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Operation Choke Point - Investigative Reporter


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Investigative Reporter - Kimberly Dvorak


Remember President Nixon’s “enemies” list? He was caught targeting his foes by passing names to the IRS and had “plumbers” fix the leaks. Flash forward 40 years and face “Operation Choke Point” another program fixated on personal revenge. While there isn’t a direct link to President Obama (yet), the program appears to show collaboration between the Department of Justice (DOJ) and the Federal Deposit Insurance Corporation (FDIC) to rid the country of businesses “they deem morally unacceptable.” Businesses like firearms retailers, ammunition manufactures, pawnbrokers, PayDay loan companies and tobacco retailers---all lawful industries within their respective states.

After tossing serious allegations against federal government officials for targeting and destroying businesses, which they considered “morally” unacceptable, the U.S. Consumer Coalition (USCC) was vindicated by a Congressional report released last month. The Subcommittee on Economic Growth, Job Creation and Regulatory Affairs report confirmed the executive branch, by way of the FDIC and with the blessing of the DOJ used personal moral values to decide the fate of legal businesses across the country.

“This new report confirms that the Obama Administration program is a clear abuse of government power. It also suggests that Administration officials have deliberately misled Congress in an effort to hide the true nature of the program,” a U.S. Consumer Coalition statement said. “The evidence collected from the FDIC shows that despite the Administration’s claims to the contrary, legal industries are being targeted by federal regulators. The Administration is unilaterally branding businesses as ‘high risk’ and intimidating banks into cutting them off from the financial system without due process. The report makes clear the Administration is attempting to single-handedly regulate industries out of existence without a legal, public, or legislative process.”

GOP firebrand Darrell Issa (R-CA), former chairman of the House Oversight Committee said last month’s comprehensive report on Operation Choke Point was appalling and that the “government is working around the law to vindictively attack businesses they find objectionable.” The report also illustrates that regulators used phrases like “reputational risks,” and we’ll deliver “the message.” They promised to either cut the business’ line of credit or outright close accounts as a method to shut down industries “they” deem inappropriate. If banks refused to listen to their reasoning, the FDIC would threaten audits of the institutions that provided financial services to targeted entities.

This month Chairman Issa ceded control of the committee and handed the reigns to Congressman Sean Duffy (R-WI) who promised public hearings in February.

Rep. Duffy claims the Obama administration is targeting businesses it doesn’t approve and illegally used FDIC power to strong-arm lawful businesses. “What they’ve done is they put short-term lenders out of business, gun dealers out of business, ammunition manufacturers out of business. Because in America, if you can’t bank, you can’t do business.”

The FDIC regulates and audits more than 4,500 banks across America. A partial high-risk list of merchants the FDIC disapproved included; Ammunition sales, lottery sales, coin dealers, money transfer networks, on-line gambling, dating services, payday loans, pornography, firearm sales, fireworks sales, surveillance equipment, telemarketing, tobacco sales (including premium cigar sales). FDIC policymakers debated which dubious methods would be used to pressure banks into terminating financial ties with banks.

Email exchanges included in the report demonstrate the personal animus that regulators had for legal business entities essentially usurping the legislative process and deciding policy within the banking industry. For example, Marguerite Sagatelian, senior counsel, Consumer Enforcement Unit at the FDIC sent an email regarding the use of the word pornography as a method to encourage banks to close PayDay loan accounts.

It reads: “I just got a call from Jonathon Miller regarding why we kept taking pornography out of their write up. I explained that we felt there was a difference between on-line gambling and payday lending (which are illegal in some states) and pornography (which may be immoral, but which is not per se illegal). I noted that we didn’t want to seem like we as a regulator were making moral judgments regarding the types of businesses with which our institutions deal. Rather, we wanted to make it clear that were making rational safety and soundness decisions by discouraging our institutions from engaging in our facilitating illegal transactions. Jonathan heard where we were coming from, but nonetheless wants to retain a reference to pornography in our letters/talking points. He thinks it’s important for Congress to get a good picture regarding the unsavory nature of the businesses at issue. He repeated that “one is judged by the friends one keeps,” and he seems to feel strongly that including payday lenders in the same circles as pornographers and on-line gambling businesses will ultimately help the messaging on this issue. If you feel that there is legal argument beyond the one I made, and would like us to push back on the issue, please let me know.”

In another instance, a senior official in the Division of Depositor and Consumer Protection asserted “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.”

