Debanking's Dueling Narratives
New CFPB Acting Director Vought and DOGE Begin Executing Project 2025 Playbook
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Debanking’s Dueling Narratives
If you’re having trouble following the burgeoning controversy around “debanking” and “Operation Choke Point 2.0,” you’re probably not alone.
The topics exploded from a fairly niche issue of concern primarily to the US crypto industry into one dominating banking and regulatory discussions when Marc Andreessen, of venture capital firm Andreessen Horowitz, made an appearance on the Joe Rogan Experience podcast last December.
Andreessen’s understanding of the banking system and the US regulatory apparatus seemed to be incomplete, at best, with the venture capitalist alleging the Consumer Financial Protection Bureau “terrorizes” fintech and crypto to protect big banks.
But the discussion with Rogan, less than a month after President Trump won a second term, elevated the salience of the crypto debanking debate — particularly given Andreessen’s vocal support of Trump and the unprecedented wave of political donations crypto-aligned groups made in the 2024 election cycle.
Andreessen’s comments about debanking took place against the backdrop of one of the largest US crypto exchanges, Coinbase, suing the SEC and the FDIC, seeking to enforce a Freedom of Information Act request for records pertaining to the regulators’ views and actions related to cryptocurrencies and blockchain. Coinbase initially filed FOIA requests in 2023 and filed suit seeking to enforce the requests in June 2024.
Andreessen Horowitz is a major investor in Coinbase, having made eight separate investments into the company. Marc Andreessen also sits on Coinbase’s board of directors.
Andreessen Horowitz and, by extension, Andreessen personally have much at stake in advocating for crypto firms to have greater access to the banking system: the firm has raised a mammoth $7.6 billion to invest in crypto, blockchain, and web3 companies.
And Andreessen Horowitz’s regulatory interests aren’t just in crypto; the firm’s past and present portfolio includes numerous fintech and related companies, such Cross River Bank, a major partner for fintechs and crypto firms, LendUp, which was ultimately shut down by the CFPB for “repeatedly lying and illegally cheating its customers,” and Synapse, the abrupt failure of which has left end users out of pocket as much as $96 million and led to an ongoing Department of Justice criminal investigation (full disclosure, I worked at LendUp from 2014-2016.)
Republican legislators, now holding majorities in both houses of Congress, have taken note of crypto’s and tech’s priorities: last week saw hearings in both the Senate Banking Committee, now chaired by Senator Tim Scott (R-SC), and the House Financial Services Committee, now chaired by Congressman French Hill (R-AR).
Senator Scott went so far as to compare what is being referred to as Choke Point 2.0 to the discrimination his own family experienced in the Jim Crow South and with redlining, saying, “Under the Biden administration, we’ve seen the rise of what many are calling Operation Chokepoint 2.0, where federal regulators exploited their power, pressuring banks to cut off services to individuals and businesses with conservative disposition, or folks aligned with industries they just didn’t like — like the color of one’s skin in my family’s history.”
As the debanking issue has risen in prominence, the discussion has mutated, with various stakeholders and partisans attempting to reshape the narrative to accommodate their talking points and policy priorities.
The initial push from some crypto advocates focused on what they described as a whole-of-government effort to block crypto firms’ access to the traditional financial system, which they dubbed “Operation Choke Point 2.0,” in reference to the widely misunderstood and mischaracterized Obama-era Operation Choke Point.
The history of the original Operation Choke Point has been re-written into something resembling a secretive government conspiracy to block access to the banking system to industries allegedly disfavored by Democrats, particularly firearms.
The reality is much more anodyne. The initiative’s intent was to protect consumers by focusing law enforcement and regulatory attention on payment processors with elevated rates of fraud, chargebacks, and disputes.
The effort was hardly a clandestine government conspiracy; in 2013, shortly after the launch of the effort, the executive director of the task force behind it, Michael Bresnickat, explained why the Department of Justice was targeting third-party payment processors and, by extension, the banks they worked with, saying at the time:
“The reason that we are focused on financial institutions and payment processors is because they are the so-called bottlenecks, or choke-points, in the fraud committed by so many merchants that victimize consumers and launder their illegal proceeds.
For example, third-party payment processors are frequently the means by which fraudulent merchants are able to get paid. They provide the scammers with access to the national banking system and facilitate the movement of money from the victim of the fraud to the scam artist.”
And a 2014 article about the initiative described it by saying, “The idea behind Operation Choke Point is simple: stop banks and third-party payment processors from abetting fraud. Financial institutions have long been required to watch out for (and report) evidence of criminal activity. Yet they have long been tempted to look the other way, since criminals can also be highly profitable customers.”
