Biden & Forgotten Federal Financial Tyranny

In 2011, the Federal Deposit Insurance Corporation (FDIC) sent banks a new list of “high risk” industries and clients. Banks were told to avoid providing services to firearms and ammo companies, pornography stars and producers, coin dealers, online tobacco retailers, payday loan operators, and other targets. Many observers were mystified at the categories of companies the FDIC denigrated. A congressional report later complained that the FDIC jumbled together legitimate businesses “with inherently pernicious or patently illegal activities such as Ponzi schemes, debt consolidation scams, and drug paraphernalia.”

In 2013, the Justice Department launched Operation Choke Point, a quasi-covert campaign to “choke” politically disfavored businesses. The Justice Department “radically and unjustifiably expanded” its subpoena authority under a 1989 antifraud law, according to a 2014 congressional report. The Department issued fifty subpoenas to banks and financial institutions which had failed to banish accounts on the FDIC “high risk” list. American Bankers Association president Frank Keating complained, “If a bank doesn’t shut down a questionable account when directed to do so, Justice slaps the institution with a penalty for wrongdoing that may or may not have happened. The government is compelling banks to deny service to unpopular but perfectly legal industries by threatening penalties.” Former FDIC chief William Isaac declared, “Bankers are being cowed into submission by an oppressive regulatory regime.” Issac wrote an op-ed for the Wall Street Journal headlined “Don’t Like an Industry? Send a Message to Its Bankers” showing how the Operation Choke Point was targeting firearm and firework vendors.

Federal threats swayed banks to blindside thousands of their business customers. Cigar sellers and manufacturers were clobbered as collateral victims. A Daily Beast story headlined “The Banks’ War on Porn” reported that “hundreds of current and former porn stars” received “curt letters of account termination without further explanation” from their banks. A top FDIC official insisted that the agency’s letters to Congress on the crackdown “always mention pornography when discussing payday lenders and other industries, in an effort to convey a ‘good picture regarding the unsavory nature of the businesses at issue,’” according to a 2014 congressional report.

For some federal regulators and prosecutors, guns were even worse than smut. The FDIC notified banks to “‘prohibit’ payment processing for firearms merchants” and described “loans to firearms dealers as ‘undesirable,’” according to a 2014 congressional report. The National Rifle Association complained that banks were “refusing to do business with legitimate law-abiding companies in the firearm industry . . . without regard to the specific company’s credit, criminal or financial history.” Hundreds of firearms and ammo companies saw their bank accounts frozen or terminated. Representative Sean Duffy (R-WI) complained that federal officials were “weaponizing government to meet their ideological beliefs.” Representative Blaine Luetkemeyer (R-MO) declared, “Unelected bureaucrats at the Department of Justice, the FDIC and other agencies set out to kill legal businesses by starving them of access to financial institutions.”

The Obama administration acted as if its regulatory targets did not deserve due process, and the program ravaged far and wide before it was exposed. Emails from FDIC officials showed they were “scheming to influence banks’ decisions on who to do business . . . [to ensure] banks ‘get the message’ about the businesses the regulators don’t like, and pressuring banks to cut credit or close those accounts, effectively discouraging entire industries,” according to an analysis published in the Daily Signal.

Federal officials continually denied the extent of the crackdown, but congressional and media investigations exposed their deceit. In 2015, FDIC chairman Martin Gruenberg admitted to Congress that “bank examiners had misinterpreted regulatory guidance to suggest that entire categories of businesses [including firearms dealers] should be barred from traditional banking services.” But the program continued plugging along until the Donald Trump administration ended the witch hunt.

Unfortunately, legions of laws and regulations remain on the books that could permit federal agencies to deny due process to any business or industry that politicians seek to scourge. The House Judiciary Committee will likely soon reveal other follies and outrages committed by Biden’s financial regulators. When it comes to Uncle Sam, “no matter how cynical you get, it’s never enough to keep up,” as comedian Lily Tomlin said.

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