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by DAVID IBSEN & JESS WARD
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Beautiful beaches, Appalachian foothills and one of the greatest rivalries in college football may attract Americans looking to relocate to South Carolina, but the Palmetto State’s real success story is its commitment to free market principles. South Carolina has built a reputation as a place where businesses can grow, families can thrive and government generally stays out of the way, helping make it the fastest growing state in the nation. That growth is a direct result of policies that embrace economic freedom instead of burdensome regulation and political micromanagement.
South Carolina’s Guarantee Banking Act — currently awaiting final approval by the State House — threatens this progress. While its goal of preventing politicized debanking is worthy, the bill would attack a federal problem with a state-level mandate that creates new costs, litigation risk and regulatory confusion.
Yes, debanking is a legitimate concern. No American should lose access to financial services because of their political beliefs, religious views or lawful business activities. But opposing debanking does not require supporting every bill offered in its name, especially when the issue is already being addressed where it should be – at the federal level.
Following President Trump’s executive order last summer, Washington has moved to eliminate the use of the vague definitions of risk that enabled politically motivated debanking. Federal banking regulators including the Office of the Comptroller of the Currency (OCC), the Federal Reserve and Federal Deposit Insurance Corporation (FDIC), have recently followed the president’s directive and removed these terms from their supervisory practices, codifying this decision earlier this month. Meanwhile, Congress is considering legislation, such as the FIRM Act, introduced by South Carolina’s very own U.S. Senator Tim Scott (R-SC) to establish clear nationwide standards and protections.
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A federal approach is correct because financial institutions operate across state lines every day. Banks are already subject to extensive federal supervision, anti-money-laundering rules, and suspicious-activity reporting obligations. A patchwork of conflicting state laws would create confusion, compliance headaches and additional costs that would burden businesses and ultimately be passed onto consumers. This goes against South Carolina’s — and the nation’s — free market principles.
Consider the practical reality for a regional bank operating in Charlotte while serving customers just across the border in Fort Mill, one of the fastest growing communities in the country. Creating separate state-specific standards for politically sensitive banking decisions would force financial institutions to navigate inconsistent rules depending on which side of the border a customer happens to live on. Those additional compliance costs and regulatory hurdles do not simply disappear. They can discourage investment, slow business expansion and ultimately threaten the kind of economic growth that has helped communities like Fort Mill thrive in the first place.
South Carolina should not become known as the state where doing business becomes harder because lawmakers decided to pile on additional red tape. We do not need to look far to see the consequences of excessive government intervention in the economy. States like California and New York have spent years layering regulations onto businesses and financial institutions. The result has been an exodus of residents and businesses to states with more predictable and business-friendly environments.
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Lawmakers should recognize that creating state-level mandates on banking practices risks inviting future political interference from both sides of the aisle. Once government gains the authority to pressure or direct financial activity, that authority rarely remains limited for long, and where is the line to stop additional red tape from being spread across the state?
Protecting free markets from unnecessary government expansion matters. The South Carolina legislature should resist creating another layer of state bureaucracy for an issue that is already being addressed federally. Advancing this legislation would move South Carolina away from the policies that helped make the Palmetto State successful in the first place.
South Carolina does not need to choose between doing nothing and passing the wrong bill. Lawmakers can stand with President Trump, Senator Tim Scott and a broad free-market coalition by putting a stop the Guarantee Banking Act and supporting a uniform federal solution that protects fair access to banking without burdening South Carolina businesses and consumers.
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ABOUT THE AUTHORS…
David Ibsen is the Executive Director of Americans for Free Markets, and Jess Ward is Senior Director of State Affairs for National Taxpayers Union.
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