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Operation Choke Point

bernorange

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bernorange

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 Operation Choke Point was an initiative of the United States Department of Justice beginning in 2013[1] which investigated banks in the United States and the business they did with firearm dealers, payday lenders, and other companies believed to be at a high risk for fraud and money laundering.

This operation, disclosed in an August 2013 Wall Street Journal story,[2] was officially ended in August 2017,[3] and the FDIC settled multiple lawsuits by promising to Congress additional training for its examiners and to cease issuing "informal" and "unwritten suggestions" to banks.
Details

Some merchant categories that the Federal Deposit Insurance Corporation (FDIC) had listed until July 2014 as being associated with high-risk activity include (until the FDIC revised the original policy in July 2014):[4]

    ammunition sales
    ATM operators
    cable box de-scramblers
    coin dealers
    credit card schemes
    credit repair services
    dating services
    debt consolidation scams
    drug paraphernalia
    escort services
    firearms sales
    fireworks sales
    get rich products
    government grants
    home-based charities
    lifetime guarantees
    lifetime memberships
    lottery sales
    mailing lists/personal info
    money transfer networks
    online gambling
    pawn shops
    payday loans
    pharmaceutical sales
    Ponzi schemes
    pornography[5]
    pyramid-type sales
    racist materials
    surveillance equipment
    telemarketing
    tobacco sales
    travel clubs

Results

In April 2014, Four Oaks Bank settled with the Department of Justice for engaging in the types of activities that Operation Choke Point was intended to stop. According to the complaint (dated January 8, 2014): "As of today, approximately 97 percent of TPPP-TX's merchants for which Four Oaks Bank permits debits to consumers' accounts are Internet payday lenders. A payday loan typically is a short-term, high interest loan that is not secured (made without collateral) and that has a repayment date coinciding with or close to the borrower's next payday. Most payday loans are for $250 to $700. Annualized interest rates for Internet payday loans frequently range from 400 percent to 1,800 percent or more – far in excess of most states' usury laws."[6]

On April 17, 2014, Kevin Wack of American Banker reported that Fifth Third Bank and Capital One had terminated their accounts with payday lenders amid alleged increased scrutiny by federal regulators. Wack notes that "in a recent submission to a congressional committee, the Financial Service Centers of America, a trade group that represents check cashers and payday lenders, listed several banks that it says have terminated their relationships with at least one of its member companies in recent months. Besides Capital One and Fifth Third, banks on the list include Bank of America, PNC Financial Services Group, Wells Fargo and U.S. Bancorp."[7]

The Financial Service Centers of America (a trade group that represents payday lenders and other consumer businesses) recently commissioned a survey of its members about bank discontinuance. The survey, conducted by Deloitte Financial Advisory Services, found that "14 of the 61 banking relationships reported by survey participants have been terminated since November 2013."[7][8]

On March 10, 2015, the U.S. Department of Justice announced a civil and criminal settlement with Commerce West Bank, located in Irvine, California for its role in facilitating a third party processor's millions of dollars worth of unauthorized debits from consumer bank accounts. From the Dept. of Justice press release:

    These merchants included a fraudulent telemarketing company and a company that charged hundreds of thousands of victims for a payday loan referral fee they had never authorized. ... Commerce West also received complaints and inquiries from other banks, which expressed their belief that their Internet transactions were fraudulent. ... Even in the face of these explicit warnings from other banks, Commerce West did not terminate their Internet transactions or file a Suspicious Activity Report, an alert banks are required to file with the government indicating the presence of suspicious illegal activity.[9][10]

Reaction

Frank Keating of the American Bankers Association complained that Choke Point was "asking banks to identify customers" who are "simply doing something government officials don't like. Banks then "choke off' those customers' access to financial services, shutting down their accounts."[11]

In August 2014, U.S. Representative Blaine Luetkemeyer introduced a bill that would limit law enforcement's ability to restrict access to the banking system as a response against Operation Choke Point.[12]

On April 8, 2014, the House Financial Services Committee held a hearing with the general counsels of the federal banking agencies regarding, among other things, Operation Choke Point. Committee members from both parties argued that Operation Choke Point was hurting lawful non-bank financial service providers by pressuring to eliminate access to the banking system and, in turn, the businesses were unable to offer services to constituents. The FDIC's Richard Osterman repeatedly asserted that Operation Choke Point is a Justice Department operation and the FDIC's participation was limited to providing information and guidance upon request. Mr. Osterman also asserted that the FDIC was not attempting to prohibit banks from offering products or services to non-bank financial service providers operating within the law. Similarly, Amy Friend, of the Office of the Comptroller of the Currency (OCC), stated that the OCC wants to ensure that banks conduct "due diligence and implement appropriate controls", but that the OCC is not prohibiting banks from offering services to lawful businesses.[13][14]
Criticism

Critics of the operation accused it of bypassing due process arguing that the government was pressuring the financial industry to cut off companies' access to banking services including access to capital, without first having shown that the targeted companies are violating the law.[15][16][17][18][19] Critics also argued that it was "thinly veiled ideological attack on industries the Obama administration doesn't like, such as gun sellers and coal producers."[20]

On May 29, 2014, the U.S. House of Representatives Committee on Oversight and Government Reform published a highly critical staff report that concluded:[21]

    Forceful prosecution of those who defraud American consumers is both responsible and admirable. However, Department of Justice initiatives to combat mass-market consumer fraud must be legitimate exercises of the Department's legal authorities, and must be executed in a manner that does not unfairly harm legitimate merchants and individuals. Operation Choke Point fails both these requirements. The Department's radical reinterpretation of what constitutes an actionable violation under § 951 of FIRREA fundamentally distorts Congress' intent in enacting the law, and inappropriately demands that bankers act as the moral arbiters and policemen of the commercial world. In light of the Department's obligation to act within the bounds of the law, and its avowed commitment not to "discourage or inhibit" the lawful conduct of honest merchants, it is necessary to disavow and dismantle Operation Choke Point.

