Operation Choke Point focused on crypto markets?

[Bern]

Amid the worst banking crisis since 2008, four Republicans in the U.S. Senate, led by Senator Bill Hagerty (R-TN), have written a letter to the heads of several federal banking regulatory agencies asking them to explain the coordinated effort to crack down on crypto-related banking providers in recent months.

The letter was addressed to Federal Reserve Chair Jerome Powell, Federal Deposit Insurance Corporation (FDIC) Chair Marty Gruenberg, and Office of the Comptroller of the Currency (OCC) Chair Michael Hsu, seeking further insights into recent statements made by the banking regulators that have called for heightened supervision of crypto-related activities.

“These releases have caused banks to reevaluate their decision to provide banking services to the crypto sector, resulting in crypto firms’ bank accounts being unexpectedly closed,” the Senators wrote. “This coordinated behavior seems disturbingly reminiscent of Operation Choke Point… an Obama Administration initiative where federal regulators applied pressure on financial institutions to cut off financial services to certain licensed, legally operating industries simply because certain regulators and policymakers disfavored those industries.”

The result of an investigation into Operation Choke Point found that businesses were illegally targeted by government officials, and the FDIC was forced to take steps to clarify that banks are allowed to provide services to legal businesses and provide enhanced training to its examiners.

“Unfortunately, nearly four years after the enhanced training, banking regulators seem to be reverting to old practices,” the letter said. “Even if the actions towards the crypto economy emanate from different regulatory concerns – it appears that the desired outcome from the banking regulators is similar to that of Operation Choke Point – the de-banking of the crypto industry in America.”
...

https://www.kitco.com/news/2023-03-1...n-America.html

Letter:
https://www.hagerty.senate.gov/wp-co...tter-FINAL.pdf


bold emphasis is mine:

... Regulators announced late Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.

The sudden move shocked executives of Signature Bank, a New York-based institution with deep ties to the real estate and legal industries, said board member and former congressman Barney Frank. Signature had 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022, according to a regulatory filing.
...
According to Frank, Signature executives explored "all avenues" to shore up its situation, including finding more capital and gauging interest from potential acquirers. The deposit exodus had slowed by Sunday, he said, and executives believed they had stabilized the situation.

Instead, Signature's top managers have been summarily removed and the bank was shuttered Sunday. Regulators are now conducting a sales process for the bank, while guaranteeing that customers will have access to deposits and service will continue uninterrupted.
...
For his part, Barney, who helped draft the landmark Dodd-Frank Act after the 2008 financial crisis, said there was "no real objective reason" that Signature had to be seized.

"I think part of what happened was that regulators wanted to send a very strong anti-crypto message," Frank said. "We became the poster boy because there was no insolvency based on the fundamentals."

https://www.cnbc.com/2023/03/13/sign...s-history.html


Kitco report has a few more details on Barney Frank's assertion:

...
As it stands now, Signature Bank’s customers have automatically become customers of the FDIC-controlled Signature Bridge Bank. Regulators will proceed to sell the bank and its assets in the coming days, which will provide additional insight into how serious the problem actually was, according to Frank.

"What's the sale price?” Frank said. “If it's got to be sold at a very severe discount, well, maybe that shows there were problems with Signature. If it's sold at a better price, which I think it will be, that's proof of our argument that they shut down Signature as a general warning shot against crypto rather than anything that was Signature's fault."
...

https://www.kitco.com/news/2023-03-1...ney-Frank.html

[Madison320]

https://www.kitco.com/news/2023-03-1...n-America.html

They don't need to, crypto will die on its own.

[Bern]

...
On Tuesday, Tom Emmer, Majority Whip of the U.S. House of Representatives, sent a letter to Federal Deposit Insurance Corporation (FDIC) chair Martin Gruenberg, calling on the FDIC head to answer the question as to whether the agency has specifically instructed banks not to provide services to crypto firms.

“Recent reports indicate that Federal financial regulators have effectively weaponized their authorities over the last several months to purge legal digital asset entities and opportunities from the United States,” Emmer wrote.

The representative cited the recent comments from former House Financial Services Committee chair Barney Frank, co-author of the Dodd-Frank Act, who said during an interview on Monday that the targeted nature of these regulatory efforts is meant to send the message that crypto is toxic and should be avoided.

“If this is the case, these actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer wrote.

Emmer’s letter mentioned the joint statement released by the Fed, FDIC and the Office of the Comptroller of the Currency in January that discouraged banks from holding crypto or serving crypto clients, the Feds public statement issued in February that “seemingly turned this perspective into a final” without a public comment period and the Biden Administration’s “Roadmap to Mitigate Cryptocurrenices’s Risks” as further evidence of a coordinated effort to malign the industry.

“In under a week, regulatory statement-driven market fear drove mass withdrawals at the few remaining banks that provide legal crypto firms access to financial services,” Emmer said. “The Administration’s demonstrated effort to choke off digital assets from the United States financial system is a lazy and destructive regulatory strategy that is stagnating innovation and subjecting American users of digital assets to less sophisticated regulatory jurisdictions.”

Emmer added that while Congress is focused on working across the aisle to develop nonpartisan legislative solutions for the crypto community, “Reports indicate that this Administration may be driven by a political agenda that has already harmed everyday Americans.”