More recently, in his 2023 academic paper in the Administrative Law Review attempting to debunk the conspiracy narratives around Operation Choke Point, Dru Stevenson, a professor at the South Texas College of Law, explains:
“Operation Choke Point was a benign initiative involving a small task force at the Department of Justice and officials from a variety of regulatory agencies that oversee the banking and consumer finance systems. Enforcement actions for consumer fraud targeted unscrupulous payday loan companies engaged in illegal activities, and exhortations from bank regulators reminded executives and compliance officers at financial institutions about their legal duties to screen business customers that presented elevated risks for fraud and money laundering.”
But, Stevenson says, the actual evidence that Choke Point intentionally targeted legal but disfavored businesses was slim. He writes:
“The gun industry also entered the fray, with vociferous but unsubstantiated claims that Operation Choke Point was a sinister conspiracy to defund (de-bank) firearm manufacturers and dealers, and was aimed at depriving the citizenry of the Second Amendment rights.
Congressional hearings followed, along with investigations and reports by the FDIC’s Office of Inspector General and class action lawsuits against several regulatory agencies, which were dismissed or settled. The Office of Inspector General reports, however, were underwhelming compared to the alarmist rhetoric characterizing the public discourse on the subject.”
Some crypto advocates leveraged this imagined history in building their case that officials across the Biden administration actively conspired to shut crypto out of the US banking system: an Operation Choke Point 2.0.
Crypto advocates, including Andreessen in his Rogan interview and in subsequent remarks, suggest these alleged government efforts resulted in various distinct challenges for business and individuals in the crypto industry:
that banks were effectively prohibited from engaging in certain crypto-related activities, including offering crypto trading or custody to their customers, even when doing so through a third-party partnership that would not involve the bank itself holding crypto assets on its balance sheet or engaging in crypto trading
that crypto-related firms were denied access to US dollar business bank accounts for operational needs, like processing payroll, paying vendors, and the like
that individuals were denied access to personal US dollar bank accounts, based on their employment or other links to the crypto industry
The first batch of crypto “pause letters,” which the FDIC released as result of Coinbase’s FOIA litigation, do support the first point: the FDIC requests generally sought information from banks that were seeking to offer bank customers crypto capabilities, typically via third-parties, wanted to develop bank-offered blockchain-powered services, and wanted to offer US dollar loans collateralized by cryptoassets.
Coinbase and others have justifiably been critical of the FDIC’s compliance with the Freedom of Information Act. Filings and orders in Coinbase’s litigation against the FDIC paint a picture of the agency being willfully obstructive, with the judge in one circumstance writing:
“The Court is concerned with what appears to be FDICs lack of good-faith effort in making nuanced redactions. Defendant cannot simply blanket redact everything that is not an article or preposition. The Court ORDERS Defendant to re-review the documents, make more thoughtful redactions, and provide the new redactions to Plaintiff by January 3, 2025. Defendant should be prepared to defend each new redaction in an ex parte discussion with the Judge.”
A recently released transcript of a status conference in the case that took place late last month depicts an exasperated Judge Ana C. Reyes grilling what appears to be a wholly unprepared FDIC lawyer, Andrew Dober, about why the FDIC responded to the FOIA in such a limited fashion, why the FDIC didn’t place a litigation hold on potentially responsive documents, and whether or not the FDIC destroyed any potentially responsive documents after receiving Coinbase’s FOIA request.
The concern about the potential destruction of responsive documents isn’t entirely without foundation. In mid-January, Senator Cynthia Lummis (R-WY), a vocal crypto advocate who holds six figures’ worth of bitcoin, sent then-FDIC Chair Martin Gruenberg a letter, relaying whistleblower allegations about the agency’s handling of crypto-related documents.
Lummis wrote in her letter:
“I have been contacted by Federal Deposit Insurance Corporation (FDIC) whistleblowers who allege that destruction of materials is occurring with respect to the digital asset activities of your agency. I have also been informed by whistleblowers that staff access to these materials is being closely monitored by management to prevent them from being supplied to the Senate before they can be destroyed, and that certain staff have been threatened with legal action to prevent them from speaking out.”
Based on the status hearing transcript in Coinbase’s FOIA case against the FDIC, the whistleblowers who contacted Lummis appear to be the same person or people operating the FDIC Exposed account on X and, in a bizarre twist, may be responsible for sending threatening text messages to the Dober, the lawyer representing the FDIC, and his wife.
