Operation Choke Point is a major abuse of executive authority. As we have detailed over the last couple of years, Choke Point is an attempt to use federal supervisory powers to intimidate providers of financial services to businesses that are deemed unacceptable by bureaucrats, even though they are perfectly legal (and in some cases constitutionally protected).
After CEI and others, notably Rep. Blaine Leutkemeyer (R-Mo.), raised concerns about the practice, the Federal Deposit Insurance Corporation revised its guidance and stepped back from the Operation.
Although the activities of Operation Choke Point now seem to have been taken over by the secretive Consumer Financial Protection Bureau (CFPB), concern remains that other Federal agencies could use its tactics again. Consequently, Rep. Leutkemeyer has introduced a bill to prevent federal banking agencies from using the tactics involved.
The Financial Institution Consumer Protection Act would do two main things:
- It would prevent supervisory agencies, including the Federal Reserve, which houses the CFPB, from ordering the closure of a banking account without material reason (Choke Point involved allegations of “reputational risk”); and
- Amend the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) to ensure that federal agency subpoena power could not be used in fishing expeditions.
Both these steps were recommended by CEI in our major report on the subject. Congress should pass the Financial Institution Consumer Protection Act to help prevent Choke Point tactics being used by any federal banking agency in the future.