A loan officer in Queens or a teller at a suburban branch in Phoenix shouldn’t be alarmed by the executive order that President Trump signed on Tuesday, May 19. It is written in the same dry, nearly bureaucratic style as all previous Treasury directives. But in between the discussion of “ability to repay” and “structural risks,” the order subtly requests that American banks become a checkpoint in the nation’s immigration system—something they have never been asked to do on this scale.
The wording is cautious, if not cautious. At least not yet, banks are not required to gather citizenship information from each and every client. The industry, which has been actively lobbying for months, appears to have pushed the final version toward something more akin to a strong suggestion than a strict rule, despite earlier drafts appearing to go further. However, it requests that federal regulators keep an eye out for indications that individuals without legal status are opening accounts or obtaining credit cards, mortgages, or auto loans. When you read it, you get the impression that the softer language doesn’t really matter. White House recommendations are typically perceived by regulators as being more firm.
For weeks, Treasury Secretary Scott Bessent has been hinting at this. “How do you know your customer if you don’t know if they have legal or illegal status?” He posed the question last month, portraying it as a know-your-customer rather than an immigration matter. It’s a deft use of rhetoric. Anti-money-laundering regulations are already followed by banks. In this story, adding immigration status is just another box to check. The boxes are rarely just boxes, as anyone who has witnessed a small business owner spend an hour at a branch attempting to explain a wire transfer to Mexico will attest.
Surprisingly little is known about the true scope of risk. The Urban Institute, which leans left, estimated that between 5,000 and 6,000 mortgages were given to holders of Individual Taxpayer Identification Numbers. That is a rounding error in a market that handles millions of mortgages annually. Freddie Mac and Fannie Mae already avoid insurance for the majority of them. The financial system does not appear to be faltering based solely on the numbers, regardless of the structural threat described in the order.
Depending on who you ask, it appears to be a slow-motion debanking event. Black and Latino communities in particular may be excluded from mainstream banking, according to Diane Thompson of the National Consumer Law Center, who described it as cruel and misguided. “Money under the mattress,” as she put it, is the kind of image that sticks. It has an almost antiquated quality, a reminder of a past America that most people believed to be lost forever.
It’s more difficult to gauge the mood inside the banks. Over the past few years, executives have publicly complained about having to debank conservative clients; now, they may be asked to debank a different group by the same administration. Since the Treasury has sixty days to issue its formal advisory, attorneys will use that time to sort through what the order actually calls for. According to reports, the advisory will address a wide range of topics, including payroll tax evasion, shell corporations, and recurring sub-threshold cash withdrawals. This type of language, in reality, gives regulators a great deal of latitude.
It’s difficult to ignore the timing. The affordability debate that dominated the previous campaign seems oddly absent now, grocery prices are still unyielding, and rents are rising in cities that thought they had stabilized. One question is whether this order significantly improves the security of the financial system. It’s another matter entirely whether it makes it smaller and for whom. In the upcoming months, the answer—like so much about this administration—will likely only become apparent in the intricate, unglamorous process of rulemaking.