All Banking Law, All in One Place. Bloomberg Law: Banking is the comprehensive research solution that powers your practice with access to integrated banking-related legal news, analysis,...
By Jeff Bater
Feb. 4 — The House passed legislation that is supported by banks seeking protection from regulators that might abuse their discretion in the anti-fraud initiative Operation Choke Point.
Lawmakers voted 250-169 in favor of H.R. 766, despite a veto threat from the Obama administration, which says the measure would weaken the fight against financial fraud.
The bill, sponsored by Rep. Blaine Luetkemeyer (R-Mo.), would prohibit a federal banking regulator from ordering a bank to terminate customer accounts unless the regulator has a material reason to do so and the reason is not based solely on reputation risk.
In House floor debate, Luetkemeyer said the bill is a response to the abuse of authority by government agencies under Choke Point. “The federal government should not be able to intimidate financial institutions into dropping entire sectors of the economy as customers,” he said.
Spearheaded by the Justice Department, Operation Choke Point is designed to look into banks that process payments for businesses engaged in fraud and other wrongdoing. Republican critics have voiced concern that its true target is disfavored types of businesses, such as payday lenders and firearms merchants.
Luetkemeyer praised fellow members for their votes, saying the measure would ensure an end to the program involving government investigation of banks and payment processors.
Opponents of the bill say it would impede financial fraud enforcement by limiting the U.S. Attorney General's authority to investigate and bring claims under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). A Feb. 2 statement by the Office of Management and Budget (OMB) says that if President Barack Obama were presented with the legislation, senior advisers would recommend a veto.
“The FIRREA statute serves as a powerful tool to address and deter frauds committed against American consumers and financial institutions,” the OMB statement said. “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.”
Banks stand behind the bill. In a memo to House members Feb. 4, James Ballentine, an executive vice president at the American Bankers Association, said banks share a common goal with law enforcement of maintaining the integrity of the payments system and are committed to fighting financial crimes such as money laundering.
“Banks already keep records and report suspicious activities to law enforcement,” the memo said. “However, some recent programs instituted by federal banking agencies make banks responsible for policing customers. Banks should not be judge and jury on whether customers are operating legally.”
Rep. Maxine Waters (D-Calif.), in remarks on the floor, said she didn't want discussion about Choke Point to obscure that the bill weakens prosecutors battling bank fraud.
“H.R. 766 seeks to stifle the Justice Department’s investigative powers over financial fraud,” Waters said, adding that it would be “a free pass to banks that make their money by breaking the law.”
“Banks that break the law don’t deserve a ‘get out of jail free' card,” Waters said.
To contact the reporter on this story: Jeff Bater in Washington at email@example.com
To contact the editor responsible for this story: Mike Ferullo in Washington at firstname.lastname@example.org
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)