The Congressman has called on the FDIC to officially answer whether it has instructed banks under its supervision to not provide crypto firms banking services, and if so, to explain the analysis for this instruction and “the goal of the instruction if not to discourage banks from servicing digital asset clients.”

Emmer also wants the FDIC to indicate whether it has explicitly or implicitly communicated with any banks that “their supervision will be more onerous in any way if they take on new (or maintain existing) digital asset clients.”
...
Emmer is calling on Gruenberg and the FDIC to answer these questions no later than 5:00 p.m. on March 24.
...

https://www.kitco.com/news/2023-03-1...-industry.html

[Bern]

Context for Rep. Emmer's letter:

Signature Bank is on the market after being shuttered by state regulators on Sunday, but any potential buyer reportedly has to agree to a major caveat: no crypto.

Reuters first reported the development on Wednesday evening, citing sources familiar with the matter.

The New York-based bank’s weekend closure came two days after the collapse of another bank, the California-based Silicon Valley Bank (SVB), and less than a week after the closure of another California-based bank, Silvergate Bank. All three of the now-defunct banks were known as being crypto-friendly financial institutions.

Signature Bank, whose crypto clients accounted for a quarter of its deposits, was reportedly under investigation by the Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) for potentially lax monitoring that may have enabled money laundering.
...

https://www.coindesk.com/policy/2023...siness-report/

[Bern]

Bold emphasis is mine:

WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank, National Association, by Flagstar Bank, National Association, Hicksville, New York, a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, New York.

The 40 former branches of Signature Bank will operate under New York Community Bancorp's Flagstar Bank, N.A., on Monday, March 20, 2023. The branches will open during their normal business hours. Customers of Signature Bridge Bank, N.A., should continue to use their current branch until they receive notice from the assuming institution that full-service banking is available at branches of Flagstar Bank, N.A.

Depositors of Signature Bridge Bank, N.A., other than depositors related to the digital banking business, will automatically become depositors of the assuming institution. All deposits assumed by Flagstar Bank, N.A., will continue to be insured by the FDIC up to the insurance limit. Flagstar Bank's bid did not include approximately $4 billion of deposits related to the former Signature Bank's digital banking business. The FDIC will provide these deposits directly to customers whose accounts are associated with the digital banking business. Questions may be directed to (866) 744-5463.
...

https://www.fdic.gov/news/press-rele...3/pr23021.html

FDIC has split off and debanked Signature's crypto clients. Operation Choke Point is in full effect.

[Bern]

Barney Frank Was Right About Signature Bank

The FDIC all but confirms it closed the bank over crypto.

We never thought we’d write that headline. But on Sunday the Federal Deposit Insurance Corp. announced that New York Community Bancorp’s Flagstar Bank will assume all of Signature Bank’s cash deposits except for those of crypto companies. This confirms Mr. Frank’s suspicions—and ours—that Signature’s seizure was motivated by regulators’ hostility toward crypto.
...

https://www.wsj.com/articles/signatu...-fdic-9b825e2e

[Bern]

For reference:

https://en.wikipedia.org/wiki/Operation_Choke_Point

[Bern]

I had been thinking about ordering a Ledger Nano X for some time. With Coinbase now in the crosshairs of the Eye of Sauron, I finally got off my duff and ordered one. It arrived this morning and I spent some time getting it set up and transfering some crypto I owned on Coinbase over to it. It was pretty easy.

https://shop.ledger.com/?r=01ea5f579ed2

If you were considering getting one, using that referral link to order should reward you with $10 of Bitcoin.

[Bern]

https://twitter.com/nic__carter/stat...51642075463682

Sorry, I apparently can't figure out how to embed tweets.

From the .PDF:

Cooper & Kirk

Operation Choke Point 2.0: The Federal Bank Regulators Come For Crypto
...
Executive Summary

Recent stories in the financial press have uncovered a coordinated campaign by prudential bank regulators to drive crypto businesses out of the financial system. Bank regulators have published informal guidance documents that single out cryptocurrency and cryptocurrency customers as a risk to the banking system. Businesses in the cryptocurrency marketplace are losing their bank accounts, or their access to the ACH network, suddenly, and with no explanation from their bankers. The owners and employees of cryptocurrency firms are even having their personal accounts closed without explanation. And over the past two weeks, federal regulators have shut down a solvent bank that was known to be serving the crypto industry and, although it is required to resolve banks through the “least cost resolution” to the Deposit Insurance Fund, the FDIC chose to shutter rather than sell the part of the bank that serves digital asset customers, costing the Fund billions of dollars.

This pattern of events is not random, and we have seen it before. This is not the first time that federal bank regulators, working with their State-level counterparts, have abused their supervisory authority to label businesses unworthy of having a bank account and worked in secret to purge disfavored lines of commerce from the financial system. Beginning in 2012, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System carried out a coordinated campaign to weaponize the banks against industries that had fallen out of favor with the administration—including gun stores, pawn shops, tobacco stores, payday lenders, and a host of other brick and mortar businesses. That campaign was called Operation Choke Point.

