International Forecaster Weekly

How the Government Uses the Banks to Choke Off Legal Businesses

...entire classes of businesses, including perfectly legal businesses that were already operating under strict licensing laws and regulatory regimes, became pariahs, cut off from the backbone of the financial system.

James Corbett | October 22, 2016

Dear Consumer, Our biometric detection division has confirmed that you participated in the protests at last month's coronation of Hillary Clinton as Supreme Leader of the United States for Life. Your case was reviewed by our enforcement personnel and you were found guilty of unlawful dissent. As a result, all of your financial accounts have been closed, your carbon credit allowance has been frozen, and your consumer participation chip has been deactivated.



You have been downgraded from consumer to laborer. As such, you may proceed to the nearest Federal Emergency Management Agency labor camp to receive your work assignment. You will be provided a space in the dormitory and three meal credits per day.

All Hail the New United Nations, Praise Be to Secretary General Rothschild.

Sound like far-fetched science fiction fantasy? If only.

This is a letter from SunTrust Bank to Brian Lynn, a former Marine Corps officer and CEO of a payday lending company that had been operating 26 branches in Florida, Georgia and Alabama for over 20 years. In 2014 both Suntrust and Bank of America closed his companies deposit and account services with no warning or explanation.

"We received a letter from our bank of more than ten years, the Bank of America, back in June, telling us they were closing down the accounts we had for nine of our stores in the Jacksonville area," Lynn explained in a news story in 2015. "I thought there was some sort of mistake, so I contacted our local branch officers, and they were as baffled as I was. We had been a very good customer throughout our long relationship with Bank of America. They contacted their superiors in the corporate offices, but got no explanation. They were just told the decision was final."

On its own, a story like this might just be an anomaly. But it is not an isolated story. It's been happening to gun dealers, pawn shops, coin dealers and tobacconists, even porn stars all across America. Hundreds of completely legal, properly licensed, regulation-compliant businesses have been subject to this treatment for years.

So here's where it gets really creepy. All of these account closures are not just the spontaneous decision of the banks themselves; they are part of a legally dubious and outright Orwellian "Justice" Department program that the DOJ tried to keep from the public for years. Initially conceived as far back as 2011 and first revealed to the public in 2013, the ominously-named Operation Choke Point induced the FDIC to use its supervisory role over the banking industry to lean on banks and "encourage" them to drop clients in industries engaging in "high-risk activities." This inducement took the form of Memorandums of Understanding between the FDIC and FDIC-supervised banks prohibiting payment processing for targeted businesses or classifying loans to such businesses as "undesirable."

But a 2014 report from the Congressional Committee on Oversight and Government Reform showed that these "high-risk" industries covered not just patently illegal or evidently pernicious businesses (pyramid schemes, online gambling, debt consolidation scams), but completely lawful and regulated ones (coin dealers, firearms merchants, tobacconists).

The entire Congressional report and the various committee hearings that were held grilling FDIC and DOJ officials on the matter are worth perusing in their entirety, but Brian Wise of the US Consumer Coalition summarized the program in 2014:

"They didn't want this program to be released, as you mentioned, to the public at all. But most of these industries are industries that they've tried to legislate out of existence over the past 20 or 30 years. They haven't been able to do that

And so the Obama administration under the direction of Eric Holder at the Department of Justice has decided: 'We're going to come up with a creative way to go after these industries. We're going to find the one unifying factor that brings together all of these industries. And what is that? Everyone needs a bank. Everyone needs a payment processor. And so we're going to go to the banks, we're going to intimidate them into stopping their client relationships with all of these companies.'"

And so by executive decree entire classes of businesses, including perfectly legal businesses that were already operating under strict licensing laws and regulatory regimes, became pariahs, cut off from the backbone of the financial system and scrambling to find backups. In Brian Lynn's case, he was forced to apply for an account at 21 different banks before he found one that was willing to take him on as a customer. Other business operators that have come forward have shared similar experiences.

Now this particular story has a "happy ending" of sorts, or at least as much of a happy ending that you're likely to find in anything to do with the abuse of power by the US government. In January of 2015, just weeks after the Congressional report was released, the FDIC retreated on Choke Point, issuing new guidance that encouraged banks "to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers." Of course, that didn't stop the practice altogether. Instead, the "Consumer Financial Protection Bureau," the completely unaccountable bureaucratic nightmare brainchild of Elizabeth Warren, effectively took over the program later that year. In June of this year, the House passed the Commerce, Justice, Science, and Related Agencies Appropriations Act to effectively de-fund Operation Choke Point by prohibiting the Justice Department from using any funds to carry out the program. It remains to be seen whether this will actually quash the program, but at this point it seems likely that it will just continue under another name and through the auspices of a different agency.

But to concentrate solely on Operation Choke Point (or, as many on the right side of the phony left/right paradigm do, to concentrate solely on gun dealers) is to completely miss the point of how truly spine-chillingly Orwellian this program is. Because this program, right here, is a microcosmic instance of the macrocosmic problem: The (FDIC-compliant, Federal Reserve-regulated) banking system as it exists is nothing other than a centralized "choke point" at which the federal government (or any other "authority") can cut an uncooperative business or an inconvenient individual off from the financial system.

But don't take my word for it. Take the DOJ's own Financial Fraud Enforcement Task Force Executive Director's word for it:

"The reason that we are focused on financial institutions and payment processors is because they are the so-called bottlenecks, or choke-points, in the fraud committed by so many merchants that victimize consumers and launder their illegal proceeds. For example, third-party payment processors are frequently the means by which fraudulent merchants are able to get paid.[...]"

"Our prioritization of this issue is based on this principle: If we can eliminate the mass-marketing fraudsters’ access to the U.S. financial system -- that is, if we can stop the scammers from accessing consumers’ bank accounts -- then we can protect the consumers and starve the scammers. This will significantly reduce the frequency of and harm caused by this type of fraud. We hope to close the access to the banking system that mass marketing fraudsters enjoy -- effectively putting a chokehold on it -- and put a stop to this billion dollar problem that has harmed so many American consumers, including many of our senior citizens."

This was what Michael J. Bresnickat told a group of bank supervisors in 2013, shortly before Operation Choke Point was revealed to the public. But we now know this noble sounding program wasn't about stopping "scammers" or "fraud," it was about finding an extra-judicial way of cutting politically targeted (but completely legal) groups and businesses off from the financial system. And they did it.

But wait, it gets worse. Think about how much worse things will be in a cashless economy, like that proffered in the imaginary email at the beginning of this editorial. When all payments are electronic, there will be no way to interact in government-issued fiat without going through the financial system. At least at this point businesses can still resort to cash to skirt these types of non-legal, extra-judicial punishments, but in the future even that (admittedly small) window will be closed.

In the dream society of the technocrats, when the government (and the banksters that pupeteer them) want you off the grid it will require nothing more than a flick of the switch. And then you will be left begging for scraps...

If only there was a decentralized, community-based monetary system or trading system that didn't require interfacing with the federal banking system. Luckily, as we've discussed here many times, there are such alternatives! They already exist, and they don't require any official permission to make use of them.

So if you are in one of these targeted "high-risk" industries or feel your industry might become one of them in the near future, there's only one choice: Start getting off the banking grid now to whatever extent possible. Because you never know when the government is going to flip a switch and your back account is going to be gone.