Stop Turning Banking Into a Government-Controlled Utility

Originally published on Substack. 

The latest headlines tell you everything: regulators are again inching toward a fresh round of “Basel endgame” capital rules, while the Fed talks about reshaping mortgage capital treatment, and the CFPB’s “open banking” experiment keeps bouncing between litigation, reconsideration, and procedural shortcuts.

Translation: Washington is still trying to run the financial system like a command economy, then acting shocked when credit tightens and consumers pay more.

If you want a clean, practical framework for pushing back, start here: the Monetary Policy and Financial Regulation Guide. It’s built for lawmakers and staff who want fewer slogans and more solutions.

The real banking fight

Most “banking reform” debates are not really about safety. They’re about who controls the pipes.

When regulators add complexity and discretion, the winners are predictable:

• the biggest institutions that can afford compliance armies
• the biggest regulators who gain leverage through ambiguity
• and the political class that gets a new lever to pull when they want outcomes the market won’t deliver

Everyone else gets the bill: tighter credit, fewer local options, and financial “innovation” that is mostly just lawyers inventing ways around red tape.

Three fights that matter right now

1) Debanking is an incentive problem created by government power

People hear “debanking” and assume it’s purely corporate behavior. But banks respond to the incentives regulators set. If supervisors can punish “reputation risk” or nudge account closures through informal pressure, banks will de-risk, even when the activity is lawful.

That’s why the push to remove “reputation risk” from supervision and prohibit regulators from using politics or lawful-but-disfavored activity as a cudgel is a big deal. The point is not to give anyone a free pass for fraud. The point is to stop financial access from turning into a soft form of social credit scoring.

The free-market fix is boring, and that’s the beauty of it: clear rules, due process, transparency, and fewer “because we said so” powers.

2) “Open banking” can become forced sharing, higher fraud risk, and higher fees

The CFPB’s Section 1033 agenda is marketed as consumer empowerment, but the tradeoffs are real: mandated data portability at scale can widen the attack surface for bad actors and raise compliance costs that ultimately land on consumers.

Even the Congressional Research Service notes the CFPB’s final rule has been tied up in litigation and reconsideration, with implementation originally set to begin in April 2026.

A market-friendly approach is not “no data sharing.” It’s voluntary, secure, contract-based sharing with clear liability. If policymakers want competition, they should stop trying to central-plan it.

3) Basel endgame rules risk turning banks into regulated utilities

Capital matters, but capital is not free. Every extra layer of risk-weighting and modeling can mean less lending at the margin, especially for households and small businesses that do not fit neatly in a regulator’s spreadsheet. Reuters reports regulators have taken steps toward proposing a new version of Basel endgame rules, and the Fed has also signaled changes around mortgage capital treatment.

If Washington wants more mortgage lending and more access to credit, it should stop designing rules that make banks act like cautious bond funds. A safer system is not one where credit disappears. A safer system is one where risk is priced honestly, failure is possible, and bailouts are not assumed.

What this guide does differently

My policy guide ties these debates together with a simple theme: stop subsidizing bad incentives, stop politicizing access to money, and stop pretending regulators can outsmart millions of market decisions.

It also pushes something Washington never wants to discuss: many “banking crises” are downstream of upstream monetary and fiscal mistakes.

When money is distorted and deficits are monetized, the system gets fragile, then regulators blame banks for living inside the warped environment government created.

Review for lawmakers

• Use the Monetary Policy and Financial Regulation Guide as the baseline for hearings, bill language, and oversight questions. Keep the PDF on your desktop.
• On “debanking,” reduce discretionary supervision by eliminating politicized “reputation risk” tools and requiring transparent, rules-based enforcement.
• On “open banking,” protect consumer control without forced sharing: prioritize consent, security, and clear liability over one-size-fits-all mandates.
• On Basel endgame, demand honest cost-benefit analysis, including impacts on credit availability, small businesses, and community banking diversity.

A simple standard

Here’s the test every proposal should pass: does it increase competition and consumer choice, or does it centralize power in regulators and mega-institutions?

If it centralizes power, it will be sold as “safety.” Then it will show up as higher costs and fewer options. Funny how that works.

For more on these issues, my writings keep tracking the fights that matter, with receipts and real-world policy fixes.