The feds are at it again: Operation Choke Point

[Merle 458]

This country is starting to look more like the Soviet Union every time one of these new scandals comes to light.

http://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/05/24/operation-choke-point/

Todd Zywicki, May 24

The Justice Departments Operation Choke Point initiative has been shrouded in secrecy, but now it is starting to come to light. I first heard about the program in January through this article and since then it has been difficult to discover details about it. It is so named because through strangling the providers of financial services to the targeted industries, the government can choke off the oxygen (money) needed for these industries to survive. Without an ability to process payments, the businesses especially online vendors cannot survive. The general outline is the DOJ and bank regulators are putting the screws to banks and other third-party payment processors to refuse banking services to companies and industries that are deemed to pose a reputation risk to the bank. Most controversially, the list of dubious industries is populated by enterprises that are entirely, or at least generally, legal. Tom Blumers extremely informative post summarizing what is known to date about Operation Choke Point reproduces the list, which includes things such as ammunition sales, escort services, get-quick-rich schemes, on-line gambling, racist materials and payday loans. Quite obviously, some of these things are not like the other; moreover, just because there are some bad apples within a legal industry doesnt justify effectively destroying a legal industry through secret executive fiat.Especially ironic, of course, is that while the DOJ and bank regulators are choking off financial services to legal industries, they are also encouraging banks to provide banking services to illegal marijuana sales.The ability to destroy legal industries through secret actions to deprive them of banking services has obvious political consequences. For example, it was reported last week that firearms shops are alleging that Operation Choke Point is being used to pressure banks into refusing to providing financial services. There are also reports that porn stars have had their bank accounts terminated for moral reasons related to the reputation risk of banking individuals in the porn industry. IRS officials must already be salivating about ways to apply Operation Choke Point to tea party groups.In principle, of course, the logic of Operation Choke Point could be extended to groups not currently targeted. Notably absent from the FDICs hit list, for example, are abortion clinics, radical environmental groups, or, well, marijuana shops, for that matter. Something similar was done to cut off credit-card payments to support the operation of WikiLeaks.The larger legal and regulatory issue here is the expansive use of the vague and subjective standard of reputation risk to target these industries. In a letter to Janet Yellen, the chair of the Federal Reserve, last week, House Financial Services Committee Chairman Jeb Hensarling expressed concern over the growing use of reputation risk as a vehicle for attacking legal businesses. Is there any discernible principle as to why, for example, a payday lender or firearms dealer poses a reputation risk and an abortion provider does not? So far, one of the porn stars has sued to try to determine why his loan application was denied. Given that Operation Choke Point seems to be doing exactly what was its alleged intent to choke the life out of the businesses in the covered industries I expect more lawsuits to come that will shed some light on this initiative.

Edited November 22, 2014 by Merle

[landr 126]

No sympathy for any of the industries in the quoted paragraph and not sure why the author thinks that abortion clinics should be on the list, unless he means illegal/unlicensed abortion clinics - in which case, I agree.

Get rich quick schemes and payday loans should definitely be on that list, in my opinion.

Edited November 22, 2014 by landr

[DavenRoxy 1,073]

No sympathy for any of the industries in the quoted paragraph and not sure why the author thinks that abortion clinics should be on the list, unless he means illegal/unlicensed abortion clinics - in which case, I agree.

Get rich quick schemes and payday loans should definitely be on that list, in my opinion.

You agree with shutting down porn? You must be some sick and twisted individual.

[landr 126]

You agree with shutting down porn? You must be some sick and twisted individual.

Well, it seems you've got me pegged, Sherlock.

[Merle 458]

No sympathy for any of the industries in the quoted paragraph and not sure why the author thinks that abortion clinics should be on the list, unless he means illegal/unlicensed abortion clinics - in which case, I agree.

Get rich quick schemes and payday loans should definitely be on that list, in my opinion.

While I may not care what happens to the porn industry or agree with the practices of pay day loan companies I do have a problem with the government selectively persecuting businesses who aren't breaking any laws just because it doesnt agree with them. They might as well put a big, yellow star of David on their front doors as well. Edited November 22, 2014 by Merle

[landr 126]

While I may not care what happens to the porn industry or agree with the practices of pay day loan companies I do have a problem with the government selectively persecuting businesses who aren't breaking any laws just because it doesnt agree with them. They might as well put a big, yellow star of David on their front doors as well.

Then we agree to disagree as I don't have a problem with the industries selected.

[lostinblue 1,989]

Holder's gun grab via Operation Choke Point

Posted: Jun 02, 2014 9:26 AM EDT Updated: Jun 02, 2014 9:41 AM EDT

By Emily Miller, FOX 5 Chief Investigative Reporter

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The Obama administration failed to get gun control passed on Capitol Hill, so it has allegedly used its executive power to try to put the firearms industry out of business.

This revelation came from a report released Thursday by Darrell Issa, the chairman of the House Oversight and Government Reform Committee. Using internal Justice Department documents, the committee concluded that the administration used Operation Choke Point, to target fully-legal companies that it finds “objectionable.”

The committee also reported that Attorney General Eric Holder was informed that the program has been shutting down legal businesses.

