New 'No Red and Blue Banks Act' Limits GSA Contracts with Banks Based on 'Social Policy'

The "No Red and Blue Banks Act" directly prohibits the General Services Administration (GSA) from awarding contracts to banks that refuse to do business with companies engaged in lawful commerce based on what the bill calls "social policy considerations." This effectively means the GSA, which handles a massive amount of government purchasing and contracting, can only work with banks that don't factor in certain social policies when choosing their clients. The law goes into effect immediately, although it won't impact contracts that existed before its passage.

Tying the Banks' Hands?

The core of this bill (Section 2) prevents banks from refusing service to lawful businesses based on these "social policy considerations." But here's the catch: the bill doesn't define what those "social policy considerations" actually are. This broad language could create real headaches. For example, if a bank decides not to finance a new coal mine because of its stated commitment to reducing carbon emissions, could that be considered a prohibited "social policy consideration"? Or, what if a bank declines to work with a weapons manufacturer due to ethical concerns raised by its customer base? This bill could potentially force banks to work with any legal business, regardless of the bank's—or its customers'—values or risk assessments.

Real-World Ripple Effects

Imagine a local construction company bidding on a government project. If their bank, which has publicly committed to sustainable practices, decides the project doesn't meet its environmental standards, the bank might still be forced to provide financing if the company is otherwise engaged in "lawful commerce." This could put banks in a tough spot, forcing them to choose between potentially losing GSA contracts and violating their own stated policies or their customers' values. It is not clear what the penalty would be for a bank that violates this law.

The Bigger Picture

While the bill aims to prevent what it sees as discrimination against certain businesses, the lack of clarity around "social policy considerations" raises serious concerns. It could limit a bank's ability to make independent business decisions, potentially favoring certain industries by restricting banks' choices. It also sidesteps the growing importance of Environmental, Social, and Governance (ESG) factors in financial decision-making. The bill's broad language could be used to challenge legitimate risk assessments or ethical stances taken by banks, creating uncertainty in the financial sector and potentially forcing banks to support activities they—and their customers—oppose.