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Financial Tyranny against Political Enemies

May 26, 2014 in Economics

By Richard W. Rahn

Richard W. Rahn

If you were a political leader who wanted to control the population, but wanted to do it without using brute force, how would you do it? The answer: control how individuals and businesses spend their money by controlling their bank and other financial accounts. The Obama administration has set up a program to do just that, called “Operation Choke Point.”

If the government can prevent you from spending your money on legal products and information services it does not like, it soon has control over much of your life. You might be thinking this could not happen in America, but it is. Increasingly, businesses and individuals engaged in legal activities are having their banking relationships severed because people within the Obama administration and some politicians do not like the particular activity.

The feds hobble their critics by choking off their banking privileges.”

In the modern age, it is almost impossible to operate without a bank account and making electronic payments directly or through a credit card company. Banks and other financial service firms, including payment processors, are very heavily regulated by the government. Also, the U.S. Treasury can label any bank in the world as a “bad bank,” which means that other banks are, in essence, prohibited from having corresponding banking relationships with the “bad bank.” Banks need to have accounts with other banks for the interbank payment system to work. Typically, small banks have such corresponding relationships with big banks, and the big banks have accounts at the Federal Reserve Bank — the ultimate bank. In sum, banks cannot function without corresponding banking relations, and the government sets the rules for these relationships.

Last year, the Justice Department started Operation Choke Point, which placed massive paperwork and information burdens on banks and money-payments firms that were servicing legal businesses that the administration doesn’t like, such as payday lenders, adult entertainment, and gun and ammo dealers. In addition, the Internal Revenue Service and Treasury Department came up with new rules for most financial-services companies (including banks) on the globe that may provide financial services to American citizens and so-called American “tax persons,” such as green-card holders. The excuse for these new rules was that some Americans were not paying the full income tax due on their foreign accounts. The fact is, the compliance costs of the new rules on the global financial system will be many times the projected revenue from the …read more

Source: OP-EDS

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