Our firm successfully challenged Operation Choke Point, and it was brought to a halt. The current bout of regulatory overreach against the crypto industry is illegal for much the same as reason as its predecessor. Specifically:

• Operation Choke Point 2.0 deprives business of their constitutional rights to due process in violation of the Fifth Amendment. It is well settled that when a federal agency attaches a derogatory label to an individual or business, and this stigmatizing label causes the business to lose a bank account or broadly precludes them from the pursuit of their chosen trade, the agency has violated the Due Process Clause of the Fifth Amendment, unless if first afforded the individual or business a right to be heard. This is precisely what the federal bank regulators responsible for Operation Choke Point 2.0 have done and continue to do by labeling crypto businesses a threat to the financial system, a source of fraud and misinformation, and a risk to bank liquidity.

• Operation Choke Point 2.0 violates both the non-delegation doctrine and the anticommandeering doctrine, depriving Americans of key structural constitutional protections against the arbitrary exercise of governmental power.

• By leveraging their authority over the banks to acquire the power to pick and choose the customers whom the banks may serve, the bank regulators have exceeded their statutory authority. The bank regulators are charged with supervising the safety and soundness of the banks; their effort to anoint themselves the gatekeepers of the financial system and the ultimate arbiters of American innovation and American economic life cannot be permitted to stand.

• The federal bank regulators are also refusing to perform their non-discretionary duties when doing so will benefit the cryptocurrency industry. State banks that are statutorily entitled to access the federal reserve system are being denied their rights solely because they serve the crypto industry. The federal bank regulators are not free to pick and choose which statutory obligations they duties they wish to perform.

• The federal bank regulators are evading the notice and comment rulemaking requirements of the administrative procedure act by imposing binding requirements on the banking industry through informal guidance documents. This is undemocratic, since it deprives the public of the right to comment on proposed rules, and it also runs contrary to the principle of judicial review, since courts lack the power to review “informal” agency actions.

• Finally, the federal bank regulators are acting in an arbitrary and capricious fashion by failing to adequately explain their decisions, by failing to engage in reasoned decisionmaking, and by failing to treat like cases alike. It is difficult to imagine a more arbitrary and capricious agency action than simultaneously placing a solvent bank into receivership solely because it provided financial services to the crypto industry, while permitting insolvent institutions not tied to the crypto industry to continue operating.

We therefore urge Congress to perform its oversight role and hold these agencies to account. In section IV of this paper, we propose a series of questions that need to be answered— and a series steps that Congress should take in an effort to obtain those answers.

• First, Congress should require the bank regulators to produce their communications with supervised financial institutions and state regulatory agencies regarding the denial or regulation of access to the financial system by crypto businesses and banks that serve the crypto industry.

• Second, Congress should require the federal bank regulatory agencies to explain the basis for their conclusion that the safety and soundness of the financial system require the insulation of the banks from blockchain technology, from customers who operate in the crypto space, and from state-chartered depository institutions that are currently serving those customers.

• Third, Congress should make clear to the federal bank regulators, and all federal agencies, that the notice and comment rulemaking requirements of the Administrative Procedure Act are not optional. The requirements imposed by the APA are not obstacles to be evaded by the use of informal guidance documents.

• Fourth, Congress should investigate the role of federal regulators in the decision by the New York Department of Financial Supervision’s decision to shutter Signature Bank. Congress should also determine the FDIC’s role in excluding bidders who wished to acquire Signature’s digital asset businesses from the bidding process.

• Fifth, Congress should investigate whether bank regulators are acting to squelch private sector innovation in order to clear the field of competition for the benefit of existing federally regulated banks or for a federal cryptocurrency alternative. The persistent unwillingness of the nation’s bank regulators to follow the law and obey the Constitution calls out for Congressional action. Cracks are starting to form in the American financial system as its regulators increasingly abuse their power to achieve aims outside their authority and beyond their competence.
...

[Bern]

I still haven't figured out how to embed tweets here...

https://twitter.com/katie_haun/statu...87966425645058

Link to WSJ OpEd on the subject in the tweet.

[dannno]

I still haven't figured out how to embed tweets here...

https://twitter.com/katie_haun/statu...87966425645058

Link to WSJ OpEd on the subject in the tweet.

I paste the full URL for those who might not be able to view embedded tweets, then I make a couple new lines above the link. Then you put the tweet tags like this with no spaces [ t w e e t ] [ / t w e e t ]. Then copy the numbers at the end of the tweet and paste special (as text) between the tags. After I click "Post" the embedded tweet doesn't show up on my browser, but when I refresh the page it shows up.

https://twitter.com/katie_haun/statu...87966425645058

[Bern]

Ok. I did every step except refresh the browser. Thanks.

[dannno]

What are they afraid of?

The Bitcoin Logo being projected onto the European Central Bank in Frankfurt, Germany
https://www.reddit.com/r/CryptoCurre...cted_onto_the/

[Bern]

SEC Commissioner dissents on their attempts to stifle crypto innovation:

...
No longer does this Commission think creatively about regulatory alternatives that advance the Commission’s mission while preserving space for potentially disruptive innovation. No longer does this Commission worry that regulatory bullheadedness often produces absurd consequences.
...

More (long):

https://www.sec.gov/news/statement/p...ion-2023-04-12

[Brian4Liberty]

Operation Chokepoint is back...

https://twitter.com/gaborgurbacs/sta...53334148817337

[Bern]

Thanks, but I don't think it ever left. They have just ramped it up lately. I didn't follow up in this thread, but the banking system has been busy developing debanking rules based upon anti-money laundering (AML) concerns that have been debanking all manner of small business that are heavy cash operations including coin shops that buy and sell physical gold and silver. It's an insidious disenfranchisement of free market trade.

