How Regulators Strangle Legal Businesses

Apparently the Feds are using banking regulation to strangle businesses, even legal ones, that they don't like by cutting off their access to the banking system (via Overlawyered).

Wall Street Journal reporter Robin Sidel, along with Andrew Johnson, reported on the success that the federal government is having in barring access to the banking system for a number of businesses. As we've discussed previously, "Operation Choke Point" and related arm-twisting efforts by the Feds are aimed at making life difficult for a variety of targeted businesses. Among those disfavored businesses are online lenders, payday lenders, check cashers, virtual currency dealers, gaming businesses, and marijuana-related businesses (although our beloved US Attorney General has been making noises that he simply will look the other way when it comes to enforcing federal drug laws against marijuana businesses that are operating legally under state law)....

In the article and a companion audio interview, Sidel states that the primary concern appears to be with the difficulty of complying with BSA and money laundering risk. While that's certainly true with many of the businesses, it's also true that some of the businesses have been targeted by the regulators for extra scrutiny because they're in a line of business, like payday lending, where the regulators simply don't like the business model on social policy grounds. If we see the Feds back off of weed but still keep the heat on payday lenders, then the argument that it's all about money laundering risk becomes a bit tenuous.

  • Chris

    how about big banks that got TARP money not doing business with gun dealers? I've seen that first hand

  • frankensteingovernment

    Payday lending is in direct competition with the government's banking masters. It is a perfect opportunity for the government to look like a hero while putting a chokehold on predatory lenders- a business almost wholly brought about by government, bankers, and a credit system designed to make borrowers look as bad as possible. It is all BS designed to do nothing except extract as much wealth as they can humanly justify.

    They do whatever they want. I don't try to parse it out. A broke and bankrupt government has to find ways to steal your money. Obama's latest trick, MyRa, is another perfect example of the government temptress, luring you in so that they can fleece you.

  • CapitalistRoader

    Holder "backing off on weed" isn't enough. Colorado banks are backing off from dealing with any high-cash businesses because the the money "smells like pot", and that could get them in trouble with the Feds.

    http://www.cpr.org/news/story/even-new-federal-guidance-colorado-bankers-wary-marijuana-business

  • morgan.c.frank

    and the shift to crypto currencies (like bitcoin) will go on.

    this sort of thing will drive businesses right into the arms of these alternative currencies and end up pushing the system even further away from any oversight.

    long term, this attitude is going to be a huge loser for the government.

  • Sam L.

    "A bit", you say? Not the understatement of the year, but...

  • obloodyhell

    Well, this tactic has been applied for a while now to the porn business via refusal of MasterCard/Visa services. Nothing surprising that it's going even further.

    "Money, not morality, is the principle commerce of civilized nations"
    - Thomas Jefferson -