By Iain Muray – Re-Blogged From Competitive Enterprise Institute (www.cei.org)
In a partial victory for all those campaigning against the abuse of power known as Operation Choke Point (see our comprehensive study here), the Federal Deposit Insurance Corporation (FDIC) has issued guidance to its supervisory staff that restricts some of the methods used to advance Choke Point.
Operation Choke Point is a Department of Justice initiative aimed at “choking off” the financial oxygen of businesses the administration disapproves of, with
a special focus on payday lending. It threatens banks that do business with these industries with burdensome investigations and subpoenas, which has led to banks closing accounts with legal businesses that have had a perfect banking record.
One of the ways Choke Point has proceeded has been via supervisors issuing veiled threats or direct but unwritten comments that suggest a banking institution should stop doing business with a client. As a result, there has been no paper trail within the administration directly linking the closure of bank accounts with Operation Choke Point.
This new memorandum purports to put a stop to that. It tells its staff that recommendations for closure of bank accounts should not be made through informal comments, and that banks should not be informally criticized for their relationships. All such recommendations now need to be put in writing.
Furthermore, “reputational risk” alone is no longer to be considered grounds for