God bless his Middle American heart (paid subscription required): Missouri Rep. Blaine Luetkemeyer "reintroduced legislation Thursday that would block regulators from ordering banks to end relationships with customers without cause, in response to" Operation Choke Point. Readers likely recall Rep. Luetkemeyer's introduction of the same bill last year which, because of Democratic control of the Senate, went nowhere. I suppose that he's encouraged by both the Republican takeover of the Senate and the FDIC's recent retreat (on paper, at any rate) from its hand-holding with the US Department of Justice in jointly bar-arming the windpipes of "disfavored" businesses so that they could not breathe in the rarefied air of the US banking system.
"I am reintroducing the Financial Institution Customer Protection Act because this legislation needs to be codified into law so that other agencies don't ever fall into this illegal and abusive practice," Luetkemeyer said in a press release.
The bill would forbid financial agencies from pressuring banks to cancel accounts unless there is a "material" reason and would mandate a formal rule defining reputational risk. The bill would also tweak language under the Financial Institutions Reform, Recovery, and Enforcement Act, narrowing violations covered under the law from those "affecting" financial institutions to those "by" or "against."
That last "tweak" would hinder the Justice Department's use of Section 951 of FIRREA to go on fishing expeditions against banks and businesses on the basis of investigation certain fraudulent or concealed actions that allegedly pose an ill-defined "reputational risk" to banks (and that, thereby, "affect" them), as opposed to actually being directed "against" the bank or undertaken "by" the bank itself. The DOJ was using the lower standard of Section 951 to pursue civil remedies (civil money penalties) rather than the higher standard to prove criminal wrongdoing, as a way to squeeze banks and the nefarious payday lending, gun-dealing, porno-purveying, online-hooking-up businesses they serviced to stop doing business together.
Even if the bill makes it through both the House and the Senate (where it will receive the gentle ministrations of War Chief Warren), you have to wonder whether the Perpetual Campaigner in the White House will veto it, and, if he does, whether the Senate has enough votes to override that veto. I'm skeptical.
Nevertheless, with Eric Holder slipping out the DOJ's back door, keeping the pressure on the DOJ (and the federal bank regulators) may bear additional fruit, if not this year, then in the next few years.