[Brian4Liberty]

Thanks, but I don't think it ever left. They have just ramped it up lately. I didn't follow up in this thread, but the banking system has been busy developing debanking rules based upon anti-money laundering (AML) concerns that have been debanking all manner of small business that are heavy cash operations including coin shops that buy and sell physical gold and silver. It's an insidious disenfranchisement of free market trade.

Makes sense. Preparation for a CBDC and revoking the "legal tender" status of cash.

Sports parks and concert venues have gone no cash several years ago. Struck me as illegal, as the Federal Reserve note is still legal tender...

[Bern]

Never thought I'd see the day where this issue blew up, but toady's the day!

Marc Andreessen appeared on Joe Rogan's show and talked about Operation Choke Point 2.0. Now it's starting to go viral and people that had no clue are learning about it.

https://x.com/nic__carter/status/1861748485424316627

This is the post Elon Musk referenced (not shown in the embedded tweet, but visible on X if you click on the tweet):

https://x.com/benaverbook/status/1861511171951542552

And Vivek is also sounding the bell:

https://x.com/VivekGRamaswamy/status...53875935478260

What a nice way to start the day.

https://x.com/pmbug/status/1861784414612537793

[Bern]

Some follow up:

Kept quiet about this for almost a year out of fear but since I'm in good company with @tyler @cameron @brian_armstrong @elonmusk now..Last December, I got a call from JPM saying "we have to close anyone's account that we know their primary source of income/wealth is crypto. This is directly from the top from Jamie. I'm really sorry."

I had a close relationship with my banker so I assume 99% of people wouldn't even get that kind of transparency/explanation. Wanted to add my own name to the debanked OCP list @nic__carter. It's real. It happened. Hopefully now it will soon be over.

https://x.com/samkazemian/status/1861956394079101391

I never shared this publicly before, but since @pmarca opened the floodgates on @joerogan’s pod, it feels appropriate to shed more light on this.

As a reminder, Libra (then Diem) was an advanced, high-performance, payments-centric blockchain paired with a stablecoin that we built with my team at @Meta. It would’ve solved global payments at scale. Prior to announcing the project, we spent months briefing key regulators in DC and abroad. We then announced the project in June 2019 alongside 28 companies. Two weeks later, I was called to testify in front of both the Senate Banking Committee and the House Financial Services Committee, which was the starting point of two years of nonstop work and changes to appease lawmakers and regulators.

By spring of 2021 (yes they slow played us at every step), we had addressed every last possible regulatory concern across financial crime, money laundering, consumer protection, reserve management, buffers, and so much more, and we were ready to launch.

We had worked on a slow rollout of a limited pilot that some members of the Fed’s Board of Governors were supportive of. At last, Chair Jay Powell was ready to let us move forward in a limited way. The story, as I heard it, is that Jay Powell was told by Treasury Secretary Janet Yellen at one of their biweekly meetings that allowing this project to move forward was “political suicide,” and she would not have his back if he let it happen. I wasn’t in the room when this conversation happened, so take these words with a grain of salt, but effectively this was the moment Libra was killed.

Shortly thereafter, the Fed organized calls with all the participating banks, and the Fed’s general counsel read a prepared statement to each of them, saying: “We can’t stop you from moving forward and launching, but we are not comfortable with you doing so.” And just like that, it was over.

One essential point is worth making here. There was no legal or regulatory angle left for the government or regulators to kill the project. It was 100% a political kill—one that was executed through intimidation of captive banking institutions. That was the hardest part of this story for me personally. Not that we had failed, but that America, this country I immigrated to and became a proud citizen of because of its rule of law and value system, behaved in such a way for political reasons. It was a very tough pill to swallow.

The bright side of the story, though, was the many learnings from this wild ride. By the end of the project, we had made so many concessions to get a thumbs-up that the whole design of the network became a Frankenstein of our initial ambitions.

We also learned the biggest lesson of all, which is that if you’re trying to build an open money grid for the world—eventually moving trillions of dollars a day, designed to be here 100 years from now—you have to build it on the most neutral, decentralized, unassailable network and asset, which, hands down, is Bitcoin.

And now this is what many of us who went through this scarring journey are building together at @Lightspark. And this time, we won’t stop until we get it done!

https://x.com/davidmarcus/status/1862654506774810641

Here's some additional color on Diem/Silvergate, another chapter in my reporting on how Silvergate was screwed. This was a portion of the text that I cut from my most recent article in PW, slightly updated to reflect Marcus' comments:

How Silvergate was Doubly Screwed by Diem

Timeline of events:
- Facebook announces Libra in June 2019
- October 2019, Zuckerberg testifies in Congress regarding his plans for Libra
- October 2019, the Libra association suffers defections from key members, including Paypal and then others
- In Dec 2020, Libra rebrands to Diem and announces that they will not be pursuing a new multi-currency unit of account, but rather just be a dollar stablecoin
- In June 2021, Yellen tells Powell that Diem is a no-go, effectively dooming the project
- In Nov 2021, the President’s working group issues their report on stablecoins
- In Jan 2022, the Diem Association winds down and the Diem assets are sold to Silvergate for $182m
- In Jan 2023, Silvergate announces a writedown of all the Diem assets to 0
- In Jan 2023, regulators release joint statement discouraging banks from touching crypto
- March 2023, Silvergate voluntarily liquidates

David Marcus points out that Diem being killed off was a fully political act from Yellen, but there’s another chapter here, which is the post-Facebook life of the project.