“We have documented that they are going after gun and ammunitions manufacturers, gun sellers and non-deposit lenders. Their own memos show they are well beyond enforcing the law,” Rep. Blaine Luetkemeyer (R-MO) told me in an interview Friday.

Luetkemeyer sponsored an amendment, which the House passed Thursday night, that prohibits federal funds in the next fiscal year from being used to carry out Operation Choke Point. The Commerce, Justice, Science, and Related Agencies Appropriations Act amendment passed by voice vote.

“There is an orchestrated effort by DOJ and FDIC to do away with entire industries instead of going after the bad actors. This is wrong,” said Luetkemeyer, a former bank regulator, who currently serves on the House Financial Services Committee.

He said the goal is to stop the Justice Department by establishing “safe harbors for legal entities to do business.” The congressman said that if the amendment doesn’t fix the problem, he will introduce legislation to do it.

Justice Department spokesman Emily Pierce said Friday that all the assertions by the House committee are “false.” She emailed that the document Issa released actually “make clear that we are targeting fraudulent and illegal behavior.” Pierce said the department will continue to hold “accountable” the financial institutions who process fraudulent transactions.

Operation Choke Point was launched in 2013 to protect consumers by “choking” fraudsters’ access to the banking system. Basically, Justice forces banks and third-party payment processors to stop accepting payments from companies considered “high risk” who are -- supposedly -- violating federal law.

However, the documents released by Issa show that the government lumped the entire firearms industry in with other “high risk” targeted businesses including pornography, drug paraphernalia, escort services, racist materials, ponzi schemes and online gambling.

The National Shooting Sports Foundation, the trade association for firearms and ammunitions manufacturers, said that several of its members have had banking relationships wrongfully terminated as a result Operation Choke Point.

The group protested against the federal government “discriminating against businesses simply because they are engaged in the lawful commerce of firearms.”

Andrew Arulanandam, the National Rifle Association (NRA) spokesman said Saturday that the group is working with members of Congress and affected parties to get answers on the program.

“The efforts of the Obama administration to impose its vision of a ‘fundamentally transformed’ America have already fallen hard on those who value the Second Amendment,” said the NRA spokesman. “Some fear this could be yet another example of his ‘phone and pen’ style of imperial governance.”

Since President Obama was inaugurated, the number of Americans who say they distrust the federal government has gone up from 54% to 60% according to a recent FoxNews.com poll.

The Obama administration failed to get gun control passed on Capitol Hill, so it has allegedly used its executive power to try to put the firearms industry out of business.

This revelation came from a report released Thursday by Darrell Issa, the chairman of the House Oversight and Government Reform Committee. Using internal Justice Department documents, the committee concluded that the administration used Operation Choke Point, to target fully-legal companies that it finds “objectionable.”

The committee also reported that Attorney General Eric Holder was informed that the program has been shutting down legal businesses.

“We have documented that they are going after gun and ammunitions manufacturers, gun sellers and non-deposit lenders. Their own memos show they are well beyond enforcing the law,” Rep. Blaine Luetkemeyer (R-MO) told me in an interview Friday.

Luetkemeyer sponsored an amendment, which the House passed Thursday night, that prohibits federal funds in the next fiscal year from being used to carry out Operation Choke Point. The Commerce, Justice, Science, and Related Agencies Appropriations Act amendment passed by voice vote.

“There is an orchestrated effort by DOJ and FDIC to do away with entire industries instead of going after the bad actors. This is wrong,” said Luetkemeyer, a former bank regulator, who currently serves on the House Financial Services Committee.

He said the goal is to stop the Justice Department by establishing “safe harbors for legal entities to do business.” The congressman said that if the amendment doesn’t fix the problem, he will introduce legislation to do it.

Justice Department spokesman Emily Pierce said Friday that all the assertions by the House committee are “false.” She emailed that the document Issa released actually “make clear that we are targeting fraudulent and illegal behavior.” Pierce said the department will continue to hold “accountable” the financial institutions who process fraudulent transactions.

Operation Choke Point was launched in 2013 to protect consumers by “choking” fraudsters’ access to the banking system. Basically, Justice forces banks and third-party payment processors to stop accepting payments from companies considered “high risk” who are -- supposedly -- violating federal law.

However, the documents released by Issa show that the government lumped the entire firearms industry in with other “high risk” targeted businesses including pornography, drug paraphernalia, escort services, racist materials, ponzi schemes and online gambling.

The National Shooting Sports Foundation, the trade association for firearms and ammunitions manufacturers, said that several of its members have had banking relationships wrongfully terminated as a result Operation Choke Point.

The group protested against the federal government “discriminating against businesses simply because they are engaged in the lawful commerce of firearms.”

Andrew Arulanandam, the National Rifle Association (NRA) spokesman said Saturday that the group is working with members of Congress and affected parties to get answers on the program.

“The efforts of the Obama administration to impose its vision of a ‘fundamentally transformed’ America have already fallen hard on those who value the Second Amendment,” said the NRA spokesman. “Some fear this could be yet another example of his ‘phone and pen’ style of imperial governance.”

Since President Obama was inaugurated, the number of Americans who say they distrust the federal government has gone up from 54% to 60% according to a recent FoxNews.com poll.

http://www.myfoxdc.com/story/25668177/holders-gun-grab-via-operation-choke-point