On November 21, 2014, William Isaac, the former Chairman of the FDIC from 1981 to 1985, wrote a scathing opinion piece in The Wall Street Journal entitled "Don't Like an Industry? Send a Message to Its Bankers: With Operation Choke Point, the Justice Department's targets have included vendors of firearms and fireworks" stating that he believed that the agency acted in bad faith.[22]

On March 24, 2015, a hearing was held before the Subcommittee on Oversight and Investigations of the House Financial Services Committee. Subcommittee chair Sean P. Duffy said at the outset, "I fear that activists at the DOJ and the FDIC are abusing their power and authority and are going after legal businesses and, in effect, they are weaponizing government to meet their ideological beliefs."[23]

In 2018, Tho Bishop of the Ludwig von Mises Institute published an article noting the strong objections of Native American leaders to Choke Point, due to claims that its effects could be economically devastating to tribal payday loan businesses. Bishop characterized CFPB head Elizabeth Warren's defense of Choke Point as heavy-handed and furthermore as "ideological imperialism" when applied to sovereign tribal territory.[24]

Operation Choke Point has been accused of being harmful to sex workers. Many sex workers have reported having their accounts shut down after years of having accounts. This led to significant financial hardship and is considered a form of discrimination.[25][26]
Federal investigations

The FDIC and the Department of Justice (DOJ) have launched investigations into the operation.[20]

The FDIC's inspector general, Fred Gibson, said he would review the conduct of agency personnel to find if the "actions and policies of the FDIC were consistent with applicable laws, regulations and policy", as well as the regulator's mission.[27] Gibson said he would investigate allegations that FDIC General Counsel Richard Osterman provided false testimony to Congress earlier this year when discussing his organization's activities.[27] Osterman was testifying to the House of Representatives member when he rejected assertions that the FDIC wanted to cut off legitimate businesses' use of the financial system.[27]
Conclusion

On January 29, 2015, the FDIC issued a Financial Institution Letter that states "The Federal Deposit Insurance Corporation (FDIC) issued a Financial Institution Letter today encouraging supervised institutions to take a risk-based approach in assessing individual customer relationships, rather than declining to provide banking services to entire categories of customers without regard to the risks presented by an individual customer or the financial institution's ability to manage the risk."[28]

The Washington Times says this letter "effectively ends Operation Choke Point."[28][29] As reported by Forbes, "a change in the political landscape, many businesses threatening legal action and a congressman with a background in banking [forced] the bureaucracy to admit to misconduct and to stop financial attacks on legal businesses that the Obama administration deems to be politically incorrect."[30] Reports of continued termination of services to legitimate businesses, however, continue.[31]

On August 17, 2017, the U.S. Department of Justice, under the Trump Administration, announced that the Obama Administration's Operation Choke Point would officially end, stating that it was hurting legitimate businesses instead of preventing fraud as intended.[3]
FDIC retraining, new limitations on its personnel, and lawsuit settlement

On 15 November 2018, the FDIC promised to Congress "limitations on the ability of FDIC personnel to terminate account relationships." These would now be made only in writing, and if made, reported to the FDIC Board of Directors. "Informal", "unwritten suggestions" would no longer be allowed. "Additional training" was promised for FDIC examiners.[32] These promises were then used as a basis to settle lawsuits against the FDIC.[33][34][35]

https://en.wikipedia.org/wiki/Operation_Choke_Point

Operation Choke Point is a weapon used by the Executive Branch to debank any industry they don't like.  It's antithetical to the American ethos.  And it's going to get much, much worse when we move into the new world order of CBDCs (central bank digital currencies).  The wiki page above talks about Operation Choke Point in the past tense as if it's a done deal, but Federal regulators are working hard right now to debank crypto markets in the USA.  The Eye of Sauron lives on.

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Amid the worst banking crisis since 2008, four Republicans in the U.S. Senate, led by Senator Bill Hagerty (R-TN), have written a letter to the heads of several federal banking regulatory agencies asking them to explain the coordinated effort to crack down on crypto-related banking providers in recent months.

The letter was addressed to Federal Reserve Chair Jerome Powell, Federal Deposit Insurance Corporation (FDIC) Chair Marty Gruenberg, and Office of the Comptroller of the Currency (OCC) Chair Michael Hsu, seeking further insights into recent statements made by the banking regulators that have called for heightened supervision of crypto-related activities.

“These releases have caused banks to reevaluate their decision to provide banking services to the crypto sector, resulting in crypto firms’ bank accounts being unexpectedly closed,” the Senators wrote. “This coordinated behavior seems disturbingly reminiscent of Operation Choke Point… an Obama Administration initiative where federal regulators applied pressure on financial institutions to cut off financial services to certain licensed, legally operating industries simply because certain regulators and policymakers disfavored those industries.”

The result of an investigation into Operation Choke Point found that businesses were illegally targeted by government officials, and the FDIC was forced to take steps to clarify that banks are allowed to provide services to legal businesses and provide enhanced training to its examiners.

