Stop Choking Lawful Businesses

House Financial Services and House Judiciary to address the Department of Justice’s “Operation Choke Point” initiative
By Keith Calder
A series of hearings will be conducted this week by the House Financial Services and House Judiciary committees regarding the Department of Justice’s “Operation Choke Point.”
On Tuesday at 10:00 a.m. The Oversight and Investigations Subcommittee will hold a hearing entitled “The Department of Justice ‘Operation Choke Point.” The hearing will review the actions of the Department of Justice and federal banking regulators in executing “Operation Chokepoint,” ensuring that businesses operating lawfully are not denied access to banking services.
That same day, the Financial Institutions and Consumer Credit Subcommittee will hold a hearing entitled “Examining Regulatory Relief Proposals for Community Financial Institutions Part II” at 2:00 p.m. This hearing will examine bills and drafts that are designed to reduce regulatory burden and streamline regulatory compliance for financial institutions in order to ensure that consumers have access to the financial services they want and need. Along with other H.R. proposals, H.R. 4986, “the End of Operation Choke Point Act of 2014” will be a focal point during the hearing. H.R. 4986 clarifies that Federal banking agencies may not prohibit, restrict, or discourage an insured depository institution from providing products or services to certain businesses and provides other legal protections.
Early Thursday morning July 17, 2014, the House Judiciary Committee will take a crack at the DOJ’s “Operation Choke Point.” The subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold its hearing: “Guilty until Proven Innocent? A Study of the Property and Legal Authority for The Justice Department’s Operation Choke Point,” at 9:30 a.m.
A recent staff report from the House Committee on Oversight and Government Reform confirms what many have suggested all along – that “Operation Choke Point” was created by the Justice Department in order to “choke out” legal and law-abiding businesses that the Obama Administration deems “high risk” (or merely objectionable), with the ultimate goal of denying access to the banking and payment networks necessary for survival.
“Choke Point,” a joint project spearheaded by the DOJ, the FDIC, and the Consumer Financial Protection Bureau has threatened and coerced many banks and third-party payment processors to end relationships with such “high risk” industries through questionable means, advising them that they could be held accountable if regulators concluded that any of their customers engaged in illegal behavior – and following up by threatening higher-level audits for those who don’t comply. Many companies have already received notices from their bank stating that their accounts were being abruptly terminated because of “regulatory trends” or “heightened scrutiny” regardless of good credit history.
The scope of industries targeted is broad – ranging from firearm and ammunition sales to short term lending, tobacco, telemarketing, and others. And the implications are significant as well. We cannot allow the government to choose which industries are allowed to conduct business, and which ones they will effectively shut down through behind-the-scenes, back door regulation and threats. These actions are a clear abuse of power by government agencies and they must not be allowed to continue.
Additionally, the government cannot expect banks and other financial services to police the legal, but arguably undesirable, business activities of their customers. It’s time consuming, intrusive, unmanageable, and – quite frankly – not part of their job. If the government has sufficient evidence of any criminal wrongdoing by a particular company then the businesses should be duly prosecuted. But using the banking system to attack entire industries is an abuse of government power and, in this case, is being used to attack legitimate businesses operating within the boundaries of the law.