Palmetto State News

A decade-old Obama administration “operation” aimed at de-banking certain industries is back in the news, as the incoming Trump administration has announced plans to investigate a second iteration of the so-called “Operation Choke Point.”

The head of a South Carolina credit union was linked, through his membership on a Federal Deposit Insurance Corporation (FDIC) committee, to the original “Choke Point” operation.

Operation Choke Point 1.0

Operation Choke Point was a 2013 initiative by the U.S. Department of Justice that pressured banks to sever ties with businesses deemed “high-risk” by certain Obama administration officials, such as payday lenders and gun dealers.

Critics argued that this strategy unfairly targeted legal industries without due process, leading President Donald Trump to terminate the operation in 2017.

Choke Point 2.0

Recently, allegations have surfaced about a similar campaign, dubbed "Operation Choke Point 2.0," allegedly targeting the cryptocurrency sector.

Documents obtained by Coinbase suggest that the FDIC advised banks to "pause" crypto-related activities in 2022, raising concerns about potential de-banking of crypto firms.

In response, David Sacks, appointed as the incoming Trump administration's "Crypto Czar," has acknowledged these concerns, stating that "there are too many stories of people being hurt by Operation Choke Point 2.0" and emphasizing the need for an investigation.

Additionally, the Trump advisory team, including Elon Musk and Vivek Ramaswamy, is reportedly considering significant changes to banking oversight, potentially targeting agencies like the FDIC, which have been implicated in these de-banking practices.

In a recent episode of The Joe Rogan Experience, venture capitalist Marc Andreessen discussed the resurgence of de-banking practices reminiscent of the original Operation Choke Point.

"We've had like 30 founders de-banked in the last four years,” said Andreessen. “It's been a big recurring pattern." 

"There's no rules, there's no court, there's no decision process, there's no appeal,” Andreessen said. “Who do you go to to get your bank account back?"

Calling it “Operation Choke Point 2.0,” Andreessen described it as a "privatized sanctions regime" that allows bureaucrats to target American citizens similarly to how the U.S. imposes sanctions on foreign adversaries.

"They don't have to de-bank you, they just have to put pressure on,” he said. 

Andreessen argued that this enables the government to sidestep constitutional limitations on direct action against individuals.

SC Credit Union Head’s "Choke Point" Ties 

Martin Eakes, founder of the Center for Responsible Lending (CRL) and Self-Help Credit Union, which operates five credit unions in South Carolina, was named as an inaugural member of the FDIC’s “Advisory Committee on Economic Inclusion” when the committee was formed in 2006.

Michael Calhoun, the president of the Center for Responsible Lending and a former employee of Self-Help Credit Union, currently serves on the advisory committee.

This advisory committee “played a major role in combating the payday lending industry,” reported the Washington Free Beacon. “The FDIC’s efforts are part of a larger initiative involving the Department of Justice and the Consumer Financial Protection Bureau called Operation Choke Point.”

“The effort seeks to eliminate the ability of businesses that federal regulators deem distasteful, exploitative, or dangerous to obtain financing from major American banks,” said the report.

The program’s critics, reported the Free Beacon, say “it is designed to shut down legitimate businesses that the Obama administration opposes on ideological grounds by pressuring banks to stop lending to the classes of businesses it singles out as allegedly destructive or illegitimate.”

Such businesses include legal enterprises like payday lenders, gun stores, and tobacco companies.

“Operation Choke Point is one of the most dangerous programs I have experienced in my 45 years of service as a bank regulator, bank attorney and consultant, and bank board member,” wrote former FDIC Chairman William Isaac in The Hill. 

“When the FDIC floated the pilot program, Eakes said it could be used as a means to eliminate the competition,” reported the Free Beacon. "Eakes ‘suggested that the most valuable outcome of the pilot project might be to convince policymakers that there is an alternative to payday loans, thereby making it more palatable to prohibit payday loans,’ according to minutes of the meeting.” 

Self-Help’s SC Lobbying

Self-Help Credit Union was very active in South Carolina’s 2024 legislative session, which spanned from January to May.

During the 2024 legislative session, Self-Help Credit Union and its advocacy arm, the Center for Responsible Lending (CRL), sought to restrict how installment lenders market their services with Senate Bill 910. The bill did not pass during the 2024 legislative session.

S-910 would have regulated and potentially restricted small-dollar loans in South Carolina by imposing restrictions on how lenders market their services to households and which households can be targeted.

Industry representatives raised concerns about how the bill depicted their practices and emphasized its unintended effects, including the risk of potential redlining due to its stringent restrictions on the neighborhoods where lenders could advertise.

Opponents of the bill argued that it could limit credit options and stifle competition in the lending sector for South Carolinians.

“I'll just say we ought to be very careful with the ways in which the government interferes in the private sector,” State Sen. Wes Climer (R-York) said during a committee hearing on the bill. “And one of the things that historically has yielded the greatest results for consumers.”

According to the IRS, that effort was funded in part by more than $2 million provided to the CRL traced back to left-wing activist George Soros. 

The Sandler Foundation, founded by Herbert and Marion Sandler, also donated over $25 million to the CRL from 2016 to 2022, supporting efforts to restrict small-dollar loans in South Carolina. The Sandlers, known for their controversial role in the 2008 financial crisis as subprime mortgage pioneers, funded the creation of the CRL through their foundation.

Kerri Smith, the South Carolina president of Self-Help Credit Union and a leading advocate for the bill through the “SC Fair Lending Alliance,” of which Self-Help and CRL are members, was targeted by critics who suggested her lobbying efforts were motivated by special interests and would harm consumers.

Connections to Soros and the Sandlers came back to bite Smith who faced criticism for pushing the legislation with help from organizations linked to leftist causes. She lost in the primary to Chris Huff, who went on to win the State House seat. 

The SC Lending Alliance is already featuring pre-written lobbying letters on its website, aimed at getting the SC legislature to regulate small-dollar loans during the 2025 legislative session.