After it became clear (in Summer 2021) that the Fed/Treasury wouldn’t permit Facebook to launch the project, Silvergate (which was one of Facebook’s bank partners on the project originally) was still induced to buy the assets, in large part because of the President’s Working Group report on stablecoins in November 2021. Individuals familiar told me:

“The PWG went ahead and said they would prefer that a regulated financial institution issue a stablecoin (rather than a tech company like Facebook). That’s why Silvergate bought the Diem assets from Facebook. The bank acquired Diem because the PwG said to, but then there was a change in policy regarding bank issuance of stablecoins.”

Individuals at the bank told me: “We had tried to launch a stablecoin with Diem. We were ready to launch a fully dollar-backed stablecoin in July 2021. BNY was going to hold the reserves (this was before we acquired the Diem technology). It came down to Jay Powell’s lunch with Yellen. This was reported by the FT. Jay goes to Yellen and says ‘they’ve done everything we’ve asked them to do.’ Yellen says ‘if you give them the green light you’re on your own politically’. A day later, we got a call from the GC of the Fed saying ‘we cant support this, we think it’s too risky.’ They didn’t say ‘this isn’t legally permissible’ – it was “wink wink nod nod, if you do this we’re coming after you.” ’

“We thought maybe Facebook was the problem, so we acquired the tech and had plans to launch it on our own, and they told us no there again.” In the end, Silvergate leadership felt that they were bait-and-switched by the Biden White House. It had been implied to them that the reason Diem met so much opposition was because of Facebook’s bad reputation at the time, and that the Biden admin would be more favorable to a bank-issued stablecoin.

Instead, Silvergate was forced to zero out their investment when they were told no once again. Then the political winds shifted for good and the Fed/OCC/FDIC came out strongly against crypto post FTX. (In August 2023, the Fed would take an even more explicit anti-stablecoin stance, strongly discouraging banks from issuing stables. Today, no US banks issue stablecoins.) This wasn’t chump change. Silvergate voluntarily liquidated in March 2023 and so the disposition of an asset acquired for $182m would have made a material difference to the creditors and shareholders (this is still being worked out).

Those knowledgeable at Silvergate even told me that they thought they were doing the government a favor by acquiring the Diem assets and launching them from the most compliant and regulated platform possible, a bank. (Ironically, Democrats negotiating the stablecoin bill today are trying to force the square peg of stablecoin issuers into the round hole of banking regulation.) Instead, they feel that it brought the eye of Sauron on them, and actually catalyzed the Choke Point-esque behavior that would ultimately doom the bank in 2023. “We didn’t launch Diem [in the end] and they still came after us,” I was told. “It put us on their radar. The fact that Jay Powell even knew who Silvergate was, was wild to us.”

You could maybe call Silvergate leadership naïve for spending a large sum on the Diem tech even after Yellen killed off the first iteration of the project. But the PWG report did seem to strike a friendlier tone, and Silvergate leadership had gotten the impression that Diem could launch if done by a fully regulated bank. Instead, they took a total loss on the $182m investment, and likely attracted further scrutiny from the Fed that would ultimately cause, in 2023, the total evisceration of their crypto business, and their ultimate demise.

(This is intended as a postscript to my original reporting that can be found here: https://x.com/nic__carter/status/1840809389638500693 )

https://x.com/nic__carter/status/1862680701054677091

Here's a special Black Friday FATF Thread to complement @pmarca 's explainer on the Joe Rogan show about how the USG's "control mechanism" was applied to Big Tech by emulating the way it already controlled the banking system.

2/ FATF stands for the Financial Action Task Force (FATF). It originated in 1989 as a one-year fact-finding mission, championed by the United States during the “war on drugs,” but has since evolved into one of the most influential, yet opaque, financial regulators in the world.
...

More (long):
https://threadreaderapp.com/thread/1...870345225.html

Long xitter thread from Caitlin Long on how to fix the US debanking problem:
https://threadreaderapp.com/thread/1...025601933.html

Marc Andreessen and the CFPB: Debunking the Debanking Debunkers
Assessing Marc Andreessen’s claims regarding the debanking of tech founders and the role of the Consumer Financial Protection Bureau
...

More:
https://medium.com/@nic__carter/marc...s-33e934442647

From the chief legal officer at Ripple:

Operation Chokepoint 2.0: The Origin Story

- In 2012, regulators (FDIC, OCC, Fed) weaponized banks against disfavored industries (gun stores, payday lenders, etc.) under the original “Operation Chokepoint.” Fast forward to 2021: crypto is the new target.

- 1/28/21: Biden's OCC kills "Fair Access To Banking Rule."

- 11/18/21: OCC demands pre-approval for banks' crypto activities (Interpretive Letter 1179).

- 4/7/22: FDIC follows suit.

- 1/3/23: Fed, FDIC, OCC warn banks of “crypto risks.”

