Trump administration approves doomed regulation to force banks to make Arctic oil loans
As the Trump administration comes to a merciful end, it has launched a rushed plan to give the federal government the power to force banks to make loans to the oil industry.
The rule is likely to survive as long in the Biden administration as the White House stockpile of MAGA hats.
On Thursday, his last day at work, the acting director of the Office of Comptroller of the Currency, Brian Brooks, signed off on the rule.
As I wrote here in November, a Georgetown law professor says the Trump plan features “legal theories so farfetched that would be laughed out of a courtroom if it actually tried to act on them.”
"There’s little chance this rule would be upheld by a court challenge,” Adam Levitin, a professor at Georgetown Law School, told American Banker.
The Trump loan rule, cheered by Republicans, including the Alaska delegation, would give the federal government the power to micromanage the investment decisions made by private banks.
Most major banks have announced plans to oppose investing in Arctic drilling, a movement that the Alaska delegation hoped to stop with an Chinese-govenment-style mandate. Citibank, Morgan Stanley, Goldman Sachs, Bank of America, Wells Fargo and JPMorgan Chase are among the institutions that have abandoned Arctic oil development financing for a host of reasons.
The Bank Policy Institute, a trade group, said Brooks didn’t have the authority to adopt this rule and had no good reason for proposing it or adopting it.
Of the 35,700 comments submitted to the agency, 31,290 opposed the plan. The Trump administration pooh-poohed the imbalance by claiming that 28,000 comments were form letters collected by one unnamed organization.
“The OCC claims to be shielding customers from political bias, but it is just telling banks and their boards that they cannot be trusted to make sound business decisions,” the Bank Policy Institute said about the rule.
The trade group asked the OCC for details on the research conduced for the rules, but the Trump administration did not reply.
The loan rule is supposed to take effect April 1, but the Biden administration will find a way to prevent that. It could be stopped in court or a new acting comptroller can delay it.
“Biden is expected to appoint a new acting comptroller on Jan. 20 while his nominee to lead the OCC awaits Senate confirmation. A new acting comptroller can likely delay when the rule takes effect so the OCC can revise it or scrap it altogether,” the Hill reported.
“Biden and Congress can also try to revoke the rule through the Congressional Review Act (CRA), which allows both chambers to pass a bill repealing a new regulation and preventing the agency from releasing a similar rule.”
The opposition by major banks to financing Arctic drilling has been mentioned by Alaska politicians as one big reason why there was no industry interest in the Arctic National Wildlife Refuge oil lease sale.
What they don’t say is that the other reasons for a lack of interest—the political and economic risks of investing in the refuge; climate change; the growth of renewables and that the Biden administration will do everything it can to either end the leases or delay acting on them.
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