“Unfortunately, nearly four years after the enhanced training, banking regulators seem to be reverting to old practices,” the letter said. “Even if the actions towards the crypto economy emanate from different regulatory concerns – it appears that the desired outcome from the banking regulators is similar to that of Operation Choke Point – the de-banking of the crypto industry in America.”
...

https://www.kitco.com/news/2023-03-10/Senators-say-regulators-are-de-banking-the-crypto-sector-in-America.html

Letter:
https://www.hagerty.senate.gov/wp-content/uploads/2023/03/Hagerty-Chokepoint-Letter-FINAL.pdf

Quote

...
On Tuesday, Tom Emmer, Majority Whip of the U.S. House of Representatives, sent a letter to Federal Deposit Insurance Corporation (FDIC) chair Martin Gruenberg, calling on the FDIC head to answer the question as to whether the agency has specifically instructed banks not to provide services to crypto firms.

“Recent reports indicate that Federal financial regulators have effectively weaponized their authorities over the last several months to purge legal digital asset entities and opportunities from the United States,” Emmer wrote.

The representative cited the recent comments from former House Financial Services Committee chair Barney Frank, co-author of the Dodd-Frank Act, who said during an interview on Monday that the targeted nature of these regulatory efforts is meant to send the message that crypto is toxic and should be avoided.

“If this is the case, these actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer wrote.

Emmer’s letter mentioned the joint statement released by the Fed, FDIC and the Office of the Comptroller of the Currency in January that discouraged banks from holding crypto or serving crypto clients, the Feds public statement issued in February that “seemingly turned this perspective into a final” without a public comment period and the Biden Administration’s “Roadmap to Mitigate Cryptocurrenices’s Risks” as further evidence of a coordinated effort to malign the industry.

“In under a week, regulatory statement-driven market fear drove mass withdrawals at the few remaining banks that provide legal crypto firms access to financial services,” Emmer said. “The Administration’s demonstrated effort to choke off digital assets from the United States financial system is a lazy and destructive regulatory strategy that is stagnating innovation and subjecting American users of digital assets to less sophisticated regulatory jurisdictions.”

Emmer added that while Congress is focused on working across the aisle to develop nonpartisan legislative solutions for the crypto community, “Reports indicate that this Administration may be driven by a political agenda that has already harmed everyday Americans.”

The Congressman has called on the FDIC to officially answer whether it has instructed banks under its supervision to not provide crypto firms banking services, and if so, to explain the analysis for this instruction and “the goal of the instruction if not to discourage banks from servicing digital asset clients.”

Emmer also wants the FDIC to indicate whether it has explicitly or implicitly communicated with any banks that “their supervision will be more onerous in any way if they take on new (or maintain existing) digital asset clients.”
...
Emmer is calling on Gruenberg and the FDIC to answer these questions no later than 5:00 p.m. on March 24.
...

https://www.kitco.com/news/2023-03-15/Rep-Emmer-accuses-the-U-S-government-of-colluding-to-cut-off-crypto-from-the-banking-industry.html

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WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank, National Association, by Flagstar Bank, National Association, Hicksville, New York, a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, New York.

The 40 former branches of Signature Bank will operate under New York Community Bancorp's Flagstar Bank, N.A., on Monday, March 20, 2023. The branches will open during their normal business hours. Customers of Signature Bridge Bank, N.A., should continue to use their current branch until they receive notice from the assuming institution that full-service banking is available at branches of Flagstar Bank, N.A.

Depositors of Signature Bridge Bank, N.A., other than depositors related to the digital banking business, will automatically become depositors of the assuming institution. All deposits assumed by Flagstar Bank, N.A., will continue to be insured by the FDIC up to the insurance limit. Flagstar Bank's bid did not include approximately $4 billion of deposits related to the former Signature Bank's digital banking business. The FDIC will provide these deposits directly to customers whose accounts are associated with the digital banking business. Questions may be directed to (866) 744-5463.
...

https://www.fdic.gov/news/press-releases/2023/pr23021.html

FDIC has split off and debanked Signature's crypto clients. Operation Choke Point is in full effect.  Even the WSJ has noticed...

Quote

Barney Frank Was Right About Signature Bank

The FDIC all but confirms it closed the bank over crypto.

We never thought we’d write that headline. But on Sunday the Federal Deposit Insurance Corp. announced that New York Community Bancorp’s Flagstar Bank will assume all of Signature Bank’s cash deposits except for those of crypto companies. This confirms Mr. Frank’s suspicions—and ours—that Signature’s seizure was motivated by regulators’ hostility toward crypto.
...

https://www.wsj.com/articles/signature-bank-new-york-community-bancorp-flagstar-bank-crypto-barney-frank-fdic-9b825e2e?st=7evtxstxygcgs0w

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Mullet Free

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4 hours ago, bernorange said:

https://en.wikipedia.org/wiki/Operation_Choke_Point

Operation Choke Point is a weapon used by the Executive Branch to debank any industry they don't like.  It's antithetical to the American ethos.  And it's going to get much, much worse when we move into the new world order of CBDCs (central bank digital currencies).  The wiki page above talks about Operation Choke Point in the past tense as if it's a done deal, but Federal regulators are working hard right now to debank crypto markets in the USA.  The Eye of Sauron lives on.

https://www.kitco.com/news/2023-03-10/Senators-say-regulators-are-de-banking-the-crypto-sector-in-America.html

Letter:
https://www.hagerty.senate.gov/wp-content/uploads/2023/03/Hagerty-Chokepoint-Letter-FINAL.pdf

https://www.kitco.com/news/2023-03-15/Rep-Emmer-accuses-the-U-S-government-of-colluding-to-cut-off-crypto-from-the-banking-industry.html

https://www.fdic.gov/news/press-releases/2023/pr23021.html

FDIC has split off and debanked Signature's crypto clients. Operation Choke Point is in full effect.  Even the WSJ has noticed...

https://www.wsj.com/articles/signature-bank-new-york-community-bancorp-flagstar-bank-crypto-barney-frank-fdic-9b825e2e?st=7evtxstxygcgs0w

Same FDIC commissioner presided/ing over both. 

