The Justice Department and the Federal Deposit Insurance Corporation (FDIC) have been exploiting a secretive federal anti-fraud initiative to deter banks from doing business with disfavored industries, such as payday lending, a December report from the House Committee on Oversight and Government Reform found.
The program, called Operation Choke Point, was supposed to be targeted at reducing banking fraud. But internal documents showed regulators taking advantage of a lack of due process to squelch a variety of legitimate transactions by legal but potentially unsavory businesses.
One of the most striking documents released by the committee was this comment in an email from the head of the FDIC in Atlanta: "I literally can not stand payday lending. They are abusive, fundamentally wrong, hurt people, and do not in any way deserve to be associated with banking." The report also noted that the FDIC likely misled Congress about its level of involvement in the program, playing a much more active role than initially advertised.
"It's appalling that our government is working around the law to vindictively attack businesses they find objectionable," Rep. Darrell Issa (R-Calif.) said in a statement. "Internal FDIC documents confirm that Operation Choke Point is an extraordinary abuse of government power."
Other legal businesses caught in the regulatory crossfire include cigar shops, ammunition sellers, fireworks vendors, and porn sites.