This article first appeared at The McAlvany Intelligence Advisor on Saturday, January 31, 2015:

Logo of the United States Federal Deposit Insu...

Kelsey Harkness, a journalist at The Daily Signal, let her enthusiasm for modest retrenchments at the FDIC override her good judgment, calling them “dramatic.” She was referring to the measures the chairman and the vice chairman of the Federal Deposit Insurance Corporation (FDIC) promised to make in their efforts to enforce Operation Choke Point. In a phone conversation she had with Rep. Blaine Luetkemeyer on Wednesday morning, she heard him say:

We’re very pleased they’ve acknowledged their wrongdoing and they’ve accept our suggestions to put in place measures to stop this activity.

What suggestions, exactly?

One, instead of verbally threatening to audit banks reluctant to terminate long-term financial relationships with customers in the “reputational risk” category, FDIC officials must now put those threats in writing. Second, they must state clearly exactly what rules, regulations, or guidelines those banks’ customers are suspected of violating. Finally, they must no longer refer to “reputational risk” because it is undefined and undefinable unless there’s a political agenda attached.

According to the FDIC, working hand in glove with ’s Justice Department, there are 30 categories of companies engaging in “high-risk” activities, including firearms sales, sales, pornography, Ponzi schemes, and debt consolidation scams. The agenda being pushed, as it became clear to Luetkemeyer, was a backdoor attack on the Second Amendment:

We have documented that they are going after gun and manufacturers [and] gun sellers…. Their own memos show they are well beyond enforcing the law.

By forcing banks to terminate relationships with these allegedly abhorrent miscreants, the Obama administration is hoping to starve them to death. As noted by the St. Louis Post-Dispatch: “[Operation Choke Point] is a thinly veiled ideological attack on industries the Obama administration doesn’t like, such as gun sellers….”

In his profound study of government, Crisis and Leviathan, Professor Robert Higgs built his case for the “ratchet effect” – that any increase in the size, reach, power, and influence of government largely remains long after the particular crisis it was supposed to address has faded away. In other words, once increased, government never shrinks all the way back to its former size.

Thomas Jefferson wrote to Edward Carrington in May, 1788, saying essentially the same thing: “The natural progress of things is for liberty to yield, and the government to gain ground.”

Operation Choke Point had its genesis long before the Journal exposed it in the spring of 2013. Back in 2012, Bank of America pulled the plug on its 12-year financial relationship with McMillan Group International, a gun manufacturer located in Phoenix, and with Spirit Arms in Scottsdale, in what was clearly an attack on guns. As Joe Sirochman, the owner of American Spirit Arms, said:

At first, it was the bigger guys – gun parts manufacturers or high-profile retailers. Now the smaller mom-and-pop shops are being choked out….


They need their case [and credit lines] to buy inventory. Freezing their assets will put them out of business.

Kelly McMillan agreed:

This is an attempt by the federal government to keep people from buying guns and a way for them to combat the Second Amendment rights we have. It’s a covert way for them to control our right to manufacture guns and individuals to buy guns.

Rep. Darrell Issa, Chairman of the House Committee on Oversight and Government Reform, investigated Operation Choke Point as it was being enforced by the Department of Justice and concluded last May that it had grossly exceeded the authority granted to it:

Forceful prosecution of those who defraud 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 of these requirements….

His committee followed up with another in-depth study in December of how the FDIC was enforcing Operation Choke Point, which likewise concluded:

Operation Choke Point is little more than government-mandated de-risking. The FDIC, in cooperation with the Justice Department, made sure banks understood – or in their own language, “got the message” – that maintaining relationships with certain disfavored business lines would incur enormous regulatory risk….


Operation Choke Point violates the most fundamental principles of the rule of and accountable, transparent government.

In both studies, Issa made clear that merely refining slightly some of the operational procedures and policies weren’t going to be sufficient: the program had to be terminated, ended, buried, obliterated:

In light of the [Justice] 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 [for the department] to disavow and dismantle Operation Choke Point.

That would represent a major de-ratcheting of an agency pushing a political agenda. And the FDIC and the DOJ aren’t the only ones that need to be reined in: there’s the National Credit Union Administration (NCUA).

Mike Shuetz, the owner of Hawkins Guns in Hawkins, Wisconsin, got a call from his credit union last November that they were terminating his relationship with them. He got mad, took a recorder down to Heritage Credit Union in Hawkins, and began asking questions and recording the answers he got. The regional manager confirmed that the NCUA forced him to close Shuetz’s account:

The examiners from NCUA – that’s who governs us, it’s a federal government agency – came in and did an exam on everything. There [were] about a dozen [examiners] crawling around the building. They were just hammering us.


They came in, looked at our books, looked at everything and said: “Here are some accounts that we feel that we’re going to regulate you on.” So they kind of put the screws to us as far as what we could and couldn’t do….


We’re not really anti-gun as a company, but our hands are tied.

Higgs is right: once the government expands itself, even illegally, it’s nigh unto impossible to force it back into its cage. That’s especially true if there are multiple agencies complicit in the crime. As Professor Higgs noted:

The more thirsty ratchets there are in a group, the thirstier those ratchets become.

It is hoped that the modest internal changes at the FDIC are a harbinger of much stouter changes in all the agencies involved in this egregious assault on freedom, on the way to eliminating Operation Choke Point altogether.

A graduate of an Ivy League school and a former investment advisor, Bob is a regular contributor to The New magazine and blogs frequently at, primarily on economics and politics. He can be reached at



Background on Operation Chokepoint Obama’s “Operation Choke Point”

House Oversight Committee report: The Department of Justice’s “Operation Choke Point”: Illegally Choking Off Legitimate Businesses?   May 29, 2014

The Daily Caller: Audio Tapes Reveal How Federal Regulators Shut Down Gun Store Owner’s Bank Accounts

The Daily Signal: Exclusive: FDIC Changes Tactics in Response to Operation Choke Point

The New American: Obama Administration Choking Off Bank Lending to Gun Dealers FDIC Retreats from Operation Choke Point Operation Choke Point: What It Is and Why It Matters

MyFoxDC: Holder’s gun grab via Operation Choke Point

House Oversight Committee report: Federal Deposit Insurance Corporation’s Involvement in “Operation Choke Point”   December 8, 2014

Robert Higg’s ratchet effect

Robert Higgs’ Crisis and Leviathan

Quote from Thomas Jefferson

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