Operation Choke Point and Marijuana Legalization

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On Monday, December 5, 2016, KPCC-FM (Pasadena, CA) aired a segment on “Take Two” about potential banking problems for California’s soon-to-be-legal recreational marijuana industry. California State Treasurer John Chiang was stunningly unprepared, suggesting that a possible solution was state-chartered banks. Anyone familiar with Operation Choke Point will immediately realize the utter ignorance behind that suggestion. Here’s the short version.

Every U.S. bank, whether a national bank or a state bank, is insured by the Federal Deposit Insurance Corporation (FDIC). And to their everlasting shame, FDIC was one of the agencies that helped implement Operation Choke Point. The point of this program was to deny banking services to businesses alleged to be high risk. The fact that many of those businesses were also politically opposed by the Obama administration is, um, irrelevant, I guess. Here are some of the lawful businesses targeted by Operation Choke Point:

  • Firearms
  • Ammunition
  • Coin dealers (?)
  • Government grants (??)
  • “Racist materials” (First Amendment, anyone? Bueller?)
  • Tobacco sales

The title of my original article was, “Using the Banking System to Circumvent the Constitution.” Since I wrote that, I have had no reason to back down on that title.

I have written about Operation Choke Point several times. Over at the Daily Signal, Kelsey Harkness has done yeoman’s work staying on top of this story. I won’t bother to include detailed links. Search either this site or the Daily Signal for “operation choke point” and you’ll get an eyeful.

Here’s the point. (“About time.” – The Couch, now I owe Jonah Goldberg $1) Dealing with state banks will not avoid Operation Choke Point restrictions. While FDIC and the Treasury Department have denied that this program is ongoing, there is evidence that banks are still enforcing the, um, suggestions.

And, oddly, there is an obvious solution. Credit unions are not monitored by FDIC. The National Credit Union Association (NCUA) is the insurance vehicle for these entities. Credit unions offer checkable deposits, savings accounts, and so on. If I was young enough to be entrepreneurial I would start a credit union called “Buds Credit Union” headquartered in Laytonville, CA.

But when the lame-stream media wonders why they get no respect, it’s partly because they talk to idiots like Mr. Chiang instead of people who actually know factual information.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.