The Southwest Public Policy Institute has signed a coalition letter to Federal Reserve Chairman Kevin M. Warsh urging federal banking regulators to decide the bank license applications now pending before them on the statutory criteria Congress enacted, and on nothing else.
The letter, dated August 5, 2026 and copied to Federal Reserve Bank of Chicago President Austan Goolsbee and Federal Reserve Bank of Minneapolis President Neel Kashkari, was organized by American Commitment and signed by eight organizations. It takes no position on whether any particular application should be approved. It asks only that the decision turn on capital, managerial resources, compliance, safety and soundness, and financial stability: the tests federal banking law actually specifies.
“Regulators are being asked to do something Congress never authorized: deny a license because the wrong people would hold it,” said Patrick M. Brenner, president and CEO of the Southwest Public Policy Institute. “The Bank Holding Company Act lists what the Federal Reserve is supposed to weigh. Whether an advocacy coalition approves of the applicant’s customers is not on the list. If these applicants fail the statutory tests, deny them and say which test they failed. That is the whole ask.”
The objection that argues against itself
The letter identifies a contradiction at the center of the campaign against the pending applications. The standing objection to bank-partnership lending — advanced for years by the same organizations now filing adverse comments — is that the arrangement obscures who the real lender is and leaves the economically consequential party outside direct prudential supervision.
Acquisition eliminates that structure. The applicant becomes the bank. Supervision becomes unified and direct, under the OCC and the Federal Reserve.
“For years we were told partnership lending was a shell game and that the real lender should be supervised directly,” Brenner said. “Now the real lender is asking to be supervised directly, and the same groups are against that too. At some point you have to conclude the objection was never about supervision.”
The record documents the point. In September 2022, the Center for Responsible Lending and the Consumer Bankers Association jointly petitioned the Consumer Financial Protection Bureau to extend supervision over large nonbank personal lenders, arguing that its absence created an unlevel playing field and real risk to consumers. In January 2025, the Bureau’s general counsel responded that those concerns had merit, noting that nonbank personal lending then encompassed roughly 85 million accounts and more than $125 billion outstanding. Opposing the partnership model and its supervised alternative simultaneously is not a supervisory position. It opposes the lending itself—which is a policy argument, and policy arguments belong in Congress.
SPPI’s contribution to the record
SPPI’s position rests on four years of the Institute’s own research and on the current empirical literature, assembled in Application Pending: 68 Million Votes for More Banks — How the Campaign to Politicize Bank Charters Shrinks Credit for Households, published this month.
America has a shortage of banks. Active U.S. bank charters have fallen from roughly 8,500 in 2008 to roughly 4,500 today. Between 2010 and 2024, fewer than six new banks formed per year nationwide; in the twelve years before the financial crisis, the slowest single year produced 93. Roughly 68 million Americans live in a county with no community bank headquarters. Federal Reserve Bank of Philadelphia research with Fed Communities documents a net loss of 5,413 bank branches between 2019 and 2023, with the population living in a banking desert growing by more than 760,000, to roughly 12.3 million. The institutions retreating from American neighborhoods are the largest incumbents; community banks under $10 billion in assets added branches over the same period. That argues for chartering more small institutions.
Rate caps redistribute credit. In December 2025, four economists at the Federal Reserve Bank of New York published Less for You, More for Me: Credit Reallocation and Rationing Under Usury Limits, examining three states that adopted 36 percent all-in caps against seven that did not, using credit-bureau data on nearly four million households. For the riskiest decile of borrowers, debt balances fell 14.7 percent and open accounts fell 19.6 percent — with no improvement in delinquency. Credit did not disappear; it moved up the risk distribution to borrowers for whom the cap was never binding, rising across the second through fifth deciles. Because credit scores correlate with income, the authors conclude the caps may transfer credit from lower-income to higher-income households.
That finding disposes of the aggregate-volume defense. Advocates in capped states point to rising total loan dollars as proof the policy worked. Rising aggregate volume is precisely what reallocation produces. New Mexico is the clearest illustration: after House Bill 132 took effect on January 1, 2023, licensed small-loan companies fell from 531 in March 2022 to 266 by October 2023 — a 50 percent decline — while the inflation-adjusted dollar value of small loans rose 31.7 percent and average interest paid fell. Both sets of numbers are true at once. Half the lenders left, and the survivors wrote larger loans to safer borrowers. Dollar volume is not access, and average price is not access. The question is who is still getting credit, and the aggregate figures say nothing.
