The Chase porn scandal is what brought inequitable treatment into the forefront, but it isn’t just what you thought. It’s much, much worse.
Behind the Green Door at Chase Bank
It made national headlines when Chase Bank shut down the bank accounts—business and personal—of a handful of people who work in adult entertainment, with the media jumping at the chance to talk about porn. But the truth is, it could happen to anyone. Banks can pretty much do whatever they want to you; more important than that, they’re obligated to scrutinize you. See, the banking industry used to be a much more personal business. You’d be friends with the local banker, and he would choose to do business with you based on what you did for a living, your character, and whether he liked you—or he’d choose not to do business with you based on those same things, or because he was racist. Now, you might know one of the tellers at your local branch, but you don’t know the people who are deciding whether or not to do business with you. So how do they decide?
Say you go to buy a gun. You know the dealer is going to do a background check. He tells you he’s going to do it, and he makes you sign a form saying you consent to it. The same goes for plenty of other things, like applying for a job. There is no such overt request for permission at the bank when you open an account, but for every account you’ve opened, there has been a thorough background check through several different systems. And it’s not just your social security number being run through some computer to see if a red flag comes up saying you’ve worked for Al Qaeda. It’s done by a team of people who determine where your money is coming from, what you do for a living, where you do it, and who pays the people who pay you.
Why, you might ask, do banks have the latitude to just go ahead and do all this? Well, it’s because of the Banking Secrecy Act (known as BSA to the people in the business), and its sister, the Anti–Money Laundering Act, which came out of our old friend the Patriot Act. Oh, yeah, that one. Almost forgot that was still on the books. But the Bank Secrecy Act started in 1970 and has been continually ratified as time has gone on. So what’s different now?
We’re in an era of banking in which the institution is so large that we feel it doesn’t matter what we do or where our money comes from, so long as we pay our fees and let the bank use our money for its own investments while it holds it. In reality, the current incarnation of the banks is close to the original model, and the idea that your banking transactions are private or secret is an illusion. Not only is it in the banks’ power to scrutinize every transaction you make, and to do research to see where your money is coming from, it is their fiduciary responsibility to do so.
This makes sense on one level: The banking industry wouldn’t do too well if it were to offer huge loans to people without doing some sort of risk assessment—as we all saw when the housing market crashed. But what exactly do the banks have to lose if someone holds a checking account and might be financially unsound in some way? Well, check fraud is really the last old-school hustle that still works. In fact, most of the facial recognition software in production is being developed to combat that particular trick. Who can blame the banks for wanting to protect themselves from fraud?
But if someone has had a checking account for years, with a good record, what exactly is the bank risking? Or, for that matter, even if a client has a lousy record, what does the bank stand to lose? Plenty of its income comes from overdraft fees, most of that from those who have the least financial stability and are likely to be the clients with the worst records.
When you open a bank account, you’re given a nice folder full of pamphlets that you probably end up never looking at. There’s a good reason why they give them to you, though. That supplementary material informs you that by signing your ATM card, you’ve agreed to a very long list of things that would have horrified you, had you bothered to read it. One relevant clause of Chase’s version opens: “We may close your account at any time for any reason or no reason. We are not required to close your account on your request.”
The information from Chase also includes these ominous statements:
- We may record or monitor any of our telephone conversations with you.
- We may decline or prevent any or all transactions to or from your account.
- We may remove funds from your account.
- We may cancel your card at any time with no notice.
- We may refuse any transaction.
- You authorize us to share information about you and your account with affiliates and third parties.
When I started looking into the Chase situation, I decided to see what the process was for opening an account. I went into a local branch asking about the possibility of opening an account, and after suggesting that I might have a lot of capital to drop into that account, I made my way up the chain of personal bankers until I was introduced to the bank’s premier service, Chase Personal Client. I was talking with the top personal banker at the branch, a very polite gentleman who clearly was very good at his job. I finally dropped the bomb.
“So, there’s a delicate matter here that I need to broach, but I’m not quite sure how.” I then related that I work for the adult entertainment industry and was concerned by stories circulating about the personal accounts of adult-film stars being closed without warning or explanation. “Yeah, it was in the papers,” the banker said, before quickly assuring me, “but for personal accounts, it doesn’t matter what you do for a living.”
Yeah, it had been in the papers. Everyone from the ultraliberal Mother Jones magazine to the super-conservative Fox News had run stories about it. Business Insider, Huffington Post, CNBC, New York’s Daily News, New York Post … everyone had jumped on the bandwagon. But no one had a real handle on why it occurred, or even what had occurred. Most of the articles merely covered the fact that the account closures were occurring. A few stories, however, made a hypothesis that it was the result of Operation Choke Point, an Obama-administration executive order allegedly designed to wage war on the porn industry.
Operation Choke Point was actually designed to curb small-scale fraud, which is a fairly large sink on the economy, and worth trying to stop. Among its many measures, the order says that banks should be cautious about doing business with fraud-prone companies. Among the dozen or so types of businesses listed, the adult-entertainment industry does appear. But this is far from a holy war on the industry as a whole, even if the porn industry was turned down for bailout money in 2009.
