There are many problems associated with a burdensome regulatory environment. Ill-conceived and overlapping regulations can make it difficult to start businesses and hire people. They can also increase prices since consumers always have to pay ultimately for all of the accountants, lawyers and lobbyists that companies hire to navigate the regulatory system. Over regulation can make it difficult to enjoy many activities people may want to pursue like hiking, or drinking or gardening. But in the end, the real threat of the regulatory state is when it is used for political means, and to hobble those who might have legitimate disagreements with government officials.
Tyranny can take many forms. It can come from the butt of a gun as in the case of the Islamic State and North Korea, or it can come from the majority, as is the case with the Inquisition or so-called Bolivarian Revolution in Venezuela. It can also come from the regulatory system itself, as is the case with Napoleonic France or the so-called nanny state right here in America.
The American Constitutional and legal system is designed to ensure that there are a number of checks-and-balances to keep tyrannical behavior at a minimum. But when regulators use their personal authority to force people to behave in a manner designed to support the Administration, then a line has been crossed, and the country moves one-step closer toward totalitarianism.
So is the case with a Department of Justice (DOJ) initiative known informally as “Operation Choke Point.” As with many of the initiatives of the current Administration, Operation Choke Point developed not out of any law, Executive Order or rule making procedure, but rather as an initiative of President Obama’s Financial Fraud Enforcement Task Force within the DOJ.
Operation Choke Point specifically targeted banks serving thousands of legal businesses with threats – mind you not regulations, but by pressuring banks to cut off access to banking services for companies that the Administration did not like for ideological reasons – firms like gun shops and coal producers.
Creating enemies lists and using the force and influence of the Federal Government to threaten those enemies, is not something that the Constitution allows in America, and eventually, as with many of these extra-legal initiatives, Operation Choke Point was significantly moderated. But the damage had already been done and many legally operating businesses with hundreds of employees were forced to close. This is not something that is supposed to happen in America, but it is exactly what can happen when the regulatory process runs amok.
Know Thy Self, Know Thy Enemy – When Ideology Overtakes Process
Alexis de Tocqueville was a French political thinker and historian best known for his book Democracy in America, which was written in the late 1830s. As a student of democracy, Tocqueville is credited with many quotes about tyranny, one of which is A man’s admiration for absolute government is proportionate to the contempt he feels for those around him.
Today there are some who believe that those in power in Washington DC have great disdain for America and particularly for American business. While this may or may not be the case, DOJ’s initiation of a project dubbed Operation Choke Point does give credence to this perception. Operation Choke Point was not authorized under any law, rulemaking process or even Executive Order, but rather came about as an initiative of the Financial Fraud Enforcement Task Force within the DOJ. This task force was established in November 2009 to help coordinate efforts between the Federal government and financial institutions to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, recover proceeds for victims and address financial discrimination in the lending and financial markets.
But the Task Force started doing more than that. In fact, according to a report from the U.S. House of Representatives, Committee on Oversight and Government Reform, the DOJ set out to harass a wide range of legitimate businesses deemed objectionable by the Administration including: Firearms and ammunition sales, adult entertainment, check cashing, and payday lending. (The DOJ’s “Operation Choke Point”: Illegally Choking Off Legitimate Businesses?, U.S. House of Representatives, Committee on Oversight and Government Reform, May 29, 2014.) According to this report, “Thousands of firms received notices that their bank accounts were being abruptly terminated due to “regulatory trends” or “heightened scrutiny.”)
No actual statistics exist on how many businesses were closed or how many people lost their jobs as a result of this DOJ activity, but the ability to access proper banking and financial operations is important to every business.
Several bills have been proffered to officially shut down Operations Choke Point, and the so-called “Cromnibus” legislation that funded DOJ for FY 2015 included a provision defunding the initiative. The Federal Deposit Insurance Corporation issued instructions for banks to look at accounts on a case by case basis, rather than targeting certain industries, which appears to finally terminate Operation Choke Point.
But the larger question remains – How was an Administration appointed task force able to use the threat of actions against banks to harass legitimate businesses simply because they were involved in industries deemed not ideologically pure. This smacks of the kind of behavior that one sees from the most oppressive regimes like those in Venezuela and Zimbabwe.
Tyranny is hiding just under the surface when regulation is pervasive, when people are cowed to speak in a certain “politically correct” manner, and when private firms are forced to serve as agents for the ruling political party. We need to take Tocqueville to heart when he says Society will develop a new kind of servitude which covers the surface of society with a network of complicated rules, through which the most original minds and the most energetic characters cannot penetrate. It does not tyrannise but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd, for this is where we appear to be heading.
Do you have a ridiculous regulation you want us to discuss?