• UNHINGED: Justice Dept. And FDIC Targeted “Immoral” Businesses For Destruction, Report Finds

    Gun stores, short-term lenders, and even porn stars pursued

    The Obama Justice Department headed by Eric Holder worked hand in hand with the Federal Deposit Insurance Corporation (FDIC) to effectively target legal businesses it deemed immoral, according to a new report by the House Oversight and Government Reform Committee. The report,“Federal Deposit Insurance Corporation’s (FDIC) Involvement in ‘Operation Choke Point’,” details the agency’s close relationship with the Department of Justice (DOJ) to deny banking services to gun stores, short-term lenders, and even porn stars.

    Documents produced to the Committee reveal that the DOJ actively partnered with the FDIC in the prosecution of Operation Choke Point. FDIC’s participation in Operation Choke Point included requests for information about the investigation, discussions of legal theories and the application of banking laws, and the review of documents involving FDIC-supervised institutions obtained by DOJ in the course of its investigation. FDIC also originated the list of “high risk” industries included in the DOJ subpoenas. Documents provided to the Committee also show that senior leadership at the FDIC opposed certain industries on purely moral grounds.

    The Chairman of the House Government Oversight Committee blasted the White House, saying, “It’s appalling that our government is working around the law to vindictively attack businesses they find objectionable.”

    “Internal FDIC documents confirm that Operation Choke Point is an extraordinary abuse of government power. In the most egregious cases, federal bureaucrats injected personal moral judgments into the regulatory process. Such practices are totally inconsistent with basic principles of good government, transparency, and the rule of law.”

    Critical findings by the Committee include:

    • The Federal Deposit Insurance Corporation, the primary federal regulator of over 4,500 banks, targeted legal industries. FDIC’s explicitly intended its list of “high-risk merchants” to influence banks’ business decisions. FDIC policymakers debated ways to ensure that bank officials saw the list and “get the message.”
    • Documents produced to the Committee reveal that senior FDIC policymakers oppose payday lending on personal grounds, and attempted to use FDIC’s supervisory authority to prohibit the practice.  Personal animus towards payday lending is apparent throughout the documents produced to the Committee.  Emails reveal that FDIC’s senior-most bank examiners “literally cannot stand payday,” and effectively ordered banks to terminate all relationships with the industry.
    • In a particularly egregious example, a senior official in the Division of Depositor and Consumer Protection insisted that FDIC Chairman Martin Gruenberg’s letters to Congress and talking points always mention pornography when discussing payday lenders and other industries, in an effort to convey a “good picture regarding the unsavory nature of the businesses at issue.”
    • FDIC equated legitimate and regulated activities such as coin dealers and firearms and ammunition sales with inherently pernicious or patently illegal activities such as Ponzi schemes, debt consolidation scams, and drug paraphernalia.
    • FDIC achieved this via “circular argument” policymaking: there was no articulated justification or rationale for the original list of “high-risk merchants.” Yet a list of “potentially illegal activities” included in FDIC’s formal guidance to banks justified itself by claiming that the categories had been previously “noted by the FDIC.”

    Related story: Chase Bank Closing Accounts For Porn Stars?

    Roberto Escoban

    Roberto Escoban is the pen name of a conservative activist who spent 20 years working in Washington including a decade on Capitol Hill.

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