The substitution claim has been tested directly, and it failed. SPPI’s consumer-emulation research put the “banks and credit unions will fill the gap” assumption to an empirical test rather than a modeled one. No Loan for You! (February 2023) followed a married homeowner with a full-time job, a mortgage in good standing, and a credit score above 800 as he sought an advertised small-dollar loan from three national banks in metropolitan Albuquerque. All three required opening a checking account first. All three declined. No Loan for You, Too! (June 2023) extended the protocol to fifteen credit unions and a second state; thirteen of fifteen denied the loan, offered no payday alternative loan, or denied membership outright, and the subject’s credit score fell from above 800 to 706 under hard inquiries. Swipe Right (May 2025) documented the reverse case, in which a comparison-shopping intermediary matched the same consumer to a suitable product within minutes after seven issuers had produced rejections or silence.
The agencies have already repudiated the method now urged on them. Between March 2025 and June 2026, the OCC, FDIC, and Federal Reserve eliminated reputation risk as a supervisory factor, codified that elimination by rule, and stripped the concept from fifteen interagency guidance documents — on the express ground that it had been used to pressure banks away from lawful customers. Executive Order 14331 cited Operation Choke Point by name and directed that banking decisions rest on individualized, objective, risk-based analysis. The principle cuts both ways. If it is wrong to push a lawful business out of banking on political grounds, it is wrong to keep a qualified applicant out on the same grounds. A denial premised on disapproval of a lawful product would restore through adjudication exactly what the three federal banking agencies have spent eighteen months dismantling by rule.
The institutional weight is not where the objections imply
The charter fight runs parallel to a live question of federal preemption. The en banc Tenth Circuit hears oral argument on August 18 in National Association of Industrial Bankers v. Weiser, concerning whether a state’s DIDMCA opt-out reaches loans originated by out-of-state banks — the most consequential reading of Section 525 since its enactment in 1980.
The alignment in that case deserves notice. The OCC and the FDIC both filed in support of the plaintiffs, the FDIC expressly reversing a prior contrary position. Twenty-one state attorneys general, led by Utah, filed jointly, as did the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, America’s Credit Unions, and 52 state bankers associations, along with the U.S. Chamber of Commerce. Eleven states and the District of Columbia filed in support of Colorado, joined by the Center for Responsible Lending and the National Consumer Law Center. This is a genuinely contested question and SPPI does not suggest otherwise. But the two federal banking regulators with direct supervisory responsibility for national banks and state nonmember banks have both concluded the extraterritorial reading is wrong, and that is not the side the charter objections assume.
What SPPI is asking for
Consistent with the coalition letter and with Application Pending, SPPI urges the Federal Reserve and the OCC to:
- Decide on the statutory factors. Evaluate the applications against 12 U.S.C. § 1842(c) and the applicable chartering and merger standards. Applicants who fail should be denied.
- Document the basis for any denial. An order should identify which statutory factor was not met and why. An unexplained denial following a high-volume comment campaign is indistinguishable from a political one, and will be treated as precedent by every future applicant and every future opponent.
- Apply the reputation-risk rule to adjudication, not just examination. Public controversy about an applicant’s lawful products is a reputational consideration by another name.
- Treat the entry shortage as the policy problem it is. With active charters down roughly 47 percent since 2008, the “convenience and needs” factor should be read as Congress wrote it — as a reason to weigh new entry favorably.
- Resolve the exportation question in Congress. The American Lending Fairness Act would clarify the scope of the DIDMCA opt-out by statute rather than through accumulated leverage on unrelated applications.
- Reform the disclosure metric. Congress should revisit the Truth in Lending Act’s APR mandate to require prominent, comparable disclosure of total cost of credit alongside the annualized rate.
“The households at issue here are the ones we have spent four years documenting,” Brenner said. “The transmission still needs repair. The shift still starts Monday. Eliminating a loan product does not eliminate the emergency that created the need for it — it only decides who gets to watch. A rigorous chartering process protects the banking system. A political one protects incumbents. Regulators are entirely capable of observing the distinction.”
Coalition signatories
Phil Kerpen, American Commitment
Jeffrey Mazzella, Center for Individual Freedom
John Berlau, Competitive Enterprise Institute
Kent Kaiser, Domestic Policy Caucus
Patrice Onwuka, Independent Women
Andrew Langer, Main Street Foundation
Patrick M. Brenner, Southwest Public Policy Institute
Related SPPI research
- Application Pending (2026)
- Swipe Right (2025)
- No Loan for You, Too! (2023)
- No Loan for You! (2023)