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bernorange

bernorange 8340

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The Eye of Sauron isn't a Republican or Dem issue.  That's just the lens you choose to see it with Wildcat09. 

The architecture of financial armageddon might one day target an industry (or many for that matter) that you care about.  The financial system should not be a tool for the Executive Branch to effect political persecution. 

I guess folks won't care about this until CBDCs have replaced the existing system and the debanking folks or the threat of it to coerce behavior becomes trivial.

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wildcat09

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16 minutes ago, bernorange said:

The Eye of Sauron isn't a Republican or Dem issue.  That's just the lens you choose to see it with Wildcat09. 

 

And yet all of your bitching is about opposing shit Democrats to do keep scum like payday lenders and crypto fraudsters from defrauding and stealing from ordinary people and your criticisms of Democratic efforts to do so always quotes GOP freaks.

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bernorange

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Fraud should be defined by statute and policed accordingly.  Entire industries should not be nuked because of the actions of a few bad actors or because POTUS wants to persecute them.

Fret not.  I'm sure some asshat Republican will win the White House in the future and enjoy this new power the Dems have built and target industries on their shit list (dispensaries, abortion clinics, etc.).  I'll still be bitching about it then if I'm still around.

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Damn the federal government, trying to debank (checks notes)….

Credit card scammers, payday loan fraudsters, Ponzi scheme operators, government grant scammers, debt consolidation scammers, pimps, and pyramid scheme. Why, you can’t even do a little bit of mail and wire fraud or steal tax dollars without the FDIC getting up in your business.

At least half of the list in that article is just outright criminal behavior. 

In all seriousness, the sheer amount of daily scam attempts the average American faces is staggering. Unlike anything in history. From extended warranties to precious metal scams to straight fraud and phishing. It’s something the government could do something about, but chooses not to because the gray area between criminal fraud and legal scammery is too blurry for comfort for our large donor class. 
 

I would argue that the constant— multiple times daily— amount of attempted scams drives more division and breakdown of social trust than Fox News or Rush could dream of. People really are trying to screw you over all the time and that’s no way to have a society that can do shit. 

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By the way, if you’re looking for some outrage material, here it is:

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Wack notes that "in a recent submission to a congressionalcommittee, the Financial Service Centers of America, a trade group that represents check cashers and payday lenders, listed several banks that it says have terminated their relationships 

We live in a country where payday lenders and check cashers have a lobbyist group and our reps answer their calls. These people are scum, they’re predatory, they provide no redeemable value whatsoever and every red cent they “earn” makes life worse for the rest of us. 
 

Even if you’re a Lew Rockwell-addled libertarian fringe case and want to defend their right to do this, you should recognize that they are scum and ought to be social pariahs along the lines of used panty brokers or whoever puts fake Spanish fly in truck stop toilet vending machines. 

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wildcat09

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2 hours ago, TwiceHorn said:

I tend to agree with bernorange.  Although I agree that many of their targets are worthy of being targeted, that doesn't justify this.

It's executive overreach.  And yeah, it can be abused the other way, too.  

In something resembling a well functioning country, I'd probably agree with you that it looks like overreach we should be concerned about. Here? Now? Absolutely fucking not. Would I prefer that Congress do more to target these scum? Of course. Do I think there's a chance in hell of a Republican House passing anything that would? Or if the Dems retook the House in 24, that Republican senators wouldn't filibuster any attempt by Dems to do so (and in such case, that the Dems would have the balls to eliminate the filibuster)? Of course not.

We are so fucking far from any scenario where I might feel the need to be remotely worried about crypto scammers or payday loan leeches. We've got tens of millions of people who aren't cartoonishly evil who are in immediate danger in America from all sorts of Republican bullshit that Bern would absolutely support if his vote made a difference and his choice was to save trans lives or save payday loan companies. Shit is so much worse for so many good people right now that "oh no, what about the slippery slope of going after payday lenders charging 2,000%!?" shouldn't be in the top million of your political concerns right now. And no, I'm not worried about the "well if we do it they can do it too!" They've been doing it. Fascists don't need precedent.

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bernorange

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From the .PDF:

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Cooper & Kirk

Operation Choke Point 2.0: The Federal Bank Regulators Come For Crypto
...
Executive Summary

Recent stories in the financial press have uncovered a coordinated campaign by prudential bank regulators to drive crypto businesses out of the financial system. Bank regulators have published informal guidance documents that single out cryptocurrency and cryptocurrency customers as a risk to the banking system. Businesses in the cryptocurrency marketplace are losing their bank accounts, or their access to the ACH network, suddenly, and with no explanation from their bankers. The owners and employees of cryptocurrency firms are even having their personal accounts closed without explanation. And over the past two weeks, federal regulators have shut down a solvent bank that was known to be serving the crypto industry and, although it is required to resolve banks through the “least cost resolution” to the Deposit Insurance Fund, the FDIC chose to shutter rather than sell the part of the bank that serves digital asset customers, costing the Fund billions of dollars.

This pattern of events is not random, and we have seen it before. This is not the first time that federal bank regulators, working with their State-level counterparts, have abused their supervisory authority to label businesses unworthy of having a bank account and worked in secret to purge disfavored lines of commerce from the financial system. Beginning in 2012, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System carried out a coordinated campaign to weaponize the banks against industries that had fallen out of favor with the administration—including gun stores, pawn shops, tobacco stores, payday lenders, and a host of other brick and mortar businesses. That campaign was called Operation Choke Point.

