The Federal Deposit Insurance Corporation (FDIC) has a new way to protect us and our banks. It proposes a mandatory program for insured nonmember banks called “Know Your Customer.” (Member banks are presumably already under such an obligation.)
This is not some friendly way for banks to serve us better. No, this is right out of Orwell. Here’s what Big Brother would require the banks to do in the name of getting to know us:
- Set up procedures to identify their customers;
- Determine their customers’ sources of money;
- Establish their customers’ “normal and expected transactions”;
- Watch for “transactions that are inconsistent with those normal and expected transactions”;
“Report any transactions that are determined to be suspicious, in accordance with the FDIC’s existing suspicious activity reporting regulation.” So if your bank activity consists of a biweekly deposit of your paycheck, and Aunt Sadie dies suddenly, leaving you $5,000, which you dutifully deposit in your checking account, your bank, seeing a transaction that is inconsistent with your normal and expected transactions could inform the government forthwith. Some bureaucrat who makes his living nosing into other people’s business might decide to find out where that money came from. After that, it’s deuces wild.
Why does FDIC want to keep such close watch over us and our financial activities? According to the agency, the new regulation will “reduce the likelihood that insured nonmember banks will become unwitting participants in illicit activities conducted or attempted by their customers.”
Let me translate: We’re all under suspicion. Thus crumbles one of the pillars of Western jurisprudence, the principle that citizens are to be free from general suspicion of wrongdoing by government. The honored term “probable cause” stands for the principle that before the government may investigate a citizen, it must have some good reason to believe a law was broken. (Police, prosecutors, and judges of course don’t consistently observe the principle.)
Excuse me, is this still the United States of America? Or did I forget that I got on a plane and landed in Albania?
If the FDIC rule is adopted, America will have crossed the Rubicon into naked authoritarianism for sure. (Considering other practices long engaged in by the state, that is a charitable statement indeed.)
There’s another angle to this regulation. Some banks are already obliged to engage in those procedures. They and the FDIC wish, in the agency’s words, to “level the playing field.” I take this to mean that banks believe that we don’t like that snooping and will patronize banks that don’t do it. The proposed regulation will see to it that we can no longer find such banks.
The program is being sold as necessary to protect the reputations of banks. “When transactions at financial institutions involving illicit funds are revealed,” states the announcement in the Federal Register, “these transactions invariably damage the reputation of the financial institutions involved and, potentially, the entire financial sector.”
With that flimsy rationalization, the FDIC is starting to sound like Bill Clinton. Let’s say you learn that one of your bank’s customers is a professional hit man who has been depositing his illicit money there for years. Are you going to quit that bank and go elsewhere because it unwittingly accepted those ill-gotten gains? I doubt it. Citizens who are trusted with the vote are likely to understand that banks are properly ignorant of, and therefore not responsible for, how their depositors obtain money. My 11-year-old son knows that!
Somehow I think banks can protect their reputations without heavy-handed government’s mandating that they snoop on their customers.
FDIC asks us not to worry about losing our privacy. It expresses confidence that the banks will acquire only the information necessary to the task and will not misuse that information.
Banks will be concerned that gathering too little information and failing to turn it over to the government will get them into trouble with the authorities. (Just as doctors, afraid of running afoul of the Drug Enforcement Agency, sometimes underprescribe painkillers.) Thus bankers will most likely err on the side of kowtowing to the state. Kiss the last bits of your financial privacy goodbye.
The government’s rationalization for this systematic snooping relates to its “need” to ferret out certain illegal activity. When you realize that such activity invariably entails victimless, or consensual, “crimes,” the whole blasted idea is exposed for the naked power grab it is. From the beginning, libertarian opponents of the war on drug users warned that outlawing consensual activity (no one is forced to buy, sell, or use drugs) would lead to wholesale violation of our civil liberties. Under the guise of ending drug use, the government is now able to do things that would have appalled the American people just a few generations ago. This is the latest thrust of the jackboot onto the neck of Lady Liberty.
Let’s not be so surprised though. The Clinton administration has an extraordinarily bad record on civil liberties, as even his apologist Alan Dershowitz acknowledges. Tim Lynch of the Cato Institute summed up the Clinton record this way:
“Although President Clinton has expressed support for an ‘expansive’ view of the Constitution and the Bill of Rights, he has actually weakened a number of fundamental guarantees, including those of free speech and the right to trial by jury and that against double jeopardy. He has also supported retroactive taxes, gun control, and warrantless searches and seizures. The president’s legal team is constantly pushing for judicial rulings that will sanction expansions of federal power. President Clinton’s record is, in a word, deplorable. If constitutional report cards were handed out to the president, he would receive an F.”
Lynch added that “the Clinton administration has repeatedly attempted to play down the significance of the warrant clause. In fact, President Clinton has asserted the power to conduct warrantless searches, warrantless drug testing of public school students, and warrantless wiretapping.” To give one example from Lynch’s paper (“Dereliction of Duty: The Constitutional Record of President Clinton,” Cato Policy Analysis No. 271), Clinton supports “roving wiretaps” for the FBI without the necessity of a court order.
Of course, Clinton also showed his devotion for individual liberty with the little disturbance at Waco.
In fact, we all know by now how Clinton views the American people. He doesn’t see us as rights-bearing, independent individuals. Rather, we are his children. He’s the ruling, but kind, papa. Is there any other way to explain his statement on why the government, not we individually, should decide how to spend the budget “surplus” — which is a euphemism for the hitherto unspent fruits of confiscation?
Here’s what he said the day after his State of the Union address: “We have no permanent deficit anymore, the natural condition is a surplus, okay — so the question is, what do we do with it? We could give it all back to you and hope you spend it right. But I think — here’s the problem. If you don’t spend it right, here’s what’s going to happen.” He went on to talk about the demise of Social Security and Medicare, which by their very nature will go bankrupt.
In other words, we can’t be trusted with our own money. We can’t even be trusted to save for the future. So Papa Clinton will open a savings account for each of us. Then whenever we put some money in it, he will match it. That way we’ll learn to save. Papa will take care of us. Let’s hope we are worthy of his love and attention.
Any president who thinks like that will think nothing of having our banks watch us and report suspicious activity to him. It is all of a piece. He shelters us from harm, and he makes sure we behave. You don’t get one without the other.
The sad thing is that the American people are eager to take the deal.