As has been demonstrated time and again, this administration is opposed to any change in the law that will reduce its powers. We see this once again in the White House’s statement that it will veto H.R. 766 (the Financial Institution Customer Protection Act) introduced by Rep. Blaine Leutkemeyer (R-Mo.) due to be voted on shortly by the House. The bill aims to restrict the powers that were abused during Operation Choke Point.
The administration’s statement is a masterpiece in justifying executive abuse. Here are some highlights.
The bill’s first change to the law would require banking regulators to have material reasons to instruct a financial institution to shut down banking services to a client. The White House says:
Requiring Federal banking agencies to satisfy a written materiality requirement is unnecessary, overly burdensome, and could impede the Federal banking agencies' ability to ensure financial institutions comply with important regulatory obligations, including maintaining effective risk management and controls. [Emphasis added]
In other words, reducing burdensome regulatory powers would be burdensome on the regulators. Making them work to do their job, prove their case, or provide genuine oversight, would be too difficult for them. They have to retain the power to act on what could be a whim or political disfavor.
Moreover, as Operation Choke Point showed, if “effective risk management and controls” are made overly difficult by too broadly drawn definitions of risk management, as was the case during Operation Choke Point, then innocent parties will suffer because banks will be unwilling to bear that cost.
The White House goes on:
Restricting the Federal banking agencies in this way could unnecessarily and dangerously hinder or compromise important law enforcement and national security efforts.
As Dr. Johnson said, patriotism is the last refuge of the scoundrel. The administration is arguing that it should retain the power to intimidate payday loan operators out of business because, you know, terrorists.
Financial institutions may … information [from banking supervisors] to understand and manage their risks, including determining whether to terminate certain customer accounts if the institution determines that it is unable to manage such risks adequately after giving such risks due consideration.
That is as it should be. No-one is saying that that should change and the bill will not affect that. The bill stops supervisors leaning on banks without good reason.
The bill would also amend the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). The administration says,
The FIRREA statute serves as a powerful tool to address and deter frauds committed against American consumers and financial institutions. The various hurdles imposed by H.R. 766 would only make such enforcement efforts more burdensome, time consuming, and rare – a series of effects that will allow fraud schemes to continue unaddressed for longer periods of time, to the detriment of the safety of consumers and the American financial system.
As CEI pointed out in its in-depth study of Operation Choke Point, FIRREA was never intended to allow this broad an approach. It was not designed to allow investigations of consumer fraud, a fact that the Department of Justice admitted in its first report on Choke Point. Far from returning to the original purpose making investigations “more burdensome, time consuming, and rare,” by abusing the statute in this way, the Department has made intimidating financial institutions easier, quicker, and more common.
Having run out of specious reasons to oppose the bill, the White House then concludes with a long paragraph that simply repeats what it has already said, because terrorists.