Federal action, not Texas' SB 946, is best way to stop political 'debanking'

Originally published at the Austin American-Statesman. 

Texas conservatives are rightly fed up with political bias in banking and Washington’s failure to stop so-called "debanking," which has targeted some bank customers across the political spectrum in Texas and nationwide. However, the root issue isn’t banks acting independently, but rather federal regulatory pressure and political mandates that distort market signals.
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The Texas Legislature's answer, Senate Bill 946, misfires and risks harming the very consumers and community banks it claims to protect. The remedy, instead, should come from Washington.

SB 946, which has passed the Texas Senate and is pending in the House, would prohibit financial institutions from denying services based on a customer’s political or religious beliefs. While that sounds straightforward, it injects state-level micromanagement into a deeply interconnected national banking system that serves Texans and customers nationwide.

Texas has earned a reputation as one of the best states to start and grow a business by avoiding overregulation, keeping costs low and letting competition, not bureaucracy, drive better outcomes. SB 946 runs counter to that legacy. It would increase compliance costs and weaken already-stretched community banks that may end up with less to lend after spending even more on compliance.

Conservatives should not create new tools for regulation based on an agenda.

If one accepts the idea that state governments can dictate who banks must do business with, they lose the moral high ground. What stops California from passing a law requiring banks to deny services to pro-life groups, gun manufacturers or religious schools? This approach risks turning financial institutions into battlegrounds for political agendas.

Texans should care because a patchwork of conflicting state-level banking rules will reduce consumer choice, raise fees and shrink the number of banks willing to operate across multiple states. Unlike Wall Street giants, Texas-based community banks can’t afford teams of lawyers to navigate a maze of conflicting regulations.

The Republican-led Congress, with support from President Donald Trump and led by U.S. Sen. Tim Scott of South Carolina, is advancing the Financial Institution Regulatory Modernization (FIRM) Act to curb government-driven debanking by removing "reputational risk" from regulatory scrutiny and establishing a fair access standard nationwide. This is a constitutionally grounded and targeted response to a legitimate problem in interstate commerce.

Texas state Sen. Tan Parker's resolution in support of the FIRM Act is a welcome and productive step forward. It recognizes that banking is a national issue requiring a consistent federal solution, not a patchwork of conflicting state laws. His leadership outlines the right path forward: backing federal action that restores fairness and access without overregulating the private sector.

Usually, I don’t support federal solutions, but this is one of the rare cases where it’s both appropriate and necessary. Banking is clearly interstate commerce, and a single, minimal regulatory standard is far better than a state-by-state patchwork that creates confusion and restricts access. That’s how we protect choice, encourage competition, and allow markets — not politics — to work.

Banking isn’t just another industry. It underpins everything from mortgages and payroll to national security and sanctions against hostile actors. Fragmenting this system will only increase costs and reduce access to resources. We’ve seen what happens in the insurance market when each state imposes mandates: higher costs, fewer choices and less innovation.

It’s also important to acknowledge that not every debanking claim is politically motivated. Some accounts are closed for valid reasons, such as suspected fraud, money laundering or other compliance risks. Banks need discretion to manage risk, and SB 946 could undermine that by imposing overly broad restrictions. What we need instead is transparency and consistent, fair rules that protect both consumers and the integrity of the financial system.

Conservatives should resist the temptation to regulate out of frustration. The best response to ideological banking isn’t more mandates—it’s reinforcing market competition and supporting innovative, limited federal reforms where constitutionally appropriate.

Let’s not undermine the important work already underway in Washington to restore trust and order to the financial system. Texas should lead with principle, not reaction.