Illinois has long been a pillar of American finance, from the iconic trading floors of Chicago to the small-town community banks that fuel local economies. But today, that foundation is cracking.

Earlier this year, Pulaski Savings Bank in Chicago became the first U.S. bank failure of 2025. Investigators uncovered a fraud scheme that left the Federal Deposit Insurance Corporation (FDIC) with a $28.5 million loss. Though the incident was isolated, it revealed how fragile some of our financial institutions have become, particularly in an environment where regulatory frameworks are unclear, oversight is uneven, and compliance burdens disproportionately harm smaller players.

Unfortunately, the Pulaski collapse isn’t the only sign of trouble. Illinois’ commercial banking industry is expected to shrink this year, with revenues projected to fall to $67.8 billion. Venture capital investment in the state has dropped by more than half since 2021. And between mid-2023 and mid-2024, Illinois lost more than 56,000 residents, more than 8,000 of them from Chicago.

These numbers don’t lie: people and businesses are leaving. Among those leaving are precisely the professionals we need to drive financial innovation — technologists, investors and entrepreneurs. They’re choosing to relocate to places where it’s easier to get a loan, launch a startup or raise a family — states like Indiana, Florida and Texas, which are lowering taxes, simplifying regulations and investing in innovation.

Illinois, by contrast, has doubled down on high taxes, restrictive rules and bureaucratic sprawl. Thousands of private-sector jobs have vanished, and venture capital investment in Illinois dropped more than 50% from 2021 to 2023. Corporate icons like Boeing and Caterpillar have moved their headquarters out of state. Meanwhile, the number of state employees continues to grow, and pension liabilities balloon, even as the state’s population shrinks. Projections suggest Illinois could see a one-third decline in high school graduates by 2040.

Instead of taking steps to attract economic growth and financial innovation, the state and federal governments are layering on more uncertainty.

One example is Illinois’ Interchange Fee Prohibition Act, set to take effect on July 1. The law aims to protect consumers from high debit and credit card fees, but the local business owners and community bankers I speak with are deeply concerned it will do just the opposite.

The law is vague and poorly communicated and merchants don’t know how it will impact their payment systems. Local banks are unsure whether their infrastructure will remain compliant, and small retailers worry about delays it may cause in card processing — or worse, being forced to raise prices or go cash-only. In small towns, where margins are tight and every customer counts, these disruptions could be devastating.

Then there’s the federal lawsuit filed last year by the Department of Justice against Visa, the preferred debit card exchange in much of Illinois, alleging that it has too much market power. But Visa operates in a competitive market with dozens of alternative networks. The businesses and community banks I have spoken to say the case feels less like a serious effort to promote competition and more like a Washington micromanagement effort that will create needless instability for the Illinois residents who depend on these platforms every day.

We cannot allow Illinois to fall further behind. A growing number of states are rolling out the welcome mat for financial firms and fintech startups. Illinois, with its legacy of banking excellence and world-class institutions, should be leading that charge — not watching from the sidelines.

To do that, we must change course. That starts with reforming our tax and regulatory policies to encourage growth, not drive it away. We need to work closely with community banks to support responsible lending, especially in underserved areas. We must protect small businesses from the confusion and cost spikes caused by unclear federal mandates. And we should push back against legal and regulatory overreach that discourages investment and undermines confidence in our financial infrastructure.

But this isn’t just about markets. It’s about trust. Families and business owners need to believe that Springfield is working with them, not against them. They need to see that Illinois can be a place where hard work and smart risk-taking are rewarded — not buried in red tape.

Illinois has the tools: the talent, the institutions and the geographical advantages. What’s lacking is the political will to act boldly and decisively.

If we want to reverse the exodus of people and capital, revitalize our financial sector and restore Illinois’ standing as a hub of innovation, we must be willing to embrace reform — and soon. Our future depends on it.

• State Rep. Martin McLaughlin is a Republican from Barrington Hills.