- 2/23/23: Another warning issued.

- These warnings include the boilerplate: “Banks are not discouraged from serving crypto customers.” As a former bank GC, I can decode that: "Don’t even think about it."

https://x.com/s_alderoty/status/1862869654005239963

Longer thread on the FDIC’s 2022-23 “pause letters” to banks regarding crypto-asset activities in 2022 and 2023. Strap in
...

More (long):
https://threadreaderapp.com/thread/1...196715487.html

Crypto banking activity was paused or prevented by the Federal Deposit Insurance Corp. at a large number of U.S. banks in 2022, according to communications pried loose by a research firm hired by Coinbase Inc. (COIN).

Coinbase's hired help, History Associates Inc., had taken the FDIC and the Securities and Exchange Commission to court in June and finally won access to certain internal FDIC communications. The heavily-redacted documents emerged on Friday, showing the banking regulator slamming the brakes on lenders offering or considering products and services in the digital assets sector.

"We respectfully ask that you pause all crypto asset-related activity," the regulator wrote in one of the 23 letters shared by the crypto exchange. "The FDIC will notify all FDIC-supervised banks at a later date when a determination has been made on the supervisory expectations for engaging in crypto asset-related activity."

The industry has long complained that it's been under a banking crisis in which companies and leading crypto figures are blocked from U.S. bank services. Coinbase Chief Legal Officer Paul Grewal argued that these letters represent hard evidence that crypto businesses were systematically walled off from banking by the regulator.

"The letters show that this was no conspiracy theory at all, that this was not just rank speculation or the musings of a paranoid industry," Grewal said in an interview with CoinDesk. "There was a concerted plan on the part of the FDIC that they carried out — without any reluctance — to deny banking services to a legal American industry. That should give everyone great pause."
...

https://www.coindesk.com/policy/2024...oinbase-reveal

[Bern]

Some juicy stuff in here:

�� FDIC Scandal EXPOSED!��Whistleblowers leak damning recordings revealing corruption, abuse, & cover-ups at the highest levels! �� From sex scandals to insider trading & crushing whistleblowers—FDIC’s darkest secrets are out! #FDICLeaks ���� (a thread ��)

Preface: None of the below should implicate the hard-working line-level employees who want nothing more than to do their jobs. This thread focuses on executive management at the agency, with 1-2 exceptions for middle managers. FDIC has an important job; eliminating it will not solve these issues.

Warning: The post below contains accounts of sexual assault and agency coverup, which may invoke emotions. Please be mindful if reading.*

We have been working closely with whistleblowers who have secretly recorded and intercepted hundreds of hours of communications, including private calls, agency telephone conversations, and mainly Microsoft Teams meetings at @FDICgov over the past seven years. The findings are nothing short of astonishing. They show signs that the FDIC is the most corrupt, disgruntled, and defunct organization ever.

We cannot discuss how these recordings were obtained; we can only say we have them. Some of the information below has been integrated into previous posts, but we provide an initial look at some of the cohesive findings. Astute observers will note we've been hinting at the below from our first post.*

As discussed in the preface, we are only commenting on recordings obtained from mid-level to senior executives, not line-level employees who mostly follow directions and policy.

We are working closely with several attorneys and intend to approach media outlets once we have a strategy. However, given the current environment, especially with VC Hill taking office soon, we believe it's the right time to reveal some key findings. We debated not providing a summary until we could publish the recordings themselves but decided the truth must come out, especially with a changing of the guard. We might not need to publish these recordings if the people involved do the right thing: resign and VC Hill opens up the FDIC's records.

The allegations below are alleged to be true but remain unverified as we are not releasing the recordings. Moreover, we delayed releasing these facts as if we had released them earlier; we were concerned that the FDIC would enact new restrictions or entirely change their posture to prevent us from getting new recordings. Because of their knowledge of some of our recordings, the FDIC has already passed a new directive regarding employee recording and has taken disciplinary action against several employees intending to chill future recordings.

We believe the time is right as we can no longer sit idly by allowing FDIC to control the narrative with inaccurate and patently false assertions using friendly journalists to amplify their reach.

Among the content in the recordings:*
1. FDIC senior managers laughed at “crypto” supporters' attempts to hold them accountable online, suggesting they’d never be organized enough to hold @FDICgov accountable, especially with the FDIC's disinformation campaign. The FDIC specifically discussed how they'd win, as they have a dedicated media relations team that pays more than most individuals make. One employee bragged that his annual salary is probably more than @nic__carter makes in a decade. Nic is not the only target, but we feel secure disclosing his name.

2. FDIC discussing intentionally mislabeling documents or including “mixed language” that would allow for FOIA suppression. An attorney says, "As long as you're able to include something in the document that would give rise to a FOIA exception, chances are we can withhold the entire thing." Others suggested reading FOIA requests in the strictest fashion, only doing the exact search the requestor asked even if they knew other responsive systems or derivative terms would hold the records the requestor truly sought.

3. Discussions around including FDIC attorneys in meetings to meet the minimum standard to claim attorney-client exemptions on topics that might be targeted for FOIA. "If we've got an attorney in the meeting and they are giving legal advice, even if it's about FOIA, it's still enough for us to claim attorney-client privilege over the entire meeting and its derivative products."

