Consumer Financial Protection Bureau (CFPB) Director Richard Cordray easily avoided being pinned down about his agency’s involvement in Operation Choke Point in the few questions posed to him by Republicans at a Congressional hearing this week.
Rather than ask Cordray directly whether or not the CFPB is involved with Operation Choke Point, Rep. Sean Duffy (R-WI) danced around the edges of the crucial question. Duffy focused on Cordray’s role as a board member at the Federal Deposit Insurance Corporation (FDIC), another federal agency, along with the Department of Justice (DOJ), reportedly at the center of the Obama administration’s Choke Point efforts.
“You’re aware that on the FDIC they set out a list of industries that were subject to Operation Choke Point?” Duffy asked Cordray.
“I don’t know if that’s quite accurate. I’m just to be clear, I’m an outside director, I’m not as engaged in the day-to-day operations, I have a full time job with the CFPB,” Cordray responded.
“The DOJ, and at least the FDIC were targeting certain industries, whether it’s payday lending, gun dealers, ammunitions manufucturers, smoke shops,” Duffy stated.
“I have read about that,” Cordray responded.
“As a board member [at the FDIC],” Duffy asked Cordray, “you had no idea about it from the inside?”
“I was not aware of [Operation Choke Point], that’s correct, until it burst into public view,” Cordray answered.
Though Duffy’s questioning at Tuesday’s hearing was indirect, he appears to be the only Republican member of the House who is offering any serious challenge to Cordray on the CFPB’s role in Operation Choke Point.
“Congressman Sean Duffy was one of only two members on the committee who even took the opportunity to question CFPB Director Cordray about Operation Choke Point. Once again, Director Cordray danced around questions, just as he did with the Senate Banking Committee.
We need more members of the Committee who understand, as Congressman Duffy clearly does, the real threat posed by this program and have the courage to question the Director of this unaccountable agency about its involvement,” Brian Wise, senior advisor to the U.S. Consumer Coalition told Breitbart News.
The CFPB, though an independent and virtually unaccountable agency, is organizationally housed under the Federal Reserve Board.
A week earlier, Duffy had asked Federal Reserve Chairman Janet Yellen to go on the record about whether or not the Federal Reserve Board was involved in Operation Choke Point. Yellen emphatically denied any such involvement.
Though he claims no direct knowledge of Operation Choke Point, Cordray was quick to rebut Duffy’s assertions that it was targeting specific industries.
“Actually, I’m not clear that’s what people are actually doing. I think some of this [press reports that Operation Choke Point is targeting specific industries] may be overdone,” Cordray responded to one of Duffy’s questions.
Later, when asked about targeting of industries in a subsequent question, Cordray again claimed that he thought the targeting allegations were overblown.
“If you’re using the power given to you at the FDIC in partnership with the DOJ to put certain lines of business that are legal that had no due process, no judge, no jury, no trial, no due process, you’ve actually put them out of business, do you think that you should have a job at the FDIC or the DOJ?” Duffy asked.
“Again, I’m not clear that that’s what happened, I don’t think it is what happened,” Cordray answered. “I believe if I’m understanding correctly that there have been modifications of policies [at the FDIC].”
Watch the full exchange between Cordray and Duffy here:
What Cordray did not say, and what Duffy did not follow up on, is that at the same time the FDIC modified its policies, CFPB stepped up its participation in Operation Choke Point.
On January 28, the FDIC issued a Financial Institution Letter that some took as a sign it was ending its role in Operation Choke Point.
“The Federal Deposit Insurance Corporation (FDIC) issued a Financial Institution Letter today encouraging supervised institutions to take a risk-based approach in assessing individual customer relationships, rather than declining to provide banking services to entire categories of customers without regard to the risks presented by an individual customer or the financial institution’s ability to manage the risk,” the press release read.
Rep. Blaine Luetkemeyer (R-MO), also a member of the House Financial Services Committee, quickly issued a press release declaring victory, stating that the abuses of Operation Choke Point were on a path to ending.
“Today is a turning point in the fight against Operation Choke Point,” Luetkemeyer wrote.
“This morning, I met with Chairman Gruenberg and Vice Chairman Hoenig to discuss the FDIC’s activity with Operation Choke Point. Not only did the Chairman and the Vice Chairman acknowledge wrongdoing within the organization, but they have accepted many of the policies put forth in my legislation, the Financial Institution Customer Protection Act. I’m pleased that FDIC is implementing these important changes without delay,” Luetkemeyer added.
But on January 27, the CFPB issued its own memo telling banks and other financial institutes that they could not “blow the whistle” on Operation Choke Point style targeting, a directive which quickly came under heavy criticism.
On January 28, Brian Wise, Senior Advisor for the U.S. Consumer Coalition, issued a statement blasting the CFPB.
“Following the release by USCC of audio recordings of a credit union executive talking about intimidation by federal regulators, the CFPB has apparently decided to take that intimidation public by issuing a guidance reminding banks not to discuss details of federal bank examinations,” Wise wrote, adding:
Operation Choke Point is not winding down and it is not just about two agencies’ overreach of authority. The guidance issued by the CFPB doubles down on the aggressive regulatory environment of this Administration by not only propping up Choke Point, but also advising banks that the Fed-based agency can also force banks to violate certain non-disclosure agreements with customers.
These extra-legal methods and intimidation tactics are getting worse. It is time Congress takes steps to rein in the CFPB and end Operation Choke Point.
Iain Murray of the Competitive Enterprise Institute was equally critical of the CFPB’s memo.
“Until now,” Murray wrote, “the mightiest agency in financial regulation, the Consumer Financial Protection Bureau, has played only a small part in Operation Choke Point. But that may be about to change.”
“About the same time as FDIC issued its new guidance, the bureau issued ominous new guidance of its own.” That memo, Murray wrote, “warns banks and affected parties against blowing the whistle on the bureau’s investigations.”
Earlier this week, the U.S. Consumer Coalition released a dramatic recording of a phone call between a tobacco retailer and a payment processor which provided hard evidence that the CFPB plays a role in Operation Choke Point.
“Have you heard of a little thing called Choke Point and the CFPB?” Alex Bacon, president of EFT Network, an independent payment processor, asked his former client, Brennan Appel, owner of Global Hookah Distributors, a distributor of tobacco products.
“They’re taking aim at industries like you and others to eliminate you from business by choking off your payment processing,” Bacon told Appel.
You can hear the audio of the recording here.
Remarkably, neither Duffy nor any other Republican member of the House Financial Services Committee asked Director Cordray a single question about the CFPB’s January 27 directive that many saw as an over act of intimidation against potential Operation Choke Point whistle blowers.
On Thursday, however, Duffy published a YouTube video which showed him signing several bills he is co-sponsoring which are designed to limit the powers of the CFPB.
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