Operation Choke Point has thrown light on several schisms in how banking is regulated, according to American Banker. The controversial program is putatively an attempt to regulate lenders that have a historical tendency towards being unscrupulous—the primary target that Justice Department officials refer to is payday lending.
The scope of Operation Choke Point, however, is much larger—it effects payday lenders, along with makers of adult entertainment, fireworks dealers and alternative publications—any business that may be legally or morally suspect but that is not actually illegal in an of itself. The program uses various federal agencies (primarily DoJ, FDIC and CFPB) to use their authority to leverage bankers away from offering traditional financial services to these businesses.
The program has revealed a sharp division between banking regulators—the FDIC publically pulled back on some of the Choke Point-inspired actions against banks earlier this summer while noting that Operation Choke Point is mostly the Justice Department’s show.
And it is a show that might well be expanding, depending on the outcomes of the November midterms. Administration officialy are committed materially and intellectually to the program, reports American Banker, and a solid victory in the fall could likely see “a much more aggressive and complex campaign by Eric Holder’s DOJ and the FDIC to fundamentally change the way commerce is conducted in America through Operation Choke Point.”
In the run-up to the those elections, AB is also expecting to see a ramp up of subpoenas, actions and inquiries made through DoJ via Operation Choke Point as Congress is currently in recess and then engaged with other issues (ISIS, immigration, said midterm elections) and unlikely to offer much oversight to the program.
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