What a corrupt way to take away guns from the American citizen. I wonder how many laws they’re breaking with this ‘Operation Choke Point’.
Banking regulations being misused to choke off the exercise of Second Amendment rights? Surely such a thing couldn’t happen here in the United States of America.
Yet that appears to be a result of the Obama administration’s Operation Choke Point and other banking programs now targeting some in the gun industry.
The effort to use banks against firearm businesses is currently carried out by at least two federal entities: Attorney General Eric Holder’s Department of Justice (DOJ) and the Federal Deposit Insurance Corporation (FDIC).
The FDIC was created during the New Deal in 1933 to guarantee the security of bank deposits. If you deposit funds in a federally insured bank (i.e., virtually all banks), then your deposit is insured up to $250,000. So if the bank goes out of business, the federal government will give you the money that you had in your bank account.
The purpose of the FDIC is to prevent “runs” on banks, in which people withdraw their money en masse, fearing that the bank is about to collapse. A bank run can be a self-fulfilling prophecy, as rapid withdrawals can drive a weak bank into insolvency.
The FDIC has extensive supervisory and examination authority over banks and the many federal laws that banks must follow. To check a bank’s financial soundness, the FDIC, since 1979, has used a mostly objective scoring system, known as “camels.” The objective criteria consider the bank’s capital, earnings, liquidity and so on.
But the Obama FDIC has introduced a new, subjective factor to the criteria, which it calls “reputational risk.” Essentially, this means a bad public image.
And what causes “reputational risk”? The FDIC provided some details in a 2011 guidance document for banks: “Managing Risks in Third-Party Payment Processor Relationships.” The document warned banks about “merchant categories that have been associated with high-risk activity.” These include some things that, by their nature, are inherently fraudulent or are illegal under state and federal laws, such as “Cable Box De-scramblers,” “On-line Gambling,” and “Ponzi Schemes.” Some “risk” categories involve gray areas, such as “Fireworks Sales,” which are legal in some states but not others. Or “pornography,” which is protected by the First Amendment unless there is a court determination that the material is legally “obscene.”
But the large majority of the FDIC’s targets involve activities that are legal everywhere, such as “Ammunition Sales,” “Firearms Sales,” “Coin Dealers,” “Dating Services,” and “Tobacco Sales.”
Plus, if federal regulatory officials want to make life miserable for a particular bank, they can easily do so. Banks are understandably eager to do whatever it takes to stay on the good side of the federal banking bureaucracy. Do you think the FDIC’s warning might make risk-averse bankers gun-shy of firearm business clients?
The results seem to be “yes,” especially in conjunction with Attorney General Holder’s “Operation Choke Point.”
DOJ publicly acknowledged this program on March 20, 2013, in a Washington, D.C., speech by Michael Bresnick, who was the executive director of the DOJ’s Financial Fraud Enforcement Task Force. Bresnick stated that Choke Point aimed to stop banks from providing services to scammers.
“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,” Bresnick said.
That’s a nice goal. But that’s not the whole story about how Choke Point has actually been used.