House Clears Anti-Choke Point Bill, But Future Unclear

WASHINGTON — The House passed a bill Thursday 250-169 that would limit regulators' ability to force banks to cut ties with certain businesses despite Democratic fears that it could hamstring the Justice Department's ability to prosecute bankers responsible for the financial crisis.

The legislation by Rep. Blaine Luetkemeyer, R-Mo., stemmed from the Justice Department's Operation Choke Point program, which sought to cut off fraudsters from the financial system.

Critics in the industry and beyond have argued the program exceeds the Justice Department's authority and forced banks to cut ties with legitimate businesses.

"My job is to stop the nonsense of Choke Point, to stop the administration's runaway activities of Choke Point, which I think is illegal," Luetkemeyer said in an interview Thursday. "Our efforts are starting to take hold. There is enough pushback from all the industries that are being affected and the banks are realizing they can push back" against federal regulators.

But the legislation only garnered support from 10 Democrats — and is opposed by the White House, which threatened to veto it. That raises questions about whether it can be taken up by the Senate. Even if it did pass that chamber, there does not appear to be enough support to override a veto.

Democrats argue that the bill was actually a backdoor way to make sure that bankers responsible for the financial crisis get off free.

"You would think the major point of this bill was the Choke Point controversy," Rep. Maxine Waters, the lead Democrat on the House Financial Services Committee, said during debate. "I do not want that discussion to obscure the real problem with this very bad legislation."

The California Democrat said the bill would "eliminate key provisions" of the Financial Institutions Reform, Recovery, and Enforcement Act, which has proved to be the "Justice Department's most effective tool for holding Wall Street accountable."

The bill amends certain language in FIRREA to set a higher bar for the Justice Department to subpoena a witness suspected of fraud and make banks less responsible for their customers' fraud.

Luetkemeyer said Waters was "misrepresenting what this bill does," arguing it does "not impact in any way the DOJ or the [Federal Deposit Insurance Corp.] from going after banks" that have committed fraud.

Rep. Mick Mulvaney, R-S.C., said Operation Choke Point was a dangerous overstep by regulators.

"The fact that we have to bring a bill to the floor of the United States House that says federal regulators cannot force a bank to close an account without good reason should frighten people," he said.

He added that all of the businesses that lost their bank accounts as a result of the DOJ program were operating legally.

Republicans are also angry at the FDIC because the agency initially identified high-risk businesses, including gun shops and porn businesses, in a letter to financial institutions that was later cited by the Justice Department during Choke Point. The FDIC argued that the list was misinterpreted and was not intended to tell banks to cut off ties with such firms. The agency later withdrew the list. An FDIC Office of Inspector General investigation cleared the agency of any wrongdoing, saying its role in Operation Choke Point was "inconsequential."

But Luetkemeyer said businesses continue to lose access to banking services. An email address his office set up to receive complaints from victims still receives three to four a month from businesses that have lost their bank account from the program, he said.

Rep. Sean Duffy, R-Wis., who held a hearing last year grilling FDIC Chairman Martin Gruenberg on internal emails that showed some agency officials had a personal distaste for those businesses, contended that Democrats were conflating Choke Point with "too big to jail."

"Big banks are not being affected by Choke Point, it is the smallest little businesses in our community," Duffy said.

After the vote, Leutkemeyer said he would be working with Senate leadership to move it forward in that chamber. "We are going to be working with them to see how it can be done," he said.

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