House passes bill to curb ‘Operation Choke Point’

The House passed a bill Thursday that would make it harder for bank regulators to order banks to close certain accounts.

The legislation, which passed by a vote of 265 to 159, is squarely aimed at “Operation Choke Point,” a controversial government effort to force banks to stop doing business with certain types of companies.

{mosads}Under that initiative, the Justice Department and banking regulators probed banks’ relationships with an eye toward ferreting out fraud. But Republicans charged the government grew overzealous and eventually directed banks to cut off ties with entire industries, including payday lending and firearms dealers.

Regulators have since clarified that their efforts should be focused on individual businesses, not entire industries. But lawmakers want to take matters a step further.

Thursday’s bill, offered by Rep. Blaine Luetkemeyer (R-Mo.) would raise the bar for regulators, requiring them to establish material reasons for a bank to cut off a business before ordering it.

“To wake up one morning and find out that your bank account, your access to funds have been choked off by an oppressive federal government, lawlessly, has to be stopped,” said House Financial Services Committee Chairman Jeb Hensarling (R-Texas), who shepherded the bill through his panel.

While two dozen House Democrats backed the measure, it faces extremely long odds of passage. Not only has the White House threatened to veto the bill, saying it would tie the hands of regulators, but the legislation has attracted particular scorn from influential voices on the left.

Democratic opponents argue that the bill would make it much more difficult for the government to build cases against banks and businesses that engage in fraudulent behavior. And given that many of them are still unsatisfied with how the government has pursued bank misbehavior since the financial crisis, they are hard pressed to go the other way with this bill.

House Minority Leader Nancy Pelosi (D-Calif.) sent a letter to colleagues Wednesday evening urging them to oppose the bill, and Sen. Elizabeth Warren (D-Mass.) took to the Senate floor that same day to tear into it.