Our firm successfully challenged Operation Choke Point, and it was brought to a halt. The current bout of regulatory overreach against the crypto industry is illegal for much the same as reason as its predecessor. Specifically:

• Operation Choke Point 2.0 deprives business of their constitutional rights to due process in violation of the Fifth Amendment. It is well settled that when a federal agency attaches a derogatory label to an individual or business, and this stigmatizing label causes the business to lose a bank account or broadly precludes them from the pursuit of their chosen trade, the agency has violated the Due Process Clause of the Fifth Amendment, unless if first afforded the individual or business a right to be heard. This is precisely what the federal bank regulators responsible for Operation Choke Point 2.0 have done and continue to do by labeling crypto businesses a threat to the financial system, a source of fraud and misinformation, and a risk to bank liquidity.

• Operation Choke Point 2.0 violates both the non-delegation doctrine and the anticommandeering doctrine, depriving Americans of key structural constitutional protections against the arbitrary exercise of governmental power.

• By leveraging their authority over the banks to acquire the power to pick and choose the customers whom the banks may serve, the bank regulators have exceeded their statutory authority. The bank regulators are charged with supervising the safety and soundness of the banks; their effort to anoint themselves the gatekeepers of the financial system and the ultimate arbiters of American innovation and American economic life cannot be permitted to stand.

• The federal bank regulators are also refusing to perform their non-discretionary duties when doing so will benefit the cryptocurrency industry. State banks that are statutorily entitled to access the federal reserve system are being denied their rights solely because they serve the crypto industry. The federal bank regulators are not free to pick and choose which statutory obligations they duties they wish to perform.

• The federal bank regulators are evading the notice and comment rulemaking requirements of the administrative procedure act by imposing binding requirements on the banking industry through informal guidance documents. This is undemocratic, since it deprives the public of the right to comment on proposed rules, and it also runs contrary to the principle of judicial review, since courts lack the power to review “informal” agency actions.

• Finally, the federal bank regulators are acting in an arbitrary and capricious fashion by failing to adequately explain their decisions, by failing to engage in reasoned decisionmaking, and by failing to treat like cases alike. It is difficult to imagine a more arbitrary and capricious agency action than simultaneously placing a solvent bank into receivership solely because it provided financial services to the crypto industry, while permitting insolvent institutions not tied to the crypto industry to continue operating.

We therefore urge Congress to perform its oversight role and hold these agencies to account. In section IV of this paper, we propose a series of questions that need to be answered— and a series steps that Congress should take in an effort to obtain those answers.

• First, Congress should require the bank regulators to produce their communications with supervised financial institutions and state regulatory agencies regarding the denial or regulation of access to the financial system by crypto businesses and banks that serve the crypto industry.

• Second, Congress should require the federal bank regulatory agencies to explain the basis for their conclusion that the safety and soundness of the financial system require the insulation of the banks from blockchain technology, from customers who operate in the crypto space, and from state-chartered depository institutions that are currently serving those customers.

• Third, Congress should make clear to the federal bank regulators, and all federal agencies, that the notice and comment rulemaking requirements of the Administrative Procedure Act are not optional. The requirements imposed by the APA are not obstacles to be evaded by the use of informal guidance documents.

• Fourth, Congress should investigate the role of federal regulators in the decision by the New York Department of Financial Supervision’s decision to shutter Signature Bank. Congress should also determine the FDIC’s role in excluding bidders who wished to acquire Signature’s digital asset businesses from the bidding process.

• Fifth, Congress should investigate whether bank regulators are acting to squelch private sector innovation in order to clear the field of competition for the benefit of existing federally regulated banks or for a federal cryptocurrency alternative. The persistent unwillingness of the nation’s bank regulators to follow the law and obey the Constitution calls out for Congressional action. Cracks are starting to form in the American financial system as its regulators increasingly abuse their power to achieve aims outside their authority and beyond their competence.
...

 

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Neonmoon

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Crypto is a scam. It provides no value other than pump and dump, or hiding money from the government. Yes, the big bad government stopping scammers, payday lenders, fraud, money laundering is a good thing. 

You two should have your own dedicated thread called Anti-Fed, Crypto, Goldbugs, & Batshit Crazy instead of the 8 threads currently spread across different forums 

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bernorange

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Don't cancel me bro.

Scammers - folks who violate the law - should be prosecuted.  SBF will get what he deserves.  Legal industries should not get debanked at the whim of the Executive branch no matter how much you consider them to be poopyheads.

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2 minutes ago, bernorange said:

Legal industries

Crypto is currently legal. It is also a scam, a way for nefarious actors to hide money for illegal activity, and manna for anti-Fed bugs. The government should protect citizens from scams and go after illegal activities. 

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Mullet Free

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1 hour ago, bernorange said:

From the .PDF:

 

It’s all right there. 
 

51 minutes ago, Neonmoon said:

Crypto is a scam. It provides no value other than pump and dump, or hiding money from the government. Yes, the big bad government stopping scammers, payday lenders, fraud, money laundering is a good thing. 

You two should have your own dedicated thread called Anti-Fed, Crypto, Goldbugs, & Batshit Crazy instead of the 8 threads currently spread across different forums 

Your position is thus. The government is doing illegal and undemocratic (shriek!) things, but I like those things so I will defend them. 

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Mullet Free

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43 minutes ago, Neonmoon said:

Crypto is currently legal. It is also a scam, a way for nefarious actors to hide money for illegal activity, and manna for anti-Fed bugs. The government should protect citizens from scams and go after illegal activities. 

Unelected, faceless bureaucrats illegally punishing people you don’t like is manna to statists. 

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Neonmoon

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1 hour ago, Mullet Free said:

It’s all right there. 
 

