The Biden administration looks set to revive a highly controversial Obama-era program that critics say was designed to punish legal, right-leaning businesses and others that were deemed unfavorable by Democrats.
The program, dubbed “Operation Choke Point” by then-Attorney General Eric Holder, was utilized mainly against gun sellers, short-term lenders, pawn shops and other businesses that were unpopular with the Obama administration.
But under President Donald Trump, the program was considered an unconstitutional infringement on otherwise legal business activity and declared “formally over” in 2017 by the Justice Department. And by the end of the former president’s term, the Office of the Comptroller of the Currency issued a “Fair Access” rule instructing large banks to provide financial services to businesses and individuals irrespective of political considerations.
However, the OCC under Biden announced Jan. 28 that it was suspending the Fair Access rule, ostensibly to “allow the next confirmed Comptroller of the Currency to review” it, leading some to speculate that the president may attempt to revive Operation Choke Point.
Under the Obama administration, the program required banks to “conduct risk assessments of individual customers, rather than make broad-based decisions affecting whole categories or classes of customers when providing access to services, capital, and credit.”
But in reality, federal regulators ordered banks to do just the opposite and “openly discriminate against entire industries the Obama administration found objectionable,” The Federalist reported.
By empowering regulators at the Federal Deposit Insurance Corp. and the Office of Comptroller, the Obama administration discovered it could block or otherwise hamstring entire business sectors that it disapproved of. The manner in which the rules were enforced made it nearly impossible for disfavored businesses to operate.
Obama administration officials claimed that the rules were not being used to cut off businesses, but at least one financial institution — SunTrust Bank — admitted to cutting off three types of businesses — “payday lenders, pawnshops and dedicated check-cashers” — which was in line with the then-administration’s political objectives.
Gun stores were especially targeted by the program.
“We’re being threatened with a regulatory regime that attempts to foist on us the obligation to monitor all types of transactions, predicated on the notion that the banks are a choke point for all businesses,” American Bankers Association Senior Vice President Richard Riese said in May 2014.
In addition to having accounts dropped, gun stores also had credit lines limited or cut, and their assets frozen.
“We are one of the most heavily regulated industries in America,” Joe Sirochman of American Spirit Arms in Scottsdale, Ariz., said after Bank of America canceled his account.
“We have to ship our guns to another federal licensed dealer for pickup. The people who pick up the rifles have to go through a background check to make sure they don’t have any felonies. You can’t own a gun or pass the background check if you do,” he added.
“This administration has very clearly told the banking industry which customers they feel represent ‘reputational risk’ to do business with, so financial institutions are reacting to this extraordinary enforcement arsenal by being ultra-conservative,” attorney Peter Weinstock, who was representing a number of firearms dealers, told the Washington Times.
After President Trump was elected, House Republicans sent a letter asking him to get rid of Operation Choke Point.
“Operation Choke Point was an Obama Administration initiative that destroyed legitimate businesses to which that Administration was ideologically opposed (e.g., firearms dealers) by intimidating financial institutions into denying banking services to those businesses,” they wrote.
“Financial institutions should be given explicit assurance that they may serve these unfairly targeted industries just like any other legitimate businesses,” the letter noted. “Institutions should also be encouraged to restore long-standing relationships with lawful, targeted industries.”
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