The Trump administration deserves great praise for ending Operation Choke Point, the controversial, and often tyrannical, program that harmed many legitimate businesses.
The Federal Deposit Insurance Corporation set the stage for the discriminatory treatment of businesses when it declared certain industries to be engaged in “high-risk” activities, sending a strong signal to the banks it regulates that they should steer clear of doing business with these entities. Then, in 2013, the Justice Department began implementing Operation Choke Point, essentially threatening banks and payment processing companies that do business with these “high-risk” merchants with federal investigations.
The government’s activities were purportedly intended to go after fraudulent operations such as Ponzi schemes, debt consolidation scams and cable box descramblers, but it also included many perfectly legal businesses like gun and ammunition dealers, coin dealers, tobacco dealers, payday lenders, dating services, fireworks sellers, travel clubs and suppliers of will-writing kits. As a result, many perfectly legitimate businesses were effectively cut off from banking, payroll, credit card processing and other financial services.
As a May 2014 House Committee on Oversight and Government Reform report explained, “Operation Choke Point effectively transformed the FDIC guidance into an implicit threat of investigation. Suddenly, doing business with a ‘high-risk’ merchant is sufficient to trigger a subpoena by the Department of Justice. Banks are put in an unenviable position: discontinue long-standing, profitable relationships with fully licensed and legal businesses, or face a potentially ruinous lawsuit by the Department of Justice.”
Indeed, in a recent meeting with the Editorial Board, California banking representatives expressed great concern over the data collection and other regulatory requirements, including Operation Choke Point, that force them to spend much of their time and money intrusively policing their own customers.
“I don’t know that people know how much is reported,” California Bankers Association President and CEO Simone Lagomarsino told us. “The banks have been put in a position where they’re the police.”
Within days, however, the banking industry got some relief. Congressmen Darrell Issa, R-Vista; Bob Goodlatte, R-Va.; Jeb Hensarling, R-Texas; Blaine Luetkemeyer, R-Mo., and Tom Marino, R-Pa., sent a letter last month to the Justice…