Your position is thus. The government is doing illegal and undemocratic (shriek!) things, but I like those things so I will defend them. 

What is the government doing that is illegal and how is it undemocratic?

54 minutes ago, bernorange said:

IIRC, Neon once professed in these forums to have a libertarian political bias, but lately he is an advocate for authoritarian lambasting of things he doesn't like.  He's found a censorship hat that fits him and he likes it.

I was once young and naïve (stupid). Shockingly there are many others, including myself, that once bought the "fiscally conservative" trope. People have the ability to learn. 

46 minutes ago, Mullet Free said:

Unelected, faceless bureaucrats illegally punishing people you don’t like is manna to statists. 

Which unelected faceless bureaucrats are you referring to?

The ones that are appointed and confirmed by elected officials? 

 

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Neonmoon

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24 minutes ago, Mullet Free said:


 

JFC. Do you actually ever read the fucking articles you post?

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In fact, “There weren’t that many people involved and the economic repercussions were pretty minor,” Goldgar says. “I couldn’t find anybody that went bankrupt. If there had been really a wholesale destruction of the economy as the myth suggests, that would’ve been a much harder thing to face.”

That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis—but only because it undermined social expectations.

I don't think anyone who references the Tulip bubble gives a shit if it collapsed the economy or not back then, they're referencing something that has little value being overvalued due to hype. 

 

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Mullet Free

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6 hours ago, Neonmoon said:

What is the government doing that is illegal and how is it undemocratic?

It’s all in Bern’s spoilered post. But off the top,

9 hours ago, bernorange said:

Our firm successfully challenged Operation Choke Point, and it was brought to a halt. The current bout of regulatory overreach against the crypto industry is illegal for much the same as reason as its predecessor. Specifically:

• Operation Choke Point 2.0 deprives business of their constitutional rights to due process in violation of the Fifth Amendment. It is well settled that when a federal agency attaches a derogatory label to an individual or business, and this stigmatizing label causes the business to lose a bank account or broadly precludes them from the pursuit of their chosen trade, the agency has violated the Due Process Clause of the Fifth Amendment, unless if first afforded the individual or business a right to be heard. This is precisely what the federal bank regulators responsible for Operation Choke Point 2.0 have done and continue to do by labeling crypto businesses a threat to the financial system, a source of fraud and misinformation, and a risk to bank liquidity.

 

6 hours ago, Neonmoon said:

JFC. Do you actually ever read the fucking articles you post?

Always.
 

There was never a tulip fever, especially not to the extent that was cited by another poster in Extraordinary Popular Delusions and the Madness of Crowds. Then the historian quoted by the Smithsonian directly refutes that specific account. Seemed noteworthy. 

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nbmishoid

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On 3/21/2023 at 2:15 PM, 956 Worldwide said:

Damn the federal government, trying to debank (checks notes)….

Credit card scammers, payday loan fraudsters, Ponzi scheme operators, government grant scammers, debt consolidation scammers, pimps, and pyramid scheme. Why, you can’t even do a little bit of mail and wire fraud or steal tax dollars without the FDIC getting up in your business.

At least half of the list in that article is just outright criminal behavior. 

In all seriousness, the sheer amount of daily scam attempts the average American faces is staggering. Unlike anything in history. From extended warranties to precious metal scams to straight fraud and phishing. It’s something the government could do something about, but chooses not to because the gray area between criminal fraud and legal scammery is too blurry for comfort for our large donor class. 
 

I would argue that the constant— multiple times daily— amount of attempted scams drives more division and breakdown of social trust than Fox News or Rush could dream of. People really are trying to screw you over all the time and that’s no way to have a society that can do shit. 

But, we really must leave it to the legal system alone. It’s the best we’ve got, better than the rest.  Doesn’t work, but, whatever.

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Neonmoon

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1 hour ago, Mullet Free said:

It’s all in Bern’s spoilered post. But off the top,

 

Always.
 

There was never a tulip fever, especially not to the extent that was cited by another poster in Extraordinary Popular Delusions and the Madness of Crowds. Then the historian quoted by the Smithsonian directly refutes that specific account. Seemed noteworthy. 

Bern’s “evidence” was a wikepedia article that talked about some criticism, a bunch of goldbug websites links, and a letter from 4 bought Republicans cocksuckers that cited a Payday Lender Lobbyist opinion article about how Operation Choke Point was mean to his predatory business or for stopping money laundering. 

And a WSJ article that said Flagstar didn’t bid on the crypto assets. Probably because they don’t think magic beans have any real value 

And if you actually read the Smithsonian article, or the part I quoted, you would realize that a bunch of idiots did pay outrageous prices for a fucking tulip, something that has no value, like crypto. 

There is no conspiracy against crypto. But I can’t wait for the continuous threads and links from you kooks as you chase windmills forever 

 

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wildcat09

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You're wrong. Tulips do have value. They're real and some people find them to be pretty and like having them around (like many other kids of flowers).  That doesn't make them THAT valuable, but they have a use that people like so they do have value.

Crypto's only real use is money laundering. It's also a speculative asset, but its value as a speculative asset is entirely built on a lie that is necessary to persuade someone else to buy it from you; it's not connected to something inherent in a unit of Bitcoin.  So the only actual use for crypto (insofar as it's actually more useful for something than already existing alternatives) is money laundering, which isn't something too many people consider to be a good thing.

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Mullet Free

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11 minutes ago, wildcat09 said:

You're wrong. Tulips do have value. They're real and some people find them to be pretty and like having them around (like many other kids of flowers).  That doesn't make them THAT valuable, but they have a use that people like so they do have value.

