The head of the FDIC faced tough grilling today from members of a House Financial Services subcommittee including U.S. Rep. Scott Tipton on a rogue policy that essentially directed banks not to deal with businesses the Obama administration found objectionable.
Dubbed “Operation Choke Point,” the Justice Department essentially directed the nation’s top financial regulator to intimidate banks into cutting off accounts or doing any business at all with a list of 30 different types small business owners.
The list included gun shops, ammunition dealers, tobacco shops, fireworks stores, and short-term loan operations.
From The Hill:
Banking regulators have since walked back guidance that was interpreted by some as calling for banks to halt operations with entire types of businesses, but GOP lawmakers say regulators that pushed that notion still need to be held accountable.
“I fear that activists at the Department of Justice and [Federal Deposit Insurance Corporation] are abusing their power and authority,” said Rep. Sean Duffy (R-Wis.), panel chairman. “They’re weaponizing government to meet their ideological beliefs.”
Tipton raised numerous questions with FDIC Chairman Martin Gruenberg about the harm done to businesses and how the feds intend to repair the damage.
“Part of your mission obviously — safety and soundness of our banks – businesses have pretty much the same concern for their own safety and soundness,” Tipton said. “And arbitrarily it sounds like it was just a big mix-up and gosh we made a mistake and we feel bad and now we’re going to try and correct it, but there is institutional damage effectively that you put into place. You have a list you’ve now wiped away. That’s like going before a jury and saying after testimony has been given, disregard that. You’ve heard it. Are you going to see a potential problem in terms of those relationships going forward for fear with maybe the threat of jail, other penalties going on, that banks are simply not going to handle these businesses as customers?”
The FDIC’s response? “I hope that’s not the case, we’re making every effort.”
Yeah, every effort to clarify a policy they’ve already clarified twice since last year, to no avail.
Tipton also got the old DC song and dance when he asked if the federal employees responsible for the mess were going to get a slap on the wrist or be terminated.
The FDIC chair said the inspector general is still investigating, blah, blah, blah, there will be lots and lots of reviews, blah, blah, blah, “and then presumably take action that’s appropriate.”
See the full exchange below.