Operation Choke Point is a U.S. Department of Justice-led joint effort with federal regulators designed to choke off access to banking services by businesses engaged in fraudulent or otherwise illegal activities. The public policy end was to protect Americans by driving seedy, fraud-laden businesses out of business. The means were to deny targeted businesses the basic but vital banking services that any business needs to process payments, thus forcing them out of the marketplace.
However, as members of Congress from both parties have protested, the cure has become worse than the disease as the scope grew to include whole classes of perfectly legal but politically controversial businesses. Banks continue to experience regulatory intimidation to drop long- standing customers that include Internet-based businesses, payday lenders, telemarketers and debt collectors.
Some of the darkest days in history have started when government intervention into free markets is driven by a political agenda and not the rule of law. Quiet pressure of this sort from an all-powerful government cannot be tolerated in a free society.
These days it is rare that Congressional Republicans and Democrats agree on anything, much less on protecting the freedom of banks to serve unpopular, but legal, businesses. I applaud them for standing together to defend the rule of law and demanding an end to government-sponsored, politically motivated, subtle bureaucratic intimidation.
Let’s be clear, no credible voice is talking about protecting illegal or fraudulent businesses. The federal government has plenty of appropriate tools to enforce state and federal laws. Justice and regulators should take aggressive enforcement action against law breakers. Likewise, Justice and regulators must stop undermining the rule of law by encouraging banks to discontinue serving legal businesses, many of which are regulated companies they have successfully banked for decades. Government must clean up Operation Choke Point and end subtle pressure from regulators to discontinue banking politically unpopular groups.
Two Congressmen from my home state of Missouri, Republican Blaine Luetkemeyer and Democrat Lacy Clay, pointed out the human cost of Operation Choke Point on consumers who are further shut out of the free enterprise system, and the need for a safe harbor for insured depositories to bank the legitimate companies who serve them. There must be immediate relief and indemnity for insured depositories to continue providing basic banking services.
We must stand ready to work with regulators to restore confidence and clarity so that community banks can serve a broad range of legal businesses that follow state and federal laws. A solution could include a regulator-certified safe harbor and indemnity for insured depositories that provide banking services to companies that demonstrate compliance with laws and regulations applicable to their business.
The regulators started Operation Choke Point; they can stop it.