Nice bank you’ve got there. It’d be a shame if something happened to it.
That’s the crux of an alleged threat made by Michael Piwowar, a Republican commissioner at the Securities and Exchange Commission, to Citigroup executives, according to a report by Bloomberg News on Friday.
The bank was there to talk about its derivatives business, but Piwowar wanted to talk about Citi’s recent decision to restrict business with gun sellers, according to Bloomberg:
"Shortly after the Citigroup executives arrived at his office, Piwowar, according to people familiar with the matter, began castigating them for straying into social policy. Glowering and speaking emphatically, he reminded them that Citigroup was given billions in government bailout money after the financial crisis. In what some of the executives took as a thinly veiled threat, Piwowar said he knew Citigroup wanted the SEC to ease regulations on derivatives and proprietary trading, and suggested they might have trouble finding the votes on the Republican-led commission.”
The incident is just the latest volley in an increasingly heated battle over gun control, where banks are under growing pressure from both sides.
Just this week, Senate Democrats sent a letter to 11 banks, including JPMorgan Chase and Wells Fargo, calling on them to follow the lead of Citi and Bank of America, both of which have taken actions to restrict relationships with gun sellers that don’t agree to certain terms.
“There is a growing consensus in the private sector that companies can and should take action to address the problem of gun violence in our country,” wrote the lawmakers, led by Sen. Dianne Feinstein, D-Calif.
Republicans, meanwhile, are alarmed by Citi and BofA’s actions. That bodes poorly for banks that are hoping for further deregulatory action by the Trump administration, especially when it comes to the Volcker Rule, which bans proprietary trading.
Piwowar is not the first Republican to bring up the government’s recent (and significant) support to banks like Citi. Senate Banking Committee Chairman Mike Crapo alluded to it in a letter to BofA and Citi last month. Sen. John Kennedy, R-La., meanwhile, used banks' actions on guns to lobby Majority Leader Mitch McConnell against a bill to ease the Volcker Rule.
“I bring this specific bill to your attention out of serious concern for the direction that America's biggest banks are trending when it comes to the Second Amendment," Kennedy wrote. "I do not believe that Congress should reward big banks for their offensive actions."
Meanwhile, state regulators like the New York State Department of Financial Services are scrutinizing banks’ relationships with gun sellers from the other side, calling on banks to rethink their relationship with the National Rifle Association in the wake of mass shootings.
As Neil Haggerty wrote in American Banker last month, this situation is lose-lose for banks. If they move to restrict gun sales, they become a target for Republicans, the gun lobby and potentially regulators like the SEC. If they don’t do so, they’re a target for Democrats, gun control advocates and potentially state regulators like those in New York.
And the squeeze is only going to get worse.
Gun control is shaping up to be a big issue in the midterm elections this November—and the 2020 presidential race beyond that. Any future shootings are likely to inflame tensions further.
With new federal laws unlikely in the short term, gun control advocates are looking for other places to have an impact — like banks.
That means attention to financial institutions’ actions is only likely to increase going forward, ensuring that no matter what happens, banks remain on the front lines of one of America’s most divisive issues.