House Passes Bill to Shield Banks from ‘Choke Point' Abuses

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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.

White House Opposition

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 Support Bill

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.”

‘Free Pass' for Bank Fraud

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 jbater@bna.com

To contact the editor responsible for this story: Mike Ferullo in Washington at mferullo@bna.com