Reining in Operation Choke Point


Last updated 2/10/2016 at 10:38am

What do you call it when the federal government targets legitimate businesses and causes them to be shut down, not for illegal activity, but because they are deemed undesirable by the Administration? Answer: federal regulatory intimidation. Last week, I voted to effectively stop one such effort: “Operation Choke Point.” We must ensure federal regulators are held accountable to stay on the right side of the line between enforcement of the law and regulatory intimidation.

Operation Choke Point was a secret U.S. Department of Justice (DOJ) anti-fraud probe that ended up pressuring banks to cut off relationships with legitimate businesses deemed undesirable by the Administration. Those businesses include short-term lenders, third-party payment processors, and firearm and ammunition sellers. Because the Administration objects to these industries, the DOJ and federal regulators labeled any business engaged in those activities as “reputation risks.” Banks and financial institutions got the message. Under this pressure from regulators, banks began to terminate access to credit and other financial services to legal, licensed businesses, making it difficult or impossible for them to operate.

Federal regulators’ push for banks to stop doing business with entire categories of industries lumped legitimate businesses in with entities suspected of fraud. As the Internal Revenue Service’s improper targeting of Tea Party groups has shown, federal regulators must be held accountable and prevented from political application of regulatory authority.

Since Operation Choke Point was revealed, the Federal Deposit Insurance Corporation (FDIC) has admitted regulators had gone overboard and recommended what it calls a “risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers….” But that does not go far enough; we must ensure that this kind of regulatory overreach does not continue. The House has now acted to require federal regulators to operate within the confines of the law and due process to investigate wrongdoing, not enforce the arbitrary political preferences of any administration.

This week, I supported passage of a bill to effectively stop Operation Choke Point once and for all. The Financial Institution Customer Protection Act would dictate that agencies such as the FDIC and the Federal Reserve cannot request or order a financial institution to terminate a banking relationship with legal businesses unless the regulator has due cause. The bill requires federal banking agencies, when requesting or ordering a depository institution to terminate a specific customer account, to provide material reasons, with national security exceptions.

The federal government should investigate and prosecute fraud and illegal activity to the fullest extent of the law, but that authority does not include intimidating legitimate businesses for ideological reasons. I support the Financial Institution Customer Protection Act to maintain customers’ access to services they want and to increase federal regulatory transparency.


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