Crypto's only real use is money laundering. It's also a speculative asset, but its value as a speculative asset is entirely built on a lie that is necessary to persuade someone else to buy it from you; it's not connected to something inherent in a unit of Bitcoin.  So the only actual use for crypto (insofar as it's actually more useful for something than already existing alternatives) is money laundering, which isn't something too many people consider to be a good thing.

The only use for cash today is money laundering and tax evasion. Should we get rid of it?

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Mullet Free

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3 minutes ago, wildcat09 said:

No, cash can also be used to purchase things much more quickly than crypto can be. 

Cash is used for wayyyyyyy more money laundering and tax evasion than crypto. It also provides too much in the way of privacy protections. Therefore, it should be eliminated. 

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bernorange

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From the link I posted last night (was on my phone then so I didn't prepare a snippet):

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Yesterday, the Treasury Department released an Illicit Finance Risk Assessment of Decentralized Finance (DeFi). Looking past the report’s, frankly half‐hearted, fear mongering and skepticism that disintermediated financial tools deserve different regulatory treatment than financial intermediaries, the report makes important acknowledgements that DeFi’s illicit finance risk is relatively small and that DeFi technology is unique. The report’s sparks of recognition that, on some level, DeFi is different from traditional finance—in enabling peer‐to‐peer financial transactions and potentially mitigating illicit finance risk through technology—ought to be noted by other U.S. policymakers who actively apply ill‐fitting legacy rules to new tools and exaggerate those tools’ risks.

While the report states that criminals and rogue states exploit DeFi to launder money and carry out cyberattacks endangering national security, it tends to bury the lede with respect to the scope of the problem. Still, Treasury ultimately acknowledges that, all told, crime is a “subset” of overall DeFi activity, which itself is a “minor portion” of crypto activity, and that the crime Treasury is concerned with is mainly a problem of traditional finance:

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[M]oney laundering, proliferation financing, and terrorist financing most commonly occur using fiat currency or other traditional assets as opposed to virtual assets.

Perhaps for this reason, the report insists that its limited identification of examples of illicit activity over DeFi should not be taken to indicate, well, that there are limited instances of illicit activity over DeFi:

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Given how recently the DeFi market has developed and expanded, there were relatively few case examples that this assessment could include. The number of case studies does not, however, reflect the level of risk identified in this assessment.

Of course, it may be that a non‐exhaustive list of examples doesn’t reflect the full extent of a problem. But persuasively making that argument generally requires providing additional evidence that speaks to the scale of the problem, beyond mere conclusory statements regarding a vague “level of risk.” However, in the rare instances where the report does address scale, it largely undermines the idea that DeFi is anything other than a relatively minor contributor to overall illicit finance risk, including for money laundering, proliferation financing, and terrorist financing, as well as drug trafficking, where the report notes, “[T]he size and scope of drug proceeds generated on the darknet and laundered via virtual assets remain low in comparison to cash‐based retail street sales.”
...

 

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bernorange

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... No longer does this Commission think creatively about regulatory alternatives that advance the Commission’s mission while preserving space for potentially disruptive innovation. No longer does this Commission worry that regulatory bullheadedness often produces absurd consequences. ...

https://www.sec.gov/news/statement/peirce-rendering-inovation-2023-04-12

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Fudge Nuggets

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On 3/28/2023 at 9:40 AM, Neonmoon said:

JFC. Do you actually ever read the fucking articles you post?

I don't think anyone who references the Tulip bubble gives a shit if it collapsed the economy or not back then, they're referencing something that has little value being overvalued due to hype. 

 

Yep, I've pointed out that exact passage from his same exact link more than once but he keeps going back to it.

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wildcat09

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On 4/8/2023 at 9:53 AM, bernorange said:

From the link I posted last night (was on my phone then so I didn't prepare a snippet):

 

Lol, how'd I miss this? Imagine championing the claim "the Treasury department admitted that fraud is just a subset of crypto use!" as a defense of crypto. 

Libertarianism rots your brain.

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bernorange

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The crypto community is calling out the alleged hypocrisy of Gary Gensler, the head of the United States securities regulator, after a 2018 video emerged of him stating that cryptocurrencies are on par with commodities or cash and are not securities.

The video came from a “Blockchain and Money” class in the Fall Semester of 2018 taught by Gensler, a former professor at the Massachusetts Institute of Technology (MIT) before he became chair of the Securities and Exchange Commission (SEC).
...

https://cointelegraph.com/news/gary-gensler-links-crypto-with-cash-in-viral-2018-video-crypto-twitter-reacts

Gensler just doing what he's being told to do IMO.

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bernorange

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Lawmakers on both sides of the aisle said at a Thursday hearing of the House Financial Services Committee digital assets panel that a Fed-issued retail central bank digital currency could stifle bank lending and grant excessive power to the Federal Reserve, highlighting the significant political headwinds facing any proposal to create a digital dollar.

Subcommittee chair French Hill R-Ark., likened a retail CBDC to an Obama-era policy critics say the administration wielded to discourage banks from doing business with industries they perceived as posing reputational risk, like pawn shops and firearms dealers.

"Some of us that oppose a U.S. CBDC warn, for example, that an unchecked government could monitor your purchases at the gun store, flag you as a threat, cut off your access to your bank accounts, even though you haven't done anything illegal," Hill said. "You think operation choke point was bad? Let that sink in."

Congressman Brad Sherman, D-Calif. — an unlikely ally to many of his Republican colleagues on this particular issue — also expressed concerns about how a Fed retail CBDC could enable the executive branch to pick and choose which industries could have access to banking. He noted while Operation Choke Point targeted traditional Republican allies like gun makers, the policy could just as easily be wielded by a GOP administration to target industries Democrats favor.