That was followed by an email from Thomas J. Dujenski, regional director, FDIC Atlanta, and Mark Pearce, director, FDIC Division of Consumer Protection; subject line: confidential. “I have never said this to you (but I am seriously passionate about this)…but I literally can not stand PayDay lending. They are abusive, fundamentally wrong, hurt people, and do not deserve to be in any way associated with banking. I had extensive involvement with this group of lenders and was instrumental in drafting guidance on stopping abuses. I really hope this bank we discussed truly gets out of this on their own as they are indicating…. I hope my persuasion skills are still effective:). I feel strongly we will do good things here!!!!”

Other findings in the report found “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.”

The report also prompted an investigation by Rep. Blaine Luetkemeyer (R-MO), who had spent 35 years in the banking industry and met with FDIC Chairman Martin Gruenberg about Operation Choke Point. Of particular concern to the Congressman was the fact that the FDIC staff blatantly targeted industries despite FDIC officials telling Congress that nothing of the sort was happening.

“After reviewing the FDIC report from the Oversight and Government Reform Committee, I can confirm that our worst fears have been validated,” he said. “The report clearly shows that senior members of the FDIC lied to me, to Congressional staff, to other Members of Congress, and in testimony to several House Committees. Not only that, the communications contained in the report show that the FDIC is inserting personal views into banking supervision, which is unethical and completely unacceptable. I have urged Chairman Gruenberg to take prompt action, including but not limited to a thorough review of each FDIC staff member implicated in the report.”

So far no one has been held accountable.

The Oversight Committee also reviewed 850 pages of internal documents turned over by the DOJ. The internal documents confirmed that DOJ executives questioned the legality of their programs, yet they continued their personal moral prerogatives anyways. Luetkemeyer describe the acts as “an issue of DOJ stepping outside the law… We have worked on a bipartisan basis to inform DOJ and other regulators of the unintended consequences of Operation Choke Point.”

Plus more DOJ connections were uncovered by Breitbart News’s sources who reported “Department of Justice Trial Attorney Joel M. Sweet (an Assistant United States Attorney in the Eastern District of Philadelphia on detail to the Consumer Protection Branch of the Department of Justice in Washington), was eager to provide specific details of ‘Operation Choke Point‘ to an important meeting of bank examiners held in Northern Virginia and sponsored by the Federal Financial Institutions Examination Council (FFIEC).” Their website proclaims they influence banks and financial institutions.

After learning of the breadth of the egregious abuse of power, Lutkemeyer introduced a bill allowing banks to maintain accounts with any legal and licensed business despite pressure from FDIC bureaucrats.

Signed, sealed, and delivered appropriation bill

Perhaps the icing on the bank scandal cake is the carve outs placed in the Congressional Fiscal-Year 2015 Consolidated and Further Continuing Appropriations Act, which was approved and signed by the president. The Act prohibits funds for the Internal Revenue Service (IRS) to target groups for scrutiny based on their political beliefs, like the Tea Party, National Rifle Association (NRA) or short-term loans like PayDay merchants.

Further, the Act prohibits “the EPA, or any other federal agency, from regulating the lead content of traditional ammunition and fishing tackle. For years, radical animal rights and environmental advocates have used all the tools at their disposal, including litigation, to attempt to ban lead ammunition. A ban on traditional ammunition would affect hunters, sportsmen, law enforcement, military, and target shooters – whether or not they hunt. There are currently no comparable alternatives to lead ammunition in terms of cost, ballistics, and availability,” the Act concluded. 

Keeping this in mind, lawmakers took the unusual move of barring the Obama administration from using taxpayer funds on programs that skirt Congressional purview.

Section 517 specifically prevents the Department of Justice, or any government entity, from spending taxpayer dollars on “gun walking” programs like Operation Fast and Furious. It also prevents funds from being used by the Obama administration to implement the United Nations Arms Trade Treaty.

Pretty shocking that the president signed this de facto confirmation of the apparent excesses with the Executive Branch into law!

There are many questions that remain unanswered by the committee’s investigation into Operation Check Point. There have been a number of federal agencies as of late that have taken it upon themselves to act as lawmakers in an effort to carry-out administrative desires. As a consequence of Executive Branch usurping legislative purview, Congress has commenced writing legislation with more specific and concise language to reduce or eliminate the power the Executive Branch exercises through federal rules making to implement legislation.

And while a public Congressional hearing will undoubtedly garner publicity, business leaders will ultimately be left wondering; “Will our industry be next?”

The Congressional report on Operation Choke Point can be found here.