However, account closures are not being done by any other bank. In fact, other banks, including Wells Fargo, have taken out ads welcoming adult performers. Additionally, Chase is not closing the personal accounts of people in any of the other named industries. So what’s going on? Does Chase have some official agenda to deny financial services to members of the porn business?
Looking at the occurrences, there’s no temporal or geographic centrality. These were singular incidences in different places, at different times. It seems unlikely that this was the result of an agenda to shut down every account connected with the porn industry, or a regional manager who wanted to clean up his area of the country. So what did happen?
As often happens with buzz-building stories of this type, one article had a small amount of information, and things grew out of proportion very fast. For instance, these “facts”:
- Hundreds of porn stars all over the world had their accounts shut down.
Actually, no. There were fewer than a dozen closed accounts. [No idea, but businesses were hit harder than hell. -Ed.] - The accounts were all closed on the same day.
Also false. A few happened one month, several happened the following month, and one had happened years previously. Things work on a cycle in banks, so it’s not surprising that the letters issued were dated the same day, and then the same day of the following month. [All the business accounts were closed on the same day as far as we know. -Ed.]
So, again, what is going on?
The only logical explanation left is that someone way up the food chain at Chase feels guilty when they masturbate, and is trying to absolve themselves by putting a bump in the road of the “sinners.” Who could this be?
It would have to be someone sufficiently high up that nobody is tapping them on the shoulder after reading the articles in the paper, asking what they think they’re doing. Whoever it is would also seem to be someone at the national level, with no answerability. Who has the power to execute a unilateral anti wet dream like this? Not many people. There’s the C-suite, and there’s the board of directors. That’s about it.
There are 11 members of the JPMorgan Chase & Company board: Linda B. Bammann, James A. Bell, Crandall C. Bowles, Stephen B. Burke, James S. Crown, Timothy P. Flynn, Laban P. Jackson Jr., Michael A. Neal, Lee R. Raymond, and William C. Weldon. And of course the board includes the CEO, James Dimon.
If one looks at the bios of each of these people, they read much as one would expect, and might give others a pang of envy that they weren’t born into a similarly charmed life, and didn’t cultivate type-A personalities. But one guy stands out in a few ways, which is not atypical; companies will often bring in an iconoclastic element to avoid groupthink. This was done very pointedly in the case of recruiting Lee R. Raymond to the board, who was hired with the express intention of being a balancing force against James Dimon. He is sufficiently frightening and headstrong, and has been nicknamed “Iron Ass.” He’s devoutly Christian and has openly discussed his views on the intersection of Christianity and capitalist practices.
Raymond is a fascinating figure: a self-made man who started out as an academic and migrated to business almost by chance. He began his corporate career as a chemical engineer, then built Exxon up into the giant it became, and spearheaded its merger with Mobil. He also dealt with the blowback over the Exxon Valdez spill. Additionally, he publicly espoused his disbelief in global warming during his time running Exxon Nuclear.
So was it Raymond who made a few calls and had the accounts of the perpetrators of moral turpitude shut down? It’s impossible to know for sure, but he gets my vote.
Even if it were none of the people on the board and instead someone else on the national level, it’s clear that someone is wielding too much power, and abusing it without repercussion. And how does that happen? Why hasn’t there been an internal investigation to try to stop the flurry of bad press? Simple: Chase has bigger fish to fry. A company that gives loans to the Department of Defense could care less if a few thousand porn lovers boycott its checking services.
It’s easy to say that Chase is just a company like any other, and it should be able to exercise its right to refuse service to whomever it likes. But the same differences that obligate banks to scrutinize the lives of their customers must be balanced by the banking industry’s fiduciary responsibility to act impartially, and to not use its privileged status unilaterally to make the survival of specific persons or businesses difficult. The bankers are holding all the keys; they are guarding all the doors. They must be forced to act fairly. Banking is trust. When we open a checking account, we are entrusting the use of our money to an institution. We trust that if we need our money, we will be able to retrieve it. We trust that it will not be invested recklessly and lost. We trust that we will be paid interest on the savings we give them to hold. Above all, we trust that our bank will not shut down our accounts, freeze our assets, or block our transactions without good reason.
Chase has a long road ahead to re-earn my trust.
Originally publishing just over a decade ago now, many of us in the industry remember that Chase purge all too clearly, no matter what this author thinks. Might a fine fellow with a fancy degree. Flat wrong in this case. Particularly when you run a business, it can be a major hassle to change banks. Businesses almost never have just one account, you see, and when you go to the next bank to try to start up this process again, they always ask why your last bank closed the accounts. You can tell them that you have no idea, and you can tell them that you have not bounced a check in the 20 years you were with Chase, but this new bank may not believe you. After all, why would they close all your accounts for no reason? … Although legal and undoubtedly more accepted than it was back before the Internet took over distribution, working in this industry can still be difficult when life requires you to go out and interact with the “civilian” world. Heck we’d never be brave enough to talk like our current President does just in some random social media post. … By the way, we still get shadow-banned on social media too. … And we still sneer at Chase commercials. (Some of us will even boo out loud.)