"I know there were some on the Democratic side who said, 'Yes, go after payday lenders and go after gun manufacturers,'" he said. "How will that sound when Planned Parenthood can't get a bank account? The power to take somebody out of the banking system is the power to impair if not destroy them."
...

https://www.americanbanker.com/news/bank-disintermediation-fed-control-fuels-bipartisan-skepticism-of-cbdc

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bernorange

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A bipartisan coalition of senators behind a cannabis banking bill is pushing for a markup and working to clear key hurdles on both sides of the aisle to lock down support.
...
The SAFE Banking Act would give federally regulated banks and credit unions legal cover to take cannabis dispensaries and growers as customers. Financial institutions have been hesitant to serve state-legal cannabis businesses because of the federal ban on the drug.
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Proponents of the bill say the SAFE Banking Act would help legally operating businesses avoid the headaches and safety risks of dealing only in cash without affecting the legal status of cannabis beyond states where it’s legal.

But despite passing the House several times in recent years, the bill has faced a bumpy road in the Senate, where it needs at least 60 votes to clear the upper chamber. Both Republicans and Democrats have expressed objections to the bill, reflecting sharp partisan divides over cannabis use and regulation beyond the financial sector.

Senators had previously sought to pass the bill as part of the larger government funding omnibus approved late last year, but talks fell apart after it faced staunch opposition from GOP leadership.
...
Republicans have also raised concerns about preventing banks from cracking down on other politically controversial industries.

“I think there’s a desire to sort of level the playing field, if you will, between things like hemp and CBD, and then there’s been some desire to — I, for one, would like to see the same premise applied obviously to banks and things like Operation Choke Point,” Sen. Kevin Cramer (R-N.D.) told The Hill, referring to the Obama-era scrutiny of bank transactions with firearms businesses.

“Try to eliminate some of that nonsense,” he said. “I think there is a discussion ripe for some compromise and some deal-making.”
...

https://www.msn.com/en-us/news/politics/senators-push-to-pass-cannabis-banking-bill-after-marijuana-rescheduling/ar-AA1gHwlW

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bernorange

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This is either an elaborate ruse or pure genius:

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BankSocial®, in collaboration with industry partners and advisors, today announces the proposed DEFY Federal Credit Union - the first digital native, self-custody credit union powered by distributed ledger technology and the ethos of credit unions. Based in Texas and powered by BankSocial® open banking features, the proposed DEFY FCU has a mission to serve its members and the larger Web3 community across the world with financial services that have been difficult to provide in the past. Built with a backbone of not-for-profit financial cooperative relationships, the proposed DEFY Federal Credit Union takes advantage of new tools that can empower every domestic credit union for an open banking future.

"As Vice Chair of the proposed DEFY Federal Credit Union board, I'm excited to help lead a movement where open banking forms our core,” said Michael Jackson. “Our mission is to empower member voices, driving our future collectively. We're committed to a democratic approach in digital spaces, leveraging partnerships and distributed ledger technology to pioneer services beyond traditional banking. Our focus on transparency, security, and efficiency marks a new era in personal finance, one that empowers and innovates with our members."

The BankSocial® App is the heart of the proposed DEFY Federal Credit Union’s self-sovereign, open banking for all model. BankSocial® open banking products come together here to give members self-custody control of their money and digital assets, combined.

BankSocial® Verifiied® is where trust and security meet. This powerful “Know Your Customer” verification tool provides confidence in all self-custody environments. Behind the scenes, a Real Time Payment solution allows payments using both standard payment rails and the Rivia stablecoin rUSD on the Hedera ledger, providing swift and secure fund transfers.

BankSocial® Secura™ Decentralized Recovery (“DeRec”) is the evolution of self-custody key management and protection. Even experts have concerns about seed phrase security. With Secura™, each member’s key is divided into pieces and mathematically protected at trusted partner credit unions. No one but the customer ever has control of their keys.

BankSocial collaborated with and built upon the transformational DeRec work of Dr. Leemon Baird of Swirlds Labs to create this unique solution. Dr. Baird explains how decentralized recovery works: “When you have enough “helpers”, your key—your secret—is shared among all of them in pieces. None of them can individually see your secret.” BankSocial®-affiliated credit unions are candidates to participate in decentralized key recovery.

To learn more about the proposed DEFY Federal Credit Union and to show your support, visit defy.coop.

https://www.einnews.com/pr_news/668773883/banksocial-announces-proposed-defy-federal-credit-union-at-north-american-blockchain-summit

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...
Wingate was inspired by the similarities between the ownership structure of credit unions and "the ethos of decentralized finance" to begin the campaign for a federal credit union charter under the National Credit Union Administration at the beginning of last year. ...
...
The proposed Defy Federal Credit Union, which was announced publicly last month, would offer members access to BankSocial's platform which includes its self-custody crypto exchange for buying and selling currencies like bitcoin and ether, in addition to a deposit account. Eligibility would be extended to the roughly 4,000 members of both Block Advocates, a nonprofit organization founded by Wingate to help promote the adoption of distributed ledger technology as well as the Texas Blockchain Council, which includes firms like Riot Platforms and Genesis Digital Assets.

Members interested in services like loans not offered by the credit union would be referred to BankSocial's growing network of more than 50 vetted credit union partners. No other details were made publicly available.

Payments and other operations of the institution, including records of member deposits, would be kept on the Hedera public ledger, which records the data across its nodes by allowing each participant to vet and approve the information before it's unilaterally approved for committing to the ledger. Personal member data such as Social Security numbers and home addresses will be stored separately from the ledger.
...

https://www.americanbanker.com/creditunions/news/banksocials-plan-to-create-a-crypto-friendly-credit-union

 

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