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🌊 Inside the Rise of Debanking
Banks kick thousands of people off the financial system. But who? And why?
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By Max Frost
In 2023, Nigel Farage – the UK’s foremost right-wing politician – awoke to a shock: He had been booted from the banking system, cut off from his accounts, cards, and ability to send or receive money. And while his debanking sparked a scandal, he wasn’t alone: At the time, UK banks were debanking over 1,000 people a day, often for unknown reasons.
In the US, it was happening too: Everyday people, startups, and small businesses were being booted from the country’s financial infrastructure, often without warning or reason.
Last November, Marc Andreessen – one of the world’s leading venture capitalists and now a major Trump supporter – brought the situation to the mainstream’s attention, saying on Joe Rogan’s podcast that he had seen “30 [tech] founders debanked in the last four years.”
While Andreessen brought the story to millions, it wasn’t new: As far back as 2014, the Republican-controlled House Oversight Committee said that an Obama-era initiative – Operation Choke Point – “has forced banks to terminate relationships with a wide variety of entirely lawful and legitimate merchants.”
They wrote:
The initiative is predicated on the claim that providing normal banking services to certain merchants creates a “reputational risk” sufficient to trigger a federal investigation. Acting in coordination with Operation Choke Point, bank regulators labeled a wide range of lawful merchants as “high-risk” – including coin dealers, firearms and ammunition sales, and short-term lending.
In essence, they accused the government and banks of using their power to boot conservatives from the financial system.
This week, President Trump acted on their concerns and ordered an investigation into whether financial institutions had denied fair access to the banking system. In today’s deep-dive, we look at debanking, the arguments for and against it, and the claims made by those who have allegedly suffered it.
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Editor’s Note
Woke up this morning and found ourselves debanked. Well, kind of. We have our bank accounts but only $7.48 left in them. Did the government take the money? Was it Jamie Dimon? Or did we just spend our life savings on $Melania coin? As with debanking, we may never know.
In all seriousness, we’re curious what you think about today’s story. Do you worry about this? Are you glad Trump is taking action? Or is it all overblown? Let us know by replying here.
Speaking of replies, we got a ton of emails in response to yesterday’s article on America’s credit card divide. Here are a handful of those:
Olenka wrote:
This was a really great article. You mentioned that customers using cash or debit cards don't receive any reward/rebate. In the past year, I've actually seen a handful of places, particularly restaurants, offer 10% discounts for cash users. This just demonstrates how badly those credit card fees hit businesses. Frontier does the same thing for internet customers ($5 off per month I believe if you use a debit card). If the discount is offered directly to me, I'd rather take that than the 1.5% cash back from my credit card. I also opt for debit cards or cash if I'm at the farmers' market or a small business. Once again, big companies are sucking the life out of anyone they can.
Josh wrote:
Great and timely article.
I'm very curious to learn if the mindset of "live within your means" is a lost concept? Why is the US financial system set up for people to so easily fall into crippling debt? Why do people make the choice to nose-dive into debt instead of living (consumer) debt free? What is the financial literacy of US citizens? Do people understand the long term benefits of budgeting, saving and living within your means? What percentage of consumer debt is due to needing a "lifeline" vs. unnecessary spending?
Looking forward to more articles like this to help shine a light on this very disturbing trend.
Greg wrote:
IMHO, credit cards have not "trapped millions of Americans in crippling debt"... spending beyond one's means (esp. on non-essential things) has. When I was in a state of lower financial means, the first thing I did was start paying most things in cash or by check... it makes you "feel" the expense much more than the ease of a card or phone tap, thereby reducing unnecessary expenditures. In our conspicuous consumption, keeping-up-with-the-Joneses society, I think a good mantra (paraphrasing Dave Ramsey) is: don't spend money you don't have, on things you don't need, to impress people that don't care about you.
And Joseph from North Carolina wrote:
I enjoyed your article on credit cards. As someone who makes under 70,000 a year I have a slightly different take. I haven’t used my debit card willingly for years. I have the AMEX Gold card and have used it since 2020. Because of the miles I have received, it has paid for 5 international flights and I have only spent 450 over 5 years. While I realize that I am Subsidizing the wealthy, I also am seriously benefiting as someone barely on the medium income level. Just a different take on the matter.
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—Max and Max