4. An organized coverup to suppress and minimize the rapes and sexual assaults occurring at the FDIC hotel and office buildings, including going so far as to secretly release suggestive photos and videos to suggest that rape victims "asked for it." Specifically, one Division of Administration (DOA) official said, "We've got the CCTV of her walking back in looking like that. I don't think anyone will second guess what she was looking for."

5. Discussions on whether FDIC chairman Martin Gruenberg's hands-down-his-pants scandal threatened his chairmanship and provided a verbal playbook such as instructing executives to "claim it's like having your grandpa tuck his hands inside his belt, just a natural reaction."

6. Concerns about whether revelations that Chairman Gruenberg physically abused his wife would end his tenure and essentially make it impossible for the agency to recover from the WSJ reporting. "We're concerned [the media] has become close as we've seen they FOIAed the local police department at Marty's house for any police records." They were concerned about FOIAs submitted to Mr Gruenberg's local police department.

7. Office of Communications Director Amy Thompson, Senior Media Affairs Officer Brian Sullivan, and others discussed with several reporters the possibility of providing the agency with "less harsh" coverage of specific topics, including Chairman Gruenberg's antics and Operation Choke Point 2.0, in exchange for further information about other "higher value" issues in a quid quo pro arrangement (we may name these individuals personally in a subsequent post).

8. Communications on how to stop sources from corresponding with journalists by "making an example" out of employees publicly within the agency and then spreading the truth via rumors that conversations around @rebeccaballhaus reporting and how to stop it. FDIC went as far as potentially having employees contact Rebecca and provide alternative accounts of what occurred to discredit the honest whistleblowers who contacted her.

9. How to disrupt @JelenaMcW leadership to and after she left strategies to blame any issues on her. Specifically, RMS Director Doreen Eberley and DCP Director Mark Pearce were involved in conversations about how McWilliams had no idea what she was doing and suggested it'd be easy to blame her for issues arising outside her tenure. Executive employees talked about fighting McWilliams at every turn because she was "not one of us." They laughed at her cooking book, one executive saying he had a video of himself burning it in his fireplace.

10. Specific meetings about this very account @FDIC_Exposed talking about how to minimize its impact and a 10-point action plan to feed to journalists or others questioning the accusations raised by stating it's an account run by fed-up employees with nothing better to do and a chip on their shoulder. After-day events conversing about a whiskey party where some executives poked fun at 'online detractors' saying they would never prove anything going so far to say (in an indirect reference to Signal) 'good luck even subpoenaing records that don't exist.

11. Conversations including employees airing personal vendettas against organizations such as @custodiabank, @coinbase, and others because they would not give into FDIC demands, and some FDIC execs thought the employees of these organizations were "$#@!s who think they know how to regulate themselves." There are at least eight other named organizations, but we want to discuss this with them before naming them.

12. Discussions about the sustainability of regulatory institutions if blockchain and Web3 take off. Specifically, concerns about what might become of the 5,000+ permanent employees should Web3 and blockchain companies prove that finance is stable and viable without banks.

13. Concerns have been raised that the US government may lack the ability to restrict, control, and monitor citizens' financial transactions if Web3 and decentralized finance continue to advance at their current pace. "Who needs deposit insurance when you can't lose money on the blockchain?"

14. Concerns by Senior Deputy Director Jenny Traillie in a conversation with Brian Sullivan that reporters were close to releasing articles about her trades and profits on Silicon Valley Bank (SVB) and Signature Bank (SBNY). You heard it right: a senior FDIC executive responsible for supervising and overseeing SIFIs owned, traded, and profited from two failed FDIC banks. Moreover, they discussed active methods to explain away how she actively supervised and held stocks of (these were not individually named in the recordings, but we have records from her own ethics filings):*
(a) Morgan Stanley Private Bank NA (BDPS),
(b) Morgan Stanley Bank NA,
(c) Signature Bank New York (SBNY),
(d) SVB Financial Group (SIVB),
(e) JP Morgan Chase & Co (JPM),
(f) Charles Schwab NEW (SCHW),
(g) East West Bancorp (EWBC),
(h) Citizens Financial Group Inc (CFG),
(i) American Express Co (AMEX),
(j) Synchrony Financial (SYF),
(k) Bank of America Corp (BAC),
(l) California Bancorp Common Stock (CALB)

15. General Counsel Harrel Pettway called FDIC whistleblower Michael Williams a piece of trash for reporting Harrels' intentionally misfiled ethics forms. Harrel tried to previously fire the same FDIC employee for not disclosing a subsidiary company on his ethics forms whilst he did not disclose numerous holdings, including his own business, which he dissolved after being confronted.

16. Conversations with Office of Communications Director Amy Thompson with several reporters trying to explain away her actively trading bank stocks, saying her financial advisor did it and she did not know anything about her profiting on bank stock trades, including on Synchrony Financial, State Street Corporation, Citizens Financial Group, Inc., Bank of America Corporation, JPMorgan Chase & Co., and Citigroup Inc. *

Moreover, we have recordings of Amy discussing concerns that reporters were close to exposing kickback agreements that reciprocal organizations gave to her husband, Brian Thompson because she awarded them contracts under the guise and preference of "helping veterans."

