Ranking Season: Combating Commercial Banks' Systemic Discrimination of Consumers

The recent disbursement of COVID-19 pandemic-related federal relief funds to businesses and individuals under the CARES Act exposed significant problems in the U.S. system of money and payments. U.S. banks' wealth maximization objectives clashed with the federal government's goals of diversity, equity, and inclusion (DEI). The discriminatory, self-interested behavior of banks, which essentially served as the federal government's long arm in these transactions, worsened the pandemic-induced economic crisis for many, especially women and minorities, and intensified racial injustice. The U.S. government's inability in 2020 to successfully execute its stimulus plan and give all its intended recipients the benefits it had designated due to the role played by banks begs the question: Should U.S. banks be subject to any legal obligations when they help the government execute its fiscal goals? This article argues that U.S. banks should help advance the federal government's fiscal policy, including the DEI social agenda, especially during critical junctures such as the economic crisis instigated by COVID-19, and proposes an agency theory approach to mandate the implementation of government social policy goals among commercial banks via a CAMELS rating-like system that includes social goals, such as DEI. This DEI rating system would create public consequences for noncomplying banks, including depositors withdrawing their funds from lower-rated banks and redepositing them in top-rated banks, resulting in higher-rated DEI banks overtaking lower-rated banks. This DEI rating system will also provide an incentive for banks to compete for more diversity and inclusion, which would solve many of the systemic discrimination-related issues that led to economic inequality and intensified the 2020–2021 crisis. Lastly, DEI-based scores could help prevent banks from finding themselves on the losing side of the growing public banking movement in the United States, enabling banks to reposition themselves and avoid future radical changes in the banking industry.