When FDIC Chairman Martin Gruenberg testified about his agency’s involvement in Operation Choke Point, he insisted FDIC was simply trying to inform banks about high-risk businesses and reduce fraud—not threaten banks or blacklist industries such as firearms retailers. However, in the two-hour hearing before the U.S. House Subcommittee on Oversight and Investigations on March 24, Gruenberg told lawmakers that the FDIC should be faulted for failing to communicate to the public that it did not want banks to cut off legitimate businesses from the banking system.
“These examples came to be viewed as a prohibition of serving, that these examples came to be seen as a prohibition on serving certain customers, was clearly in hindsight a failure on our part,” Gruenberg said.
The government used Operation Choke Point to stop financial service companies from providing banking and credit services for some industries. Operation Choke Point was a Department of Justice initiative that targeted gun and ammunition businesses as high risk, along with payday lenders, pornographers, Ponzi schemes, and others. See our previous coverage of the topic here, here, and here.
During the hearing, Committee Chairman Rep. Sean Duffy (R-Wis.) compared Gruenberg to former IRS official Lois Lerner and called for his removal from office. Duffy took over as chairman of the House Financial Services Subcommittee on Oversight & Investigations in January.
“You’re abusing your power,” Duffy said. “You say, ‘I don’t like these industries. And I’m gonna use — just like Lois Lerner — the power that I have at the FDIC to target these industries, and I’m gonna put them out of business. … I think the buck stops with you. I don’t think you should chair the FDIC.” Sen. Marco Rubio (R-Florida) introduced legislation to end Operation Choke Point in February. His proposal would fully defund Operation Choke Point and prohibit the incoming attorney general from restarting it or a instituting a similar program. During the markup of S. Con. Res. 11, the fiscal year 2016 budget continuing resolution, Sen. Mike Crapo (R-Idaho) introduced an amendment to establish a deficit-neutral reserve fund to end Operation Choke Point. The Crapo amendment was approved by a committee vote of 13-9 and the full Senate passed S. Con. Res. 11 with the Crapo amendment on March 27.