This is the Kator Daily Podcast for Monday, September 16, 2024. I'm Caleb Brown.

It's being called Operation Choke Point 2.0, a Federal Reserve effort to discourage and punish banks

that engage in financial innovation that the Fed doesn't like.

Caitlin Long is CEO of Custodia Bank, which has been denied access to the Fed's payment system, the case is is now before the

the Fed's payment system.

The case is now before the Tenth Circuit.

We talked last week, along with Cato's Jack Solaway,

about the threat posed by crackdowns on financial innovation.

Before we get into some of the details of, well, your case and some of the other issues related to what we're talking about today.

I think a brief refresher and maybe a first time ever explanation for a lot of people is that the Federal Reserve has a payment system.

It controls access to that payment system.

And Jack, if you don't mind, I'll start with you.

Can you talk about just what that is?

Why does the Fed control the flow of payments in the United States?

So historically the US has had what's referred to as a

dual banking system which involves both a state chartered depository

institutions and banks as well as nationally chartered banks.

The Fed, its role in the payment system has evolved over the years, but presently it offers

payment services to both members of the Federal Reserve system as well as

holders of what are known as master accounts which are really the linchpin of

having access to Federal payment services such as wires, automated

clearinghouse payments, and the like. And what you are alluding to, Caleb, is that

...