One of the individuals behind the FDIC Exposed account offered to speak on the record regarding the alleged threat, but did not make good on the offer or respond to follow up questions by the time of publication.
The FDIC’s letters generally instructed banks to pause crypto- and blockchain-related activity until they satisfactorily answered the FDIC’s questions and, in some cases, said the FDIC would make future information requests in order to provide supervisory feedback — without providing any set timeline.
The letters do not contain any evidence supporting the allegations that crypto businesses or individuals in the crypto industry were denied basic banking services.
Last week, the FDIC released an additional 175 documents, totaling nearly 800 pages. Acting FDIC Chair Travis Hill described those the contents of those documents by saying:
“The documents that we are releasing today show that requests from these banks were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence as institutions waited for responses, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity.
Both individually and collectively, these and other actions sent the message to banks that it would be extraordinarily difficult—if not impossible—to move forward. As a result, the vast majority of banks simply stopped trying.”
While the letters do seem to confirm that the FDIC made it exceedingly difficult, if not impossible, for banks to engage in certain crypto or blockchain activity, they do not support the theory that regulators instructed institutions they oversee to cut off crypto firms’ access to US dollar operating accounts or individuals’ access to banking and lending services.
Evidence supporting these claims has mostly be limited to personal anecdotes shared by industry participants — which isn’t to say there were no instances in which crypto companies or individuals may have been denied opening an account or had an existing account closed.
But there’s no evidence that this happened as the result of a coordinated government effort vs. individual banks making business decisions in line with their own policies, procedures, and risk tolerances.
From Choke Point 2.0 Targeting Crypto to Debanking Conservatives
Crypto world’s Operation Choke Point 2.0 narrative morphed into allegations of discrimination and debanking of conservatives in general, turbocharged by President Trump’s recent remarks delivered virtually at the World Economic Forum in Davos late last month.
In response to a question from Bank of American CEO Brian Moynihan, Trump responded by alleging Bank of America and JPMorgan Chase won’t work with conservatives, saying:
“You’ve done a fantastic job. But I hope you start opening your bank to conservatives because many conservatives complain that the banks are not allowing them to do business within the bank, and that included a place called Bank of America. They don’t take conservative business. And I don’t know if the regulators mandated that because of Biden or what. But you and Jamie [Dimon, CEO of JPMorgan Chase] and everybody, I hope you’re going to open your banks to conservatives because what you’re doing is wrong.”
Moynihan didn’t address Trump’s comments, though it’s not clear if he heard them.
Bank of America later released a statement saying in part, “We serve more than 70 million clients and we welcome conservatives. We are required to follow extensive government rules and regulations that sometimes result in decisions to exit client relationships. We never close accounts for political reasons and don’t have a political litmus test.”
JPMorgan Chase’s Dimon addressed the issue on the bank’s podcast, saying he reached out to Marc Andreessen after his appearance on Joe Rogan touched off the debanking furor. Dimon said:
“I called Mark Andreessen after that. He’s a friend of mine. I want to explain to him, we have not debanked anyone because of political or religious relationships, period. Now, when we de-bank someone, they often blame that reason, but that’s not a reason.
We don’t bank marijuana companies because there’s no federal law around it. We simply can’t follow the law. If there’s a federal law, we probably would, and we do bank some crypto companies, and very carefully. We are responsible in the law to fight sex trafficking, money laundering, tax avoidance. It’s the Bank Secrecy Act, and we have to follow that.”
Dems Join the Debanking Debate
Democrats have been comparatively quiet on the debanking debate — with a couple of notable exceptions.
Former Consumer Financial Protection Bureau Director Chopra used some of his final weeks in office to weigh in, though bringing a significantly different perspective and proposed policy solutions regarding debanking.
In a late January discussion hosted by the conservative Federalist Society, Chopra didn’t take issue with the idea that debanking is happening, per se, though he did push back on the idea that regulators, including the CFPB, were to blame.
Chopra acknowledged that “lots of people are losing their accounts” and argued for “bright line” prohibitions on closing accounts for political, religious, or ideological reasons.
Chopra also linked account closures with consumers being put on an industry “blacklist,” preventing them from opening accounts at other institutions, most likely a reference to specialty consumer reporting agencies like ChexSystems and Early Warning Services that track data on how consumers manage their bank accounts.
Banks “should only have the ability to [close accounts] when there is some reasonable business justification or a very clear law or regulation that they are following,” Chopra argued.
He also pushed for greater transparency when banks do close accounts, saying, “We want to really pressure test the multitude of ways in which businesses are using advanced analytics and algorithms.”
