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Former U.S. Attorney General Bill Barr is warning conservative state legislators against new laws in both red and blue states that set state-level rules surrounding national financial institutions in addition to existing federal banking laws.
Barr told lawmakers on the sidelines of the American Legislative Exchange Council’s policy summit in Washington that federal law supersedes those state efforts, like a new Illinois law that bars credit card companies from charging swipe fees on portions of transactions that include taxes and tips.
“If every state were to adopt their own version of what the fee can apply to and what it can’t apply to, what does that mean for running a national system? And it would just become impractical,” Barr said. “And so that’s why I think this has to be struck down and eventually will be struck down.”
Barr is the chairman of the Center for Legal Action Advisory Board, a branch of the American Free Enterprise Chamber of Commerce, which submitted an amicus brief in a lawsuit seeking to overturn the Illinois Interchange Fee Prohibition Act.
This story is sponsored by Americans for Free Markets
Barr also took aim at efforts to prevent state governments from working with banks if they serve certain industries. While some Democratic-led states are trying to advance legislation that would ban – or “blacklist” – a bank if it financed fossil fuels or firearms, Republican-led states are trying to do the opposite, banning a bank if the lawmakers perceive it is not doing business, or enough business, with those same industries.
Blue states and red states are both seeking to limit financing to influence policy outcomes on a variety of the same issues, including Environmental, Social and Governance (ESG) considerations.
“When there’s an effort by a state to take what is, by definition, a national network or system that’s meant to facilitate commerce across the country, then our antenna has to go up and say, this is a direct attack on our common market and what makes it possible,” Barr said.
“I can understand why the conservative state legislatures have looked at this,” Barr said, adding, “[the actions they’ve taken are] going down the wrong path at the end of the day, because it validates the whole idea of using a business for political objectives.”
In the last half-decade, states have taken on myriad measures to set new requirements or restrictions on financial institutions — regulations that routinely conflict with each other.
In California, a recent legislative proposal would implement new regulations on financial institutions that have business relationships with firearms or ammunition manufacturers, restricting state agencies from engaging in financial activities with those companies.
On the other side of the political spectrum, Florida Gov. Ron DeSantis (R) signed legislation that prohibits a bank or credit union from closing an account if the state determines the financial institution exhibits ‘political bias’ in doing so.
Barr, speaking at an event held by Americans for Free Markets, said the federal National Banking Act of 1864 centralized authority to oversee financial institutions with Congress — something he said protects the free flow of commerce across state lines. A state-by-state patchwork that would create different rules for financial institutions in each jurisdiction would allow blue states, as well as red, to pick winners and losers, he said.
“We can’t have, you know, 50 separate investigations of these things,” Barr said. “We’re all outraged at the idea of innocent people being de-banked but let’s get the facts and have a proportionate response to it.”
Barr, who served as attorney general under both President George H.W. Bush and President Donald Trump during his first term, said state-level interventions in financial and banking policy is an outgrowth of a broader crisis of confidence in American institutions.
“The story of our time right now is the politicization of a lot of institutions. And I think personally the driver of that is the emergence of, you know, a very aggressive form of progressivism on the left that is trying to, believes that the meaning of life centers on achieving some perfectly equitable society here and now,” Barr said. “And that just about anything is justified to get there because that’s sort of the secular equivalent of human salvation.”
“It’s the corruption of our institutions and their weaponization and politicization,” he said.