Tuesday, December 9, 2014

Operation Choke Point

You may be aware that the FDIC has been using its regulatory authority over banks to "encourage" them to not provide banking services to what it considers high-risk businesses.  In some cases, businesses have suddenly had their checking accounts closed by their bank.  What are the high-risk businesses?  Some won't surprise you: pornographers, cable-TV box descramblers, online gambling, and businesses that promise to clean up your credit history for a fee (Yes, that means Rachel at Cardholder Services).  Many of these are actually in violation of federal and state laws.  But it also includes gun sales, ammunition sales, dealers in gold, and payday advance loan operations, all of which are lawful.  This report from the U.S. House Commitee on Oversight and Governmental Reform includes a very large stack of really embarrassing emails from the bureaucrats involved in creating Operation Choke Point, justifying why to include legal and heavily regulated  industries in a list of businesses that banks were supposed to stop doing business with.

What amazes me is the venom being expressed about these businesses.  In particular Thomas J. Dujenski, regional director, Atlanta, FDIC writes about pay day lenders: "They are  abusive.  They are fundamentally wrong, hurt people, and do not deserve in any way to  be associated with banking."  Now, I  find the whole pay day lending industry disturbing.  It is a sign that someone is probably living beyond their means, and needs to bring their spending under control, much like carrying a large credit card balance from month to month.  But no one forces customers into pay day lenders.  I can see why progressives would be offended by such businesses; they are a reminder of the lack of self-discipline the progressive voting block has: unable to stop partying long enough to join the middle class.  Dujenski's tone immediately makes me think Jesuit.

7 comments:

Jim said...

Thankfully, I don't require the services of pay-day lenders but they provide a valuable service to some. For example, if you're about to have your electricity turned off or need quick cash to avoid an overdraft charge for example, there is no other place for that sort of service. Even though the interest in astronomical (expressed in annual terms), the interest for a few days could be much less than the overdraft charge or restarting the power, not to mention the potential hit to one's credit rating.

Clayton Cramer said...

Agreed. Some alternatives are worse than a few days of usury.

Jeff Dege said...

Maybe it's just me, but my outrage is that these people seem to think that their personal outrage over a business model should influence the way they carry out their professional responsibilities.

Does no one teach ethics, anymore?

Clayton Cramer said...

Ethics only matter if they advance the revolution.

John Cunningham said...

These apparatchiki have plenty of ethics, the ethics of the Party. they hate profit-making businesses, and want to regulate them out of existence. Success is this will be cause for rejoicing to them.

keathwarlick said...

Isn't the Federal Reserve the payday lender for the living-beyond-its-means state? The irony of government nannyism...

StormCchaser said...

The outrage doesn't surprise me. A lot of liberals are utterly blind to cause and effect, preferring blind moralizing as a way to choose action and decide between good and evil.