Chopra floated the idea of a bank account equivalent to notices of adverse action, a disclosure which lenders are required to provide explaining why a consumer’s application for credit has been denied. But it is unclear how this could work in practice, given the Bank Secrecy Act and anti-money laundering provisions that explicitly prohibit telling customers why an account is being closed in many circumstances.
Chopra, whom Trump fired last week, made a nod to these issues in a goodbye letter posted on X, writing in part, “[The CFPB] ha[s] also put forth policies to block financial firms and technology giants from debanking and deplatforming Americans based on their speech or religious views, while also restoring freedom and other individual rights.”
Senator Elizabeth Warren (D-MA), an original architect of the CFPB and mentor to now-former Director Chopra, echoed his sentiments in the Senate debanking hearing last week.
In her remarks, Warren acknowledged that debanking is “a real problem,” though her explanation of the problem is notably different than Republicans and crypto advocates:
“‘De-banking’ happens when a bank shuts down a customer’s bank account because they think that account poses a financial, legal, or reputational risk to the bank. Once the bank shuts someone out, they may share that information with companies that get paid to maintain a Do Not Bank list—with the result that the customer is blacklisted everywhere.”
Warren’s examples of groups facing debanking included:
tens of millions of consumers who have been “blacklisted” by the banking industry “because they overdrafted their account a few times”
formerly incarcerated Americans that have been debanked because of their criminal history
individuals who merely share a name with someone who has a criminal history
Muslim- and Armenian-Americans, who have faced debanking on account of their last names
non-profits and charities operating internationally
lawful cannabis businesses
Warren even agreed with Trump, saying, “Donald Trump was onto a real problem when he criticized Bank of America for its debanking practices,” arguing that, “Banks may be taking shortcuts when it comes to assessing risks. Rather than investing time and resources to identify true criminal risks and shutting down those accounts, big banks are relying on black box algorithms and middle-men companies and shutting down accounts without doing careful due diligence.”
Warren argued the CFPB — not the FDIC, OCC, or Federal Reserve — is the right regulator to stop “unfair debanking,” and highlighted what she described as rules the bureau has in place or in progress to address the “root causes” of debanking, such as overdraft fees and religious discrimination.
What Does “Fair Access” to Banking Look Like?
The debanking conversation — or conversations, really — do raise a number of legitimate public policy issues.
Some of what Republicans and Democrats are now describing as “debanking” stems from financial institutions’ anti-financial crime requirements, as defined through legislation like the Bank Secrecy Act, the Money Laundering Control Act, the USA PATRIOT Act, and Anti-Money Laundering Act.
Broadly speaking, these laws and the regulations that implement them require financial institutions, including but not limited to depository institutions, to develop and implement a risk-based approach to mitigating financial crime risk.
To illustrate, a business that is understood to have higher risk — think the primarily cash-based car wash in Breaking Bad or the casino in Ozark — should expect to face greater due diligence from their financial services providers.
In turn, the policies, procedures, systems, and personnel necessary for financial institutions to carry out these greater levels of initial and ongoing due diligence logically carry higher operational expenses.
Rather than make the necessary investments to serve higher-risk customers in a safe and compliant manner, some banks may opt simply not to serve those segments.
The efficacy and cost-benefit tradeoff of anti-financial crime policy has justifiably come into question. It is estimated that, globally, financial institutions will spend nearly $200 billion on financial crime compliance technology and operations, and that doesn’t even take into account public-sector spending on investigations, supervision, and enforcement.
Beyond financial crime risk, the more amorphous idea of “reputational risk” has also been linked to the debanking debate.
The concept of reputational risk is meant to capture the potential financial implications of customers’ or the market’s loss of trust or confidence in a financial institution.
While it is hard to argue that trust and credibility aren’t legitimate considerations in banking, deciding what constitutes a reputational risk and how to quantify that risk seems to be a borderline impossible task.
Critics of the concept have argued reputational risk is inherently subjective, that there is little evidence regulators can accurately predict bank losses related to such risks, and thus the concept has little utility as a supervisory tool.
Some Republicans have proposed legislation or rulemaking that, in their view, would address debanking practices by requiring financial institutions to serve all customers, absent a clear legal or financial basis not to.
In January 2021, shortly before Trump left office, the OCC finalized its Fair Access Rule, which would have required banks with more than $100 billion in assets to:
make each financial service it offers available to all persons in the geographic market served by the covered bank on proportionally equal terms;
not deny any person a financial service the covered bank offers unless the denial is justified by such person’s quantified and documented failure to meet quantitative, impartial risk-based standards established in advance by the covered bank;
not deny, in coordination with any others, any person a financial service the covered bank offers.
