Trump’s First National Bank of Scams Is Coming

Why does World Liberty Financial want a trust bank? Because the GENIUS Act passed last July subjected fintech to various options for regulatory oversight, of which the least burdensome is to receive a federal bank charter. According to a recent paper by Georgia State University assistant professor Todd Phillips, a federal bank charter shields the bank from state consumer protection laws and also provides potential access to a master account with the Federal Reserve that allows it to receive electronic funds. A federal bank charter also allows fintech companies like World Liberty Financial, rather than some third party, to be custodian of their own stablecoins, and to easily convert stablecoins to dollars and dollars to stablecoins. Many fintech firms have received bank charters already; the OCC seems to be handing them out like so much penny candy.

Unfortunately, Phillips points out, when a proposed trust bank is linked to the president of the United States, that president is liable to pressure the OCC to approve a charter. In a January 13 letter to Jonathan Gould, comptroller of the currency, Senator Elizabeth Warren, Democrat of Massachusetts, said that fear of precisely such a scenario prompted her to vote against the GENIUS Act. Warren also expressed annoyance that when she asked Gould about this possibility in July, he declined to answer “hypothetical questions.” In addition, it seems to me, a president who’s already demonstrated an eagerness to tilt Fed policy to his political advantage probably wouldn’t balk at tilting it also to his commercial advantage (though not being familiar with the mechanics of the Fed’s master accounts, I can’t tell you exactly how).

“We have never seen financial conflicts or corruption of this magnitude,” Warren said in her January 13 letter. You can say that again. Constitutional emoluments-clause concerns about Trump’s Pennsylvania Avenue hotel during his first term now seem quaint. The nonprofit Citizens for Responsibility and Ethics in Washington, or CREW, sued Trump back then for violating the emoluments clauses. CREW prevailed in lower courts, but when it got to the Supreme Court the justices quietly set the matter aside until Trump left office so that they could declare it moot.