The National Shooting Sports Foundation (NSSF) has denounced the US Senate’s confirmation of Martin J. Gruenberg as Chair and Member of the Board of Directors of the Federal Deposit and Insurance Corporation (FDIC). NSSF’s condemnation was driven by Gruenberg’s leadership of the FDIC from 2011 to 2018, during which he partnered with the Obama Justice Department to run Operation Choke Point, which restricted banking access to businesses of which the administration disapproved, including firearms manufacturers and dealers.
“The Senate’s confirmation of Martin Gruenberg is a flagrant disregard for his role in illegally using the levers of government to force discriminatory banking policies on the firearm and ammunition industry,” said, Larry Keane, NSSF’s Senior Vice President and General Counsel. “His culpability in shepherding this illegal operation was not only previously investigated by Congress but was also highlighted by Senate Banking Committee Republicans. Mr. Gruenberg’s leading role in creating, administering, and punishing the firearm industry through illegal means simply because he, President Barack Obama, and former Attorney General Eric Holder found this industry politically disfavored clearly disqualified him from being confirmed to a position of public trust.”
What is the FDIC?
The FDIC was established in 1933, at the height of the Great Depression, to help build public trust in banks. Basically, every federally insured bank, which is almost all banks, insures a depositor’s money up to $250,000. That means if the bank folds, the feds pay off the depositors, so they don’t lose their money.
It was a safeguard against bank runs, which are caused when people fear the bank will go under. When everyone draws their money out in a panic, even solvent banks often can’t stand the strain. If people were assured that their money was safe, the ruinous bank runs marking the Depression’s first few years would stop. And it worked.
But the FDIC also supervises and investigates banks to enforce federal banking laws. This is done through an objective scoring system known as “CAMELS.” The system considers a bank’s earnings, available capital, liquidity, and stuff like that. But, in 2011, Gruenberg, as part of the Obama Administration, added a new, subjective criteria called “reputational risk.” It assesses whether the bank has a bad public image.
“Reputational risk” grew, according to the FDIC, from business dealings involving certain industries, including firearms and ammunition manufacturers and retailers. To show you how the Obama Administration viewed the firearms industry, it was lumped in with others such as “cable box de-scramblers,” “online gambling,” “fireworks sales,” and “Ponzi schemes.” Besides these dubious activities, other legitimate businesses like “coin dealers” and “tobacco sales” were included.
The FDIC Pressured Banks
The FDIC essentially threatened banks with investigations. Essentially, guidance issued by the FDIC and Justice Department told them they would be subpoenaed to appear before an FDIC panel to answer questions about dealing with the disfavored industries or businesses.
Few banks would willingly risk running afoul of the feds, so many severed or restricted their relationships with such businesses, including the firearms and ammunition industries:
- Powderhorn outfitters of Hyannis, Massachusetts was turned down for a loan by TD Bank in 2014 because they sold firearms. Despite a 20-year relationship, the bank manager told them, “Your credit history is great, but the bank is turning you down because you sell guns.”
- McMillan Group International was dropped by Bank of America in 2012 because they expanded from making gun parts to manufacturing complete firearms.
- Bank of America also suspended the account of American Spirit Arms, which made AR-15 rifles, after a surge in sales in late 2012. That was the sales spike after the Sandy Hook tragedy, when everyone thought Obama would get his “assault weapons” ban. The bank manager told American Spirit that they should not be selling guns or gun parts on the internet.
These are just a few of many such stories. It all goes back to Operation Chokepoint, in which Martin Gruenberg played a major role.
Congress Investigates Operation Chokepoint
The House Committee on Oversight and Government Reform investigated Operation Chokepoint in 2015. Some of the findings include:
- The Justice Department knew their tactics harmed legitimate, lawful businesses, but they continued anyway.
- The Justice Department believed that lawful businesses should be able to prove to their banks that they had done nothing wrong. That, of course, is just about impossible, considering the feds directly warned banks to drop certain customers.
As the hearings brought Operation Chokepoint’s abuses to light, Frank Keating of the American Bankers Association penned a Wall Street Journal op-ed in which he said that the Justice Department and FDIC were “asking banks to identify customers” who were “simply doing something government officials don’t like.” Banks were forced to deny access to financial services for those customers.
The Economist added that the expense of an investigation was so threatening that “banks have good reason to be supremely cautious in their interpretation of the law, even if it means tossing out blameless clients.”
Of course, the Justice Department and the FDIC, including Eric Holder and Martin Gruenberg, knew all this. That’s why they did it. Depriving businesses of financial services means they won’t be in business very long. But that’s how the Obama Administration rolled when it came to guns.
A Not Surprising Nomination
No one should be surprised that the equally anti-gun Joe Biden nominated Gruenberg to the FDIC position. Honestly, anti-gun credentials likely had little, if anything, to do with it since Biden and Obama share similar fiscal philosophies. But it does show that the current administration sees nothing wrong with Operation Chokepoint, other than maybe wishing it was more successful.
Good for the NSSF for calling Gruenberg out. If the feds try something similar in the future, perhaps we will see it coming.
Much of this information was sourced from Dave Kopel’s detailed December 2015 article on Operation Chokepoint in America’s 1st Freedom.