Further communications discuss concerns from FDIC attorneys that Amy was hiding and deleting internet content critical of the FDIC, including suppressing posts on X (by hiding the responses to the FDICgov official account) that she did not like. They verbally told her she could not suppress communications she did not like as it was against the law. Amy rebuffed the suggestion but agreed not to further delete or hide communications with which she disagreed.

17. Discussions by OCISO Deputy Director Rami Dillon concerned that reporters were getting close to exposing her awarding contracts to companies who privately agreed to provide derivative kickback hiring to her relatives. Essentially, Rami would award a contract to a company, and that same company would hire her relative, specifically Manpreet Dillon, for another contract at a fantastic wage.*

18. Agency infighting, including Doreen Eberley's personal campaign to attack another FDIC division, CISR, and reclaim their supervisory authority. She talks about discrediting fellow employees and personally attacks other employees in CISR, claiming they are incompetent to do their jobs to merge CISR back to RMS.

19. Division of Information Technology Deputy Director Jyotsna Jame (who is likely now gone) discussed concerns about her trading numerous stocks and holding bank stocks and her wilful ethics nondisclosure being exposed after a whistleblower reported it to the agency.

20. Human Resources Specialist (Labor/Employee Relations) Lisa Lander discusses how to fire whistleblowers and ensure they do not return because they are bad people. The recordings include her forcing managers to use certain words in their reports and counseling others on following a process that makes it nearly impossible for the employee to appeal the findings.

21. Agency supervisor Jennifer Lucas (now in Chief of Training Section I in Risk Management Supervision) *discussed how she had sex with another employee who she knew was a whistleblower to gain leverage over him, then reported him to FDIC's ethics department using disparaging remarks in an attempt to get him fired. She disclosed this to two other executives in an attempt to advance her career.

This is just the beginning. We've summarized previously disclosed facts and distilled them into a cohesive narrative; there's far more to come.

As discussed in this narrative, the following employees must be fired and jailed:
1. Legal General Counsel, Harrel Mychal Pettway
2. Office of Communications (OCOM), Director Amy Thompson
3. Office of Communications (OCOM), Senior Media Relations Officer Brian Sullivan
4. Office of the Chief Information Security Officer (OCISO), Deputy Director Rami Dillon
5. Division of Complex Institution Supervision and Resolution (CISR) Senior Deputy Director Jenny G. Traille
6. Divison of Administration (DOA) Human Resources Specialist (Labor/Employee Relations), Lisa Lander
8. Risk Management Supervision (RMS) Training Section I, Chief, Jennifer Lucas
9. Risk Management Supervision (RMS), Director Doreen Eberley
10. Division of Consumer Protection (DCP), Director Mark Pearce

We have a comprehensive list coming of other employees who must go, but this is the start.

- From your friends at FDIC Exposed

https://x.com/FDIC_Exposed/status/1878135189253284280

[Bern]

There are a lot of recent developments on this story. I have not been updating this thread with them. Most of the developments are encapsulated in this discussion with three of the main protagonists in the developing story:

https://www.youtube.com/watch?v=LQA-6w8nsNs

[Bern]

Bold emphasis is mine:

On January 20, 2025, Travis Hill became Acting Chairman of the Federal Deposit Insurance Corporation (FDIC). Acting Chairman Hill issued the following statement:

“It is my honor and privilege to serve as Acting Chairman of the FDIC. While the FDIC faces a broad range of issues, and as always will fulfill our mandate to promote a safe, sound, and resilient banking system, below is a list of matters I expect the FDIC to focus on in the coming weeks and months.”

• Conduct a wholesale review of regulations, guidance, and manuals to ensure our rules and approach promote a vibrant, growing economy.
• Adopt a more open-minded approach to innovation and technology adoption, including (1) a more transparent approach to fintech partnerships and to digital assets and tokenization, and (2) engagement to address growing technology costs for community banks.
• Improve the bank merger approval process and replace the 2024 Statement of Policy to ensure that merger transactions that satisfy the Bank Merger Act are approved in a timely way.
• Withdraw problematic proposals from the past three years, such as proposals on brokered deposits and corporate governance.
• Improve the supervisory process to focus more on core financial risks and less on process, and reevaluate the supervisory appeals process.
• Enhance our readiness and preparedness for resolving large financial institutions, incorporating lessons from the far-too-costly failures of 2023, including the need to be much more proactive and nimble and to improve the bidding process.
• Pursue adjustments to our capital and liquidity rules to appropriately balance driving economic growth with ensuring safety and soundness and resilience to shocks.
• Encourage more de novo activity so there is a healthy pipeline of new entrants in the banking sector.
• Work to ensure law-abiding customers have, and do not lose, access to bank accounts and banking services.
• Modernize implementation of the Bank Secrecy Act.
• Study deposit behavior to develop a more sophisticated understanding of the relative stability of different types of deposits and depositors.
• Reevaluate our disclosure practices, and expand transparency in areas that do not impact safety and soundness or financial stability.
• Ensure the FDIC remains within our statutory mandates, and stops coloring outside the lines.
• Pursue internal efficiencies to ensure we are serving as responsible stewards of the Deposit Insurance Fund.
• Reestablish a strong workforce culture, where misconduct is not tolerated and those who engage in misconduct are held accountable.

https://fdic.gov/news/press-releases...an-travis-hill

Operation Chokepoint 2.0 is over.