Operation Choke Point Surfaces. It’s Alive And Destroying A Lot Of American Business

 Icing the hockers

On March 20, 2013, federal prosecutor Michael Bresnick gave a little-noticed speech to the Exchequer Club in Washington in which he said that that Justice Department planned to crack down on banks that allowed online scammers to access the payments system. “Sadly, what we’ve seen is that too many banks allow payment processors to continue to maintain accounts within their institutions, despite the presence of glaring red flags indicative of fraud,” said Bresnick, who was then the executive director of the Financial Fraud Enforcement Task Force. Bresnick has since gone into private law practice.  SOURCE – American Banker

It started with online lenders in the fall of 2013.  Federal regulators pressured banks into beginning to end their relationships with online lending companies.

Next up were firearms dealers.  Suddenly people who sold guns were no longer welcome to do business with banks with which they had long established relationships.

Then in April of this year, came the porn star bank account closings.  All of a sudden, people in the adult entertainment industry were informed via letter that their money was no good at some big banks around the country.

Given that sex was part of the story when the porn stars’ accounts were closed without any preface or dishonesty (money is money to a bank), that was the first time a lot of people had heard the term “Operation Choke Point,” the name of the secret Justice Department program that investigates “banks and the business they do with payment processors, payday lenders, and other companies believed to be at higher risk for fraud.”  The idea is to block these businesses from the national online payment system and lines of credit which small business owners need to survive.

What made the story especially interesting at the time was that lawmakers – Congress, that is – had no idea that this program existed, and that it targeted perfectly legal, although some distasteful and downright unsavory, industries shutting many businesses down.  There was justifiable outrage at the time that the Justice Department was meddling with the fabric of American enterprise.  So much so that the House of Representatives, fairly quickly for that body, voted to defund the program in early June.  Of course, the mainstream media ignored the event, and that that particular bill is one of the hundreds sitting on Harry Reid’s desk awaiting a new Senate Majority Leader.

And the Democrats accuse the Republicans of obstruction and gridlock.

As the Foggy Bottom Theater Summer of Scandal Part Deux rolled along, the House of Representatives did hold hearings on Operation Choke Point and as usual the Department of Justice people couldn’t answer Rep. Darrell Issa’s questions without the requisite stammer.  (See video here.)  The questions asked had to do with allegations of wrongdoing prior to the issuing of subpoenas to the BANKS SERVING BUSINESSES that could be committing fraud, not the businesses themselves, which if fraud was part of their business model, they should be targeted (but not at the banking level).  The poor, young Justice Department staffer in the hot seat claimed that Justice believed the banks had evidence of the fraud and that was what they were after.  Industries that are considered high risk for fraud by the Federal Deposit Insurance Corporation (FDIC) was included in the guidelines attached to the subpoenas.

Judge for yourself of the legality or wholesomeness of the industries targetted:

Image: Washington Times via NewsBusters

This week, Sun Trust Bank, a small business banking institution, announced that it would no longer be serving small companies in three industries: payday loans, pawn shops, and dedicated check-cashers.

SunTrust Bank is cutting ties with three types of legal businesses in the latest evidence of the Obama administration’s secretive crusade against “objectionable” enterprises.

SunTrust, which counts more than 400,000 small business clients, cited “compliance requirements” as its reason for closing accounts with “payday lenders, pawn shops and dedicated check-cashers.”

“It is consistent with long-standing industry practice to review relationships to ensure they satisfy a range of business and risk considerations,” the bank said in a little-noticed press release dated Aug. 8.  SOURCE – The Daily Signal

Interesting that only payday loans is on the FDIC list of risky businesses.  Yes, all are used by the poor for easy cash, and the terms may be very much to the lender’s advantage, but until the law is changed, such businesses are legal.  If there are interest rate violations with payday lenders, go after the business.  No need to involve the banks without probable cause.  On the other hand, without some of these businesses, there would be a lot more calls to expand the dole since the people who use the services being cut off this week are cash poor.

The press release did go on to say that SunTrust Bank stands by the rights of all Americans and is open to doing business with firearms dealers.  According to The Daily Signal piece, observations from more than one think tank are that the press release was a signal to other banks that Operation Choke Point is alive and well.  Expect it to surface again.

For more information on Operation Choke Point and how the Obama Administration is using it to fundamentally change the USA via banking audit and regulation strong-arming, David Keene of The Washington Times provides some great insight.  The gist:

The government decided to inform banks and processors that some business sectors were higher risk than others. Businesses operating within these sectors might be more prone to defrauding their customers or breaking other laws, and a bank providing such “high-risk” businesses services could be viewed by bank regulators and federal law enforcement officials as accomplices in whatever laws the high-risk enterprise might break. A financial institution providing services to such a business might have to be more carefully and extensively audited than other banks to make sure it is diligently checking on its high-risk customers to make sure nothing is amiss.

In meetings with bank officials, the feds made it clear that the bankers have every right to provide services to such businesses, but warned them that doing so might put them at risk, too, and could almost certainly trigger more extensive audits than would be required of banks that don’t service such customers. Bankers depend for their very survival on those who regulate them and know a threat when they hear one. Many decided it would be wiser to quietly get rid of customers in such high-risk businesses.

As a result, customers of long-standing around the country had their lines of credit called and their accounts closed. The affected businesses were never officially told why, because the government made it clear to the banks that they would face criminal charges if they talked. Even as the feds were briefing bankers on the program and their need to protect themselves by choking off high-risk businesses, the Justice Department was refusing to brief Congress on what was going on.

Welcome to life in the Obama Thugocracy.