A new survey by the DeFi Education Fund found that 74 percent of Americans value financial privacy. This result aligns with what the Cato Institute found in 2022. Back then, 83 percent of Americans said the government should need a warrant to get your financial information. 

Yet, despite the values of the American people, the American government thinks differently. Financial surveillance is everywhere. The Bank Secrecy Act, the PATRIOT Act, the geographic targeting orders, the know-your-customer requirements, the third-party doctrine, and more all add up to mean that the government has sweeping access into our financial lives. 

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New research about the effects of post-2008 bank regulation confirms what I’ve argued since the financial crisis: increased bank regulation will often lead to more ills. 

The study looked at the effect of 

two major regulatory changes that took effect in 2013: the phased implementation of Basel III capital requirements and stress tests required under the Dodd–Frank Act. … [S]ince construction loans are relatively risky and require substantial capital under these rules, the policies may have encouraged the largest banks to reduce this type of lending.

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Improving bank liquidity rules is a focus for some of Washington’s top policymakers. In prepared remarks for a March roundtable, Treasury Secretary Scott Bessent called bank liquidity “the next big-ticket item” in the administration’s regulatory reset. Fed Vice Chair for Supervision Michelle Bowman has warned that the current framework leaves banks “hoarding high-quality liquid assets rather than lending.” 

They are correct: liquidity coverage ratios (LCRs) are overly restrictive, and the entire banking regulatory infrastructure is too archaic, complex, and burdensome. However, simply easing the LCR won’t significantly reduce banks’ demand for reserves, because the Fed still pays banks interest to hold them through the interest on reserves (IOR) program. Liquidity reform that leaves IOR in place is likely to fall short of its goals, which is one more reason Congress should revoke the Fed’s authority to pay IOR.

LCR Requirements Are Too Restrictive

The LCR requires large banks to hold enough high-quality liquid assets—such as Treasury securities and reserve balances at the Fed—to cover projected net cash outflows over a 30-day stress period. Bessent’s remarks note that safe assets now account for about 25 percent of large banks’ balance sheets, a big increase from roughly 10 percent before the 2008 crisis. Bowman made a parallel case about capital rules at Cato days later, arguing that excessive requirements “impair the banking system’s fundamental function of providing credit to the real economy.” 

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Merchants pay fees to debit card networks (called “swipe” or “interchange” fees) each time a consumer uses a card. In 2010, the Durbin Amendment capped debit card interchange fees in the United States. On October 26, the 8th Circuit Court of Appeals ruled that the Federal Reserve exceeded its authority by including costs such as a share of expected fraud losses as part of interchange fees, thus setting the cap too high. In 2025, a district court in Kentucky had upheld the Fed’s rule: if the Sixth Circuit upholds the Kentucky court, the conflict between the circuits could reach the Supreme Court. 

The legal details—including the courts’ disquisitions on economic theory and comma placement—though interesting, are a distraction: the real problem is that the Durbin Amendment is a misadventure in price controls. Price controls on financial services harm consumers, for the same reasons that price controls on gasoline or fire insurance harm consumers. When regulators force prices down, firms react by raising other prices or by cutting services or service quality. 

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Cato Surveillance Week 2026 featured a panel that included my colleague and Cato Research Fellow Nicholas Anthony. As is always the case with such expert panels, there are inevitably more questions than we have time to address in an hour. Moreover, because the reach of the Bank Secrecy Act (BSA) is so vast, I wanted to follow up with Nick on some of the issues we covered and some we didn’t have a chance to get into depth on. What follows is the transcript of my chat with Nick, edited for clarity. 

Q. Folks may not be as familiar with the Bank Secrecy Act as other laws. Can you give them a brief crash course?

The Bank Secrecy Act was enacted in 1970 to require banks and other financial institutions to monitor customers and report certain transactions to the government. It started as an attempt to go after tax evaders, but it has since been expanded to go after drug dealers, terrorists, and immigrants (and everything in between). 

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Are banks systematically discriminating against conservatives and Christians? That’s what the Office of the Comptroller of the Currency’s (OCC’s) new report on debanking has led many people to believe. OCC head Jonathan V. Gould said, “Today’s report provides irrefutable evidence that the nation’s largest banks have denied, debanked and discriminated against customers and lawful businesses.” 

Yet, a careful read of the report shows something else. The OCC simultaneously overstated and understated the problem. 

Evidence Without Scale

In preparation for this report, the OCC reviewed nearly 100,000 complaints—an impressive feat. Yet, the OCC failed to establish just how widespread discrimination might be. The report identifies only about 13 cases of suspected religious or political debanking. Making matters worse, these cases were only provided with minimal information, and it does not appear that the banks were given the chance to provide context for each decision (or at least, no context was published). That’s a problem considering one famous case of alleged religious debanking also involved the ministry running a debt-collection agency in Uganda. 

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Prediction markets allow people to trade contracts on future events, from interest-rate decisions to sports results, and the exchanges that list these contracts are overseen by the Commodity Futures Trading Commission (CFTC). Illinois says that is not enough. It wants any exchange offering sports contracts to get a state license as well, and it treats operating without one as a crime.

In April 2025, Illinois sent a cease-and-desist letter to Kalshi, a CFTC-registered exchange that had started listing sports contracts that January. When Kalshi, its partner Coinbase, and the CFTC challenged that demand in federal court, a judge in Chicago ruled on October 2 that federal law likely overrides it for the sports contracts central to the case. The preliminary ruling bears on a question that extends far beyond Illinois, namely, whether these markets answer to a single federal regulator or face a patchwork of state-level rules.

Judge Martha Pacold of the US District Court for the Northern District of Illinois found that contracts like one on a Chicago Cubs victory in the 2026 World Series are likely “swaps,” and federal law gives the CFTC exclusive authority over swaps traded on the exchanges it oversees. She further concluded that Illinois’s licensing rules likely conflict with the federal framework, not least because complying with them would “force Kalshi to build a market solely for Illinoisans.”

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