What happens when a government accrues so much power that it can force legal enterprises out of business through specific, intentional, and targeted regulatory abuse? It’s a fair bet that such a government will eventually abuse its power in this fashion, but will set the precedent with an unpopular-yet-legal industry. That seems to be the point behind Operation Choke Point, a Department of Justice attempt to kill off funding of the porn industry — and gun shops.
Tom Blumer wrote about this effort at the beginning of the month, with a focus on the payday lending industry:
DOJ is essentially employing a variant of the tactics former New York Attorney General Eliot Spitzer used against mutual fund companies last decade: threatening to smear them in the business community and otherwise make their lives miserable unless they settle.
Even despite the tactics, some readers may be reacting to all of this as a good idea. After all, payday lenders don’t have the cleanest of hands, and some — but far from all — may be operating illegally. There are two problems with this position.
The first is that DOJ doesn’t have the constitutional authority to go after businesses whose illegality has not been established by threatening their bank and financial services providers with legal sanctions and regulatory harassment if they don’t participate in the persecution. There are these things called laws which must be passed to declare certain financial practices and contracts illegal. That hasn’t happened. Short of that, there at least need to be court rulings having the same effect. There is apparently no evidence that DOJ has involved the courts at all.
The second is that although the bankers’ montage concentrated on payday lenders, many more business endeavors besides payday lending are involved. At least some of them, as odious as nanny-state officials and other might believe they are, operate legally.
TechDirt reported that Operation Choke Point also targeted porn stars:
After we just talked about Chase Bank appearing to close the personal bank accounts of a bunch of employees in the adult performing business, a few of you pointed us to reports that this may just be Chase Bank dancing to a federal piper. That report has expanded upon Teagan Presley, a former porn star, and her comments upon finding out she was suddenly no longer a Chase customer. …
So, the obvious question to ask next is what makes her “high risk”? After all, Chase Bank really likes money, even when it is generated by doing some pretty crappy things, so what’s the deal? Well, the latest is that this may be a part of the US Department of Justice’s “Operation Choke Point” program, in which the government has apparently decided that some extremely legal businesses don’t get to exist anymore, but since they can’t just disappear companies and industries in good standing, they’ve decided to route around the whole “freedom” thing and get the financial industry to act as contract hitmen.
This is the key point to remember. While many people think the porn industry and payday lending exploit people, the proper expression of that kind of cultural consensus would be to pass laws barring their operation. That hasn’t happened in these two cases, or the 30 other industries noted by Blumer in his post. This exercise in power is completely illegitimate, an intervention into private transactions of legal operations simply because those in power don’t happen to like their operations. It’s the rule of whim writ large — and getting larger.
Glenn Reynolds warns that this precedent could very well be used against other industries more favored by the current elite:
Justice Department targetsinclude industries as diverse as ammunition sales, coin dealers, payday loans, “racist materials,” etc. And, again, these are all legal businesses that haven’t been charged with breaking any laws — the Justice Department just doesn’t like them.
So what we have under “Operation Choke Point” is the government deciding it wants to put the squeeze on certain lines of (legal) business, for no other reason than that the Department of Justice doesn’t favor them. It seems almost like some sort of conspiracy to deprive people of their civil rights. …
Personally, I don’t think that regulators should be able to abuse their discretion — and this certainly looks abusive to me — in order to pressure banks to shut down the accounts of legal businesses. (As Sen. David Vitter, R-La., noted in March, the Justice Department has no statutory authority to do this). And while abortion clinics and environmental groups are probably safe under the Obama administration, if this sort of thing stands, they will be vulnerable to the same tactics if a different administration adopts this same thuggish approach toward the businesses that it dislikes. And why wouldn’t it, if the Justice Department gets away with this?
Congress, and the courts, and the press, need to bring the Justice Department to heel. And, in fact, I think that the officials involved should be named, shamed, and disciplined. Because what’s going on here doesn’t look much like justice at all.
No, it smells like autocracy at the least, if not outright tyranny. Congress needs to rope in the DoJ, but we need to recognize that this is a symptom of a far greater problem. The impulse to regulate everything at the federal level, and the lack of distinct limits on regulatory power granted to the executive branch, inevitably leads to this kind of politicization of law enforcement. Just because we don’t think highly of the first targets of such abuse of power doesn’t mean we should wait until it starts getting applied to us. Martin Niemöller had a thing or two to say about that.