The rule was quite controversial — including among banks. The OCC received approximately 35,700 comments on the proposed rule, of which about 28,000 opposed it.
When Biden took office in 2021, his administration paused publication of the final rule in the Federal Register, preventing it from ever taking effect.
More recently, Republicans have made legislative efforts to enact similar requirements.
Congressman Andy Barr (R-KY) introduced the Fair Access to Banking Act in 2023, which, the press release announcing the bill said, “would prohibit banks from denying fair access to financial services under the standards of woke corporate cancel culture and prevent the weaponization for political purposes.”
And last week, Senator Kevin Cramer (R-ND) reintroduced his Fair Access to Banking Act to Protect Legal Industries from Debanking bill, which, according to Cramer’s statement announcing it, would “penalize[] banks and credit unions with over $10 billion in total consolidated assets, or their subsidiaries, if they refuse to do business with any legally compliant, credit-worthy person.”
The proposed Senate bill would “also prevent[] payment card networks from discriminating against any qualified person because of political or reputational considerations. The bill requires qualified banks to provide written justification for why they are denying a person financial services.”
Banks found to be violating the measure, if it went into effect, would be disqualified from using emergency liquidity programs through the Fed’s discount window, having their deposit insurance terminated (effectively forcing them to shut down), or a civil penalty up to $10,000 per violation.
Trump Names (Another) Acting CFPB Director, Comptroller, As DOGE Descends on the Bureau
Trump had promised to fire CFPB Director Chopra on “day one,” and, though a bit behind schedule, he got it done, terminating Chopra last Saturday, February 1st.
On Monday, Trump named recently confirmed Treasury Secretary Bessent as the acting Director of the CFPB, though his time in the role was exceedingly brief: by Friday, following his Senate confirmation to lead the Office of Management and Budget, Russ Vought, a key architect of the Heritage Foundation’s Project 2025, replaced Bessent as the acting CFPB Director.
Vought’s appointment to the acting role at CFPB came the day after three DOGE staffers, Christopher Young, Nikhil Rajpal, and Gavin Kliger, arrived at the bureau’s DC headquarters. By late Friday afternoon, Musk took to X, posting “CFPB RIP” —
Project 2025 explicitly called for abolishing the CFPB, demands that Musk, Marc Andreessen, and other conservatives and tech leaders have echoed.
Now, the CFPB’s homepage returns a 404 not found error, though, as of Saturday morning, the rest of the site remained online. According to reporting from Bloomberg Law’s Evan Weinberger, sources familiar with the situation expect the rest of the site to be taken down as well.
Saturday evening, CFPB acting Director Vought sent an email to bureau employees, instructing them halt any formal or informal rulemaking, pause all investigative activity, not issue public communications of any type, not make any filings or appearances in litigation, and to cease all examination and supervision activity.
Vought also notified the federal reserve that the CFPB would not request additional funding, as, he wrote, “it is not ‘reasonably necessary’ to carry out its duties.”
In other bank regulatory news, acting Comptroller of the Currency Michael Hsu is out at the OCC.
Treasury Secretary Bessent announced his intention to appoint Rodney E. Hood as deputy comptroller and to designate him as first deputy comptroller, enabling him to serve as the Acting Comptroller of the Currency. Hood was previously appointed by Trump, during his first term, to serve as the chairman of the National Credit Union Administration.
In his role as Acting Comptroller, Hood will also sit on the board of the FDIC.
In a statement on the appointment, Hood used the opportunity to signal his understanding of the priorities the current administration, saying, “I remain steadfastly committed to serving the American people and the banking system by creating a regulatory structure that fulfills our obligations, fosters innovation, and promotes financial inclusion, including those Americans who have been debanked and underserved.”
For those looking for more detailed coverage of what’s unfolding at the CFPB, I’d recommend following Bloomberg Law’s Evan Weinberger and Punchbowl’s Brendan Pedersen, who have both done excellent, well-sourced reporting on this.
Other Good Reads & Listens
Delete the CFPB? No. Refresh it Instead (Open Banker)
Trends in Credit Unions' Share of U.S. Private Depository Household Lending (Fed Notes)
Why Doesn’t Every Small Business Have a Credit Card? (Fintech Takes)
Listen: Ecosystem Building & Hot Takes for 2025 (Breaking Banks)
Listen: Banking as a Service: Author Interview with Paolo Sironi (The Bankers’ Bookshelf)
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