New regulation affects businesses

Nichole Davila-Sanchez, ‘Doah Staff Writer
September 17, 2014



Imagine you own a small business that sold firearms legally, and suddenly in the mail you got a letter from your bank stating that your account was going to be closed. You scan the piece of paper over and over again for a couple minutes, looking in vain for an explanation to magically appear before you. Outrage replaces disbelief as you immediately call the bank looking for answers, only to find out the even the bank manager doesn’t know why this has happened to you.

Operation Choke Point: This is the name dubbed to a regulation – not law — set up by the Obama administration and carried out by the Department of Justice (DOJ), Federal Depositors Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB). This new form of distress for the American dream was first heard of at the end of 2013, when business owners started to find out that their banks had closed their accounts for seemingly no reason. These businesses were legal; it was not as if they were selling illegal weapons out the back. However, due to the guidelines set by the DOJ and a fear of being fined, banks all over the country are closing accounts simply because these businesses are deemed “high risk.” Michigan pawnshop owner Brian Brookeman’s account was closed because the Standard Industrial classification (SIC) code assigned to his business categorized it as high risk; this was due to the fact that he sold firearms and dealt with rare coins.

This infamous list included casinos, retail stores, travel agencies, jewelry stores, businesses that cash checks, drug pharmacies, currency exchange and firearms. The FDIC says that the banks misunderstood; the list was meant to be a guideline for banks to be aware that these businesses are targets of fraud. With a hefty fine associated with backing a high-risk business, one tends to misunderstand. Brian Wise stated in an interview with former senator Mike Huckabee on Aug. 31, “This single program represents the biggest threat to consumer choice and freedom that this country has ever seen.”

In the summer of this year, 31 congressmen sent a letter to Attorney General Eric Holder and FDIC Chairman Martin Gruenberg requesting to be briefed on Operation Choke Point which they had very vaguely heard about but did not have solid reliable information. Within this letter the congressmen stated, “We are especially troubled by reports that the DOJ and FDIC are intimidating some community banks and third party payment processors with threats of heightened regulatory scrutiny unless they cease doing business with online lenders… As a result, many bank and payment processors are terminating relationships with many of their long-term customers who provide underserved consumers with short-term credit options.” Attorney General Eric Holder and FDIC Chairman Martin Gruenberg were made aware that agencies involved in this project did not run it through Congress.

In response to this letter, an official of the Dept. of Justice met with the Congressional members but refused to answer questions and even stated that the DOJ was not required to inform Congress about this agenda. She even refused to state her name. However, Department of Justice Trial Attorney Joel M. Sweet stepped forward; he revealed to an audience of bank examiners the program was intended to obstruct fraudsters and suck agencies like the FBI were also involved. The Washington Times stated on Aug. 22, “The President doesn’t like payday lenders, and neither, particularly, do we. But rather than seek changes by legislation or an open rule-making process to propose reform, the White House simply cracked down on payday lending… [Our] system of checks and balances was put in place to prevent such abuses. Mr. Obama is determined to lend himself as much power as he can. If Congress won’t assert its constitutional authority by blocking such behavior, it will never retrieve the power and authority the Constitution gave it.”

With all the bad publicity, this program has gotten the FDIC pulled the list from its website and have stopped leaning on banks. However, the damage done by this one program with steel and cemented carbide only reinforced the people’s mistrust in our government.

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