House Committee Blames FDIC for Operation Choke Point Foul Ups

House Committee Blames FDIC for Operation Choke Point Foul Ups

Watchdog groups have been reporting for some time now to expose the improper activities taken by the Department of Justice (DOJ) as part of the ill conceived Operation Choke Point. The DOJ continues to insist that the operation was put into place simply to protect the American financial system via the targeting of fraudulent or predatory businesses. Recent reports, however, seem to indicate that Operation Choke Point was more about choking out legitimate businesses that regulators objected to, instead of actually offering protection to financially at-risk citizens. Firearms and ammunition merchants, payday lenders and other legit business owners have essentially been unnecessarily targeted.

A recent report from the committee titled ‘Federal Deposit Insurance Corporation’s Involvement in operation Choke Point’ points out some pretty harsh evidence against the Federal Deposit Insurance Corporation (FDIC.) The FDIC is the primary regulator of banks in this country. The report says that FDIC officials actually did target businesses that were completely legal and that the committee also made it a point to portray businesses that they did not favor as being ‘high risk’ to send messages to the banks about consequences that would have to be paid as punishment for having dealings with those types of businesses.

The report indicates that all of this poor treatment was instigated by FDIC officials’ personal feelings about the moral standings of those industries rather than on the businesses compliance and financial dealings of individual companies. The report also reached the conclusion that one senior FDIC official’s statement, while under oath, was misleading about the degree of cooperation between the DOJ and the FDIC in carrying out Operation Choke Point. In addition, the program’s purposeful targeting of certain industries caused banks to indiscriminately terminate business relationships with a wide variety of legal businesses in this country.

The report went to great lengths to explain how firearm and ammunition businesses have suffered because of their banks essentially cutting them off from much needed financial services. According to the report, “The experience of firearms and ammunition dealers – one of the most heavily regulated businesses in the United States – is a testament to the destructive and unacceptable impact of Operation Choke Point.” The report went on to explain how in certain cases, “the financial institutions and payment processors made no reference to the merchants’ creditworthiness, individual risk profile, or due diligence findings.”

So what is it that caused the FDIC to lump together payday lenders, ammunition dealers and other businesses with companies that are known for involvement in Ponzi schemes, distributors of racist materials and drug paraphernalia companies? The FDIC does not, as of yet, have an explanation. The FDIC supposedly used what they said is common criteria to identify ‘high risk merchants’ but none of those factors actually apply to payday lenders or ammunition dealers. It seems to be just another all-too-familiar example of a government sponsored initiative playing by its own rules and running amuck.
There are more than a few members of Congress and the Senate who are now aware of just how destructive Operation Choke Point has been over the past year or so. And some of those elected officials are actually beginning to take action. Hopefully, this operation will wrap up once and for all in the near future, and some of the businesses that have been negatively impacted will be able to recover.