-encompassing.
But there is no need for Republicans to wait for federal regulators to bail them out. They can act at the state level right now. If New York can pressure banks to deny service to the politically unpopular, then Florida or Texas can explicitly ban companies from doing the same.
In fact, Republicans can and must go further. There is no reason to limit pro-freedom regulations to credit cards and bank loans. The left has already signaled that it wants to deny "racists" and "insurrectionists" the right to rent an apartment or fly on a plane or run a website. So cut them off at the pass, preemptively. Republicans, conservatives and patriotic independents should fight for laws, right now, that bar companies from denying, on political or "reputational" grounds, the services that are integral to modern life: Banking, travel, accommodations, access to the Internet, et cetera. This won't just be valuable for protecting American patriots. It will be politically popular as well. Much like with affirmative action, the left will fail when forced to honestly defend what it wants: To freely discriminate and punish law-abiding American citizens for their religious beliefs, their innate, God-given traits, or their freely-held views.