Articles & Research Papers

Operation Choke Point Targets Businesses Liberals Don’t Like


On some level, the left knows the country is not buying what it’s selling.

Liberals hold fewer electoral offices at the federal, state and local level than at any time in the last century. Their sole significant legislative victory of the last 20 years – Obamacare – passed in the dead of night on Christmas Eve without a single Republican vote

Liberal immigration, environmental, crime and labor policy is run largely by executive fiat because the administration’s big ideas could not hope to pass Congress.

Necessity being the mother of invention, the current administration has come up with some extra-legal ways to pursue its goals through measures such as Operation Choke Point. Billed as a way to go after fraudsters by reducing their access to the financial system, it morphed into a way to harass a kitchen sink of legal industries the Obama administration is annoyed with but can’t otherwise prohibit.

The Justice Department, along with the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation, told banks and payment processors, such as credit card companies, they would be audited, sued or harassed by regulators if they did not close the accounts of what the government termed high-risk businesses.

Suddenly, gun and ammunition manufacturers, wholesalers and retailers found their bank accounts shuttered. A host of other legal businesses, such as money transfer companies, telemarketers, tobacco firms, travel clubs and those who sold surveillance equipment found themselves in similar situations.

The heavy-handed activities have subsided somewhat because of public scrutiny. Sens. Ted Cruz, R-Texas, and Mike Lee, R-Utah, introduced legislation that says banks need to have a better reason than “reputational risk” to deny services to legal businesses. The FDIC has backed off pressuring banks for dealing with law-abiding businesses. And the Consumer Financial Protection Bureau has turned its focus to rulemaking – in particular a current pending rule that would cripple online and payday lenders – increasingly, the only reliable sources of credit for working class Americans.

The administration knows it can’t get rid of consumer lenders or money transfer firms or telemarketers or tobacco companies. So it enlists outside help. For instance, Google, an administration ally on a variety of Internet and technology issues and a beneficiary of significant government largesse, is helping with the online lenders.

In recent weeks, it announced it would stop accepting advertising from online lending firms. Payday lenders have their storefronts as advertising. Consumers who seek online loans have few other ways to find vendors, which means the unscrupulous lenders the government allegedly seek to stop hold more market share than they should.

Google controls 95 percent of the mobile search market and more than 75 percent of all paid search advertising. This is not a small thing. And it follows, more than coincidentally, on the heels of Google’s announcements in recent years to stop selling ads to pawn shops, firearms and fireworks dealers and other businesses the current administration doesn’t like.

Indeed, when the move was announced, a Google executive compared online lending to pornography, cigarettes and guns … an interesting list considering the administration’s priorities in Operation Choke Point.

“We don’t allow ads for products that we think are excessively harmful,” Vijay Padmanabhan, a policy adviser at Google, said at the time.

It’s also interesting how Google defines these lenders. It says it will not accept ads in the United States for personal loans with annual percentage rates above 36 percent or where repayment in full is due within 60 days. Technically, this second group could include American Express, but no matter.

The language Padmanabhan used also sounded administration-approved. “While users really do need small-dollar loans, they don’t really need short-term loans,” he said.

Research shows that most borrowers of payday loans can only afford to give up about 5 percent of their next paycheck. And it makes sense, right? If you have savings, you don’t take payday loans. If you take payday loans, you don’t have savings. So how are you going to be able to part with more than 5 percent of y our next check? So, the reality is though these products are marketed as short-term products, users use them in ways that make them long-term products.

Which sounds straight out of the Consumer Financial Protection Agency playbook, with its talk of “debt traps” and “ability to repay.”

Google, of course, is a private company and doesn’t have to sell to anyone it doesn’t want to. It also is the seventh-largest lobbying presence in Washington and spends money on both sides of the aisle. In this case, it is seemingly doing the bidding of an administration with which it hopes to curry favor and ease pressure from the Federal Trade Commission, among others.

This ought to show you where its priorities lie … and the extent the administration is prepared to go to force on the American people that which they do not want.