Newsroom

Comment from Treasurer David McRae, the Prohibition on Use of Reputation Risk

RE: No. R-1884 and RIN 7100-AH17

Thank you for the opportunity to comment on the Prohibition on Use of Reputation Risk. I write in full support of the Federal Reserve’s proposal to prohibit the use of reputation risk as outlined. The previous reputation risk allowance was an ill-defined, weaponized concept that has picked winners and losers, punished lawful businesses, and unnecessarily injected politics into our financial system. Ending it will bring consistency, protect hardworking Americans, and force regulators to focus on actual financial risk, not political agendas.

The regulatory “reputation risk” loophole has allowed for an infringement upon many Americans’ First and Second Amendment rights. The truth is that conservatives, Christians, and small business owners have been repeatedly shut out of the financial system – not because they posed real risks, but because they were out of step with the views of major financial institutions.

That raises real concerns for vocally conservative states like Mississippi. If financial institutions can target gun sellers today (as occurred during “Operation Choke Point”), it’s not difficult to imagine them targeting the states which defend the Second Amendment tomorrow. Simply put, access to our financial system and the ability to freely express our constitutional rights should never hinge on the political preferences of Wall Street.

Removing the vague “reputation risk” standard would get regulators back to basics. It would allow examiners to focus on real, measurable risks – credit, operational, liquidity, and market – where their attention belongs. Just as important, it would help rein in unnecessary regulatory burdens, in line with the goals of the Paperwork Reduction Act and the Regulatory Flexibility Act, so we’re not making it harder for job creators and American citizens to operate.

Again, thank you for the opportunity to write in support of prohibiting the use of reputation risk. This is the right step by the Federal Reserve – one that gives certainty to citizens, respects the role of states, and protects our fundamental constitutional rights.

Sincerely,

Treasurer David McRae