Operation Choke Point

I would be among the first to argue that websites (or even physical storefronts) that offer get-rich-quick schemes or high interest payday loans preying on poor people, or escort services, or porn sites, or on-line gambling offer no redeeming social value. But all of these businesses are legal, and although they all have a certain sleeze factor, our body of laws allows them to operate.

But the current reigning political class has decided that legal or not, these businesses should be choked into bankruptcy. How? Enter the Justice Department's Operation Choke Point. Todd Zwicki explains:

The Justice Department's "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 ... 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 Blumer’s 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 doesn’t justify effectively destroying a legal industry through secret executive fiat.

It seems that this administration encourages the use of federal agencies to intimidate and even destroy those that don't pass its ideological or 'moral' muster. The IRS scandal is a frightening example of direct government intimidation in which opponents of the Obama administration were directly targeted by the most intimidating of all federal agencies. Operation Choke Point is an example of another Federal Agency putting pressure on the banking industry to choke businesses that the current elite's find objectionable (even though those businesses are legal). Since legislation cannot be passed to accomplish their whims, the current administration works in the shadows, using clandestine regulations and subtle pressure to accomplish its goals. After all, they are always right and always just, aren't they?

The problem isn't the current list of seedy businesses but rather the direction in which that list might grow. What if under a left wing administration, there was an attempt to 'choke' a conservative fund raiser by not allowing it to accept credit card donations? The left might like that, but would it like a conservative administration choking planned parenthood by shutting down credit card donations to that group?

Operation Choke Point is still another example of government overreach—of big government trying to dictate politically correct activities and punish those who don't abide by them.

To paraphrase Glen Reynolds: They told me that if I voted for Mitt Romney, the federal government would try to dictate our lives and morals in ways that many people might find objectionable. I guess they were right.