While the report by the Senate Democrats on CIA "enhanced interrogation techniques" has been grabbing the attention of the press, the emails released by the staff of the House Committee on Oversight and Government Reform this week should be of interest to bankers who fear choking on regulatory overreach. In June, Darrell Issa's Committee issued subpoenas for such emails to the FDIC and the FDIC turned them over. They show a clear intent on the part of some FDIC officials to deny payday lenders who are operating in accordance with the law access to the banking system.
The emails from the FDIC's Atlanta head honcho are especially illuminating. "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." Therefore, he and his minions put pressure on banks to get out of the entire line of business.
He wasn't alone, of course. Other emails from other regional offices and officials in D.C. show similar intent. The attempt to link payday lending and pornography was, to the credit of FDIC lawyers, opposed by them. As many clients do when confronted with sound advice, the FDIC officials ignored their attorneys. Their intent was to persuade Congress to conflate payday lending with pornography and online gambling, not because it actually is analogous in any legal sense, but because the FDIC officials simply didn't like it. Similar treatment was accorded coin dealers and firearms and ammunition dealers, with businesses being named in the report that were denied access to the financial system because banks were exiting the "industry."
The report also alleges that certain FDIC officials "may have misled Congress" about the FDIC "partnering" with the Department of Justice in implementing Operation Choke Point. Specifically attacked is the FDIC's Acting General Counsel, the truthfulness of whose testimony before Congress is called into question by the report.
Issa has been on this hunt for awhile and, obviously, he's now naming names. In response to the increased pressure, we've seen the FDIC make baby steps in the direction of backing away from this endeavor that it denies ever having particpated in, such as the revised guidance issued this summer that proclaimed that when the FDIC said certain businesses were problematic, it was just joshing.
We'll see whether this new attitude trickles down to the regional and field levels. If it doesn't, expect Issa to continue hunting.