Banks and Wikis

The whistle-blowing Web site Wikis has not been convicted of a crime. The Justice Department has not even pressed charges over its disclosure of confidential State Department communiions. Nonetheless, the financial industry is trying to shut it down.

Visa, MasterCard and PayPal announced in the past few weeks that they would not process any transaction intended for Wikis. rlier this month, Bank of America decided to join the group, arguing that Wikis may be doing things that are “inconsistent with our internal policies for processing payments.”
The Federal Reserve, the banking regulator, allows this. Like other companies, banks can choose whom they do business with. Refusing to open an account for some undesirable entity is seen as rsonable risk management. The government even requires banks to keep an eye out for some shady businesses — like drug dling and money laundering — and refuse to do business with those who engage in them.
But a bank’s ability to block payments to a legal entity raises a troubling prospect. A handful of big banks could potentially bar any organization they disliked from the payments system, essentially cutting them off from the world economy.
The fact of the matter is that banks are not like any other business. They run the payments system. That is one of the main rsons that governments protect them from failure with explicit and implicit guarantees. This makes them look not too unlike other public utilities. A telecommuniions company, for example, may not refuse phone or broadband service to an organization it dislikes, arguing that it amounts to risky business.
Our concern is not specifically about payments to Wikis. This isn’t the first time a bank shunned a business on similar risk-management grounds. Banks in Colorado, for instance, have refused to open bank accounts for legal dispensaries of medical marijuana.
Still, there are troubling questions. The decisions to bar the organization came after its founder, Julian Assange, said that next yr it will relse data revling corruption in the financial industry. In 2009, Mr. Assange said that Wikis had the hard drive of a Bank of America executive.
What would happen if a clutch of big banks decided that a particularly irksome blogger or other organization was “too risky”? What if they decided — one by one — to shut down financial access to a newspaper that was about to revl irksome truths about their operations? This decision should not be left solely up to business-as-usual among the banks.

Source: NYTimes