A little-known program carried out by President Obama’s Department of Justice (DOJ) whipsawed small business for years, and to date no one has been held accountable. Federal officials pressured banks to close the accounts of businesses solely because they were ideologically opposed to their existence. This runs counter to the very principles of due process and fairness that form the backbone of our nation’s laws.
This program, known as Operation Choke Point, operated unrestrained for years. Officials at both the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) threatened banks with regulatory pressure if they did not bend to their will. Gun and ammunition dealers, payday lenders and other businesses operating legally suddenly found banks terminating their accounts with little explanation aside from “regulatory pressure.”
{mosads}I know what a thorough and fair investigation looks like. I have served as an FBI agent and U.S. Attorney in Oklahoma. I was also the third-ranking official at the DOJ during the Reagan administration in charge of all criminal matters. At all times, I strived to proceed with due process, the way our founders intended. However, the clandestine Operation Choke Point had more in common with a purge of ideological foes than a regulatory enforcement action. It targeted wide swaths of businesses with little regard for whether legal businesses were swept up and harmed. In fact, that seemed to be the goal.
The role of DOJ in aiding and abetting this program is especially troubling. During my tenure, it would have been unthinkable for us to develop a targeted campaign against lawful businesses simply because we objected to their existence. But under the Obama administration, the DOJ watched the FDIC and OCC carry out this program without intervening, and even gave Operation Choke Point its name – because “it was designed to ‘choke out’ payday lenders and other ‘high risk’ businesses.” It knew full well the extent of the FDIC and OCC’s illegal regulatory activities and yet stood idly by.
What’s more, recently unsealed documents show the FDIC and OCC put banks in an untenable position. As the former president of the American Bankers Association, I am appalled at the brazen threats levied against banks during Operation Choke Point. In one case, the FDIC’s Atlanta Regional Office met with a bank chairman and suggested he would face criminal prosecution if he did not terminate the bank’s relationship with a payday lender. Banks should answer to federal and state law, not to the whims of individual regulators with a vendetta against lawful businesses.
In August 2017, the Trump administration ended Operation Choke Point. However, that is little comfort to the many businesses that still feel its impact. Banks are not convinced they can again serve these businesses without fear of threats or regulatory pressure. Ending the program doesn’t return the banking relationships that were terminated, and the stigma associated with Operation Choke Point will follow these businesses for years to come. In fact, one major lender has been turned away by 275 banks since the start of Operation Choke Point, a trend that has continued far beyond the so-called ‘end’ of the program.
We must demand answers from those accountable and a remedy for the harm done. In light of the now- public documents, those who previously testified and denied involvement in Operation Choke Point should be brought back before Congress and made to answer for their role in this investigatory farce and removed from those positions of power they so casually abused. Otherwise, we risk setting a terrible precedent that ideology and partisan bias can control our regulatory agenda at the expense of banks and small businesses alike.
Frank Keating served as governor of Oklahoma from 1995 to 2003 and is the former president of the American Bankers Association.