“Other institutions should take note: The era of performative racial engineering in finance is closing.” ~ Curtis Hill
The U.S. Department of Justice’s $30 million settlement with PayPal marks a long-overdue reckoning.
In 2020, amid the national turmoil following George Floyd’s death, PayPal launched a $530 million Economic Opportunity Fund explicitly aimed at “Black and underrepresented minority businesses and communities.” This was not neutral economic aid. It was race-based preferential treatment in lending and investment decisions—precisely the sort of discrimination the federal Equal Credit Opportunity Act was enacted to prevent.
PayPal is far from alone. A long line of major financial institutions eagerly jumped on the social justice bandwagon in the summer of 2020. Corporate America, desperate to signal virtue in a politicized climate, channeled billions into programs that divided opportunity by race rather than extending it equally under the law. These initiatives were not born of careful legal analysis or evidence of specific past discrimination by the institutions themselves. They were symbolic gestures to appease the demands of the moment—gestures that substituted group identity for individual merit and equal treatment.
JPMorgan Chase announced a staggering $30 billion Racial Equity Commitment to black, Hispanic, and Latino communities to support lending, homeownership, small businesses, and supplier diversity. Bank of America pledged over $1 billion to address “economic and racial inequality,” directing resources toward minority-owned businesses and communities of color. Citigroup rolled out a Special Purpose Credit Program, making it easier for woman-, minority-, and veteran-owned businesses to qualify for loans and lines of credit. U.S. Bank established its Business Diversity Lending Program, offering up to $2.5 million in financing with relaxed criteria for businesses at least 51% owned by women, veterans, or “people of color.”
Other institutions followed suit with targeted funds, grants, and preferential lending funneled through Community Development Financial Institutions or directed using race-conscious criteria. The message was clear: To demonstrate commitment to “social justice,” banks would create economic opportunity programs specifically tailored to blacks and other politically favored groups. Merit, creditworthiness, and colorblind standards took a back seat to demographic checkboxes.
This approach was always on shaky legal ground. The Supreme Court’s rulings against race-based preferences in higher education should have served as a warning. The Equal Credit Opportunity Act prohibits discrimination in credit transactions based on race, color, or national origin. Good intentions do not override the Constitution’s guarantee of equal protection. Treating citizens differently based on skin color does not heal division; it entrenches it and invites precisely the scrutiny now arriving from the Department of Justice.
The PayPal settlement is a warning shot. It requires the company to abandon race-based criteria and to redirect support through neutral channels, such as waiving fees for veteran-owned businesses and those in key sectors like manufacturing and technology. No admission of liability, but a clear pivot away from illegal preferences.
Other institutions should take note: The era of performative racial engineering in finance is closing.
The path forward is straightforward. Financial institutions still operating race-conscious lending, investing, or supplier programs must proactively review and reform them. Replace explicit racial targeting with criteria rooted in economic need, geography, veteran status, industry sector, or other neutral factors that comply with the law. Document the basis for any special purpose credit programs to ensure they meet strict regulatory standards rather than political ones. Leadership should prioritize restoring public trust by recommitting to equal opportunity for every American, not engineered outcomes by group identity.
America’s strength has always rested on the principle that individuals rise or fall on their own efforts, not the color of their skin. Corporations that rushed to embrace the racial politics of 2020 now face the consequences. The Justice Department’s action against PayPal is only the beginning. Institutions that heed the lesson and correct course will serve their customers, shareholders, and country far better than those clinging to yesterday’s divisive fads. The rule of law demands nothing less.
About the National Center for Public Policy Research
The National Center for Public Policy Research, founded in 1982, is a 501(c)3, nonpartisan, free-market, independent conservative think tank. The National Center’s programs include the Project 21 black leadership network, the Free Enterprise Project, Able Americans and the Environment and Enterprise Institute.
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