Wednesday, March 25, 2015
FDIC Chairman in Hot Seat Over Operation Choke Point
FDIC Chairman in Hot Seat Over Operation Choke Point
by Michael Patrick Leahy24 Mar 2015
Martin Gruenberg, Chairman of the Federal Deposit Insurance Corporation, will be in the hot seat Tuesday afternoon. He’ll be facing the Oversight and Investigations Subcommittee of the House Financial Services Committee as it holds a hearing on the FDIC’s role in Operation Choke Point, the Obama administration’s under-the-radar project designed to destroy several industries (payday lending, firearms dealers, pawn shops) by “choking off” their banking relationships.
In a news release, Representative Sean Duffy (R-WI), the subcommittee chairman, said the subcommittee members will have some tough questions for Gruenberg.
“The Subcommittee is calling the hearing with Chairman Gruenberg to get answers that he has long evaded:
What did he know? When did he know it? And who has been held accountable?” the release asks.
Immediately prior to the subcommittee hearing, Duffy will hold a news conference at which several whistle-blower victims will assert their bank accounts were closed due to pressure from bank examiners.
“When we pass laws and make them legal, but the FDIC, through their activist bureaucrats, try to put them out of businesss under the cover of darkness that’s not American and it’s beyond the control and the charter given [the FDIC] by Congress,” Duffy told Fox News on Monday. (Beginning at the 1:40 mark in the video below.)
FNC "America's Newsroom" (03/23/2015): Congress set to begin hearing on Operation Choke Point
Committee members are also expected to press Gruenberg to explain why former Acting General Counsel Richard Osterman still has a job with the agency. Osterman previously responded to questions before the full House Financial Services Committee in April that Representative Darrell Issa (R-CA), at the time chairman of the House Oversight and Government Reform Committee, said in a scorching letter to FDIC Chairman Gruenberg “call[ed] into question the sincerity and truthfulness of Mr. Osterman’s testimony.”
In January, Charles Yi was named general counsel of the FDIC and Osterman returned to his position as deputy general counsel of the Legal Services Division of the FDIC, where he is currently employed.
Critics of Operation Choke Point and the FDIC do not think Osterman’s reassignment goes far enough.
“We cannot know precisely the reasons for Mr. Osterman’s recent demotion but we do know that Congress was misled and there should be consequences for covering up the FDIC’s role in Operation Choke Point,” Amy Cantu, a spokesperson for the Community of Financial Services Association tells Breitbart News.
“This program is an unwarranted and improper intrusion by federal regulators and it sets a dangerous precedent for any legitimate business that could one day be deemed unfavorable by unelected bureaucrats,” Cantu adds.
In his April testimony, Osterman told several members of Congress FDIC examiners were not pressuring banks to shut down accounts of certain businesses. Osterman also said Operation Choke Point was a Department of Justice (DOJ) program, and the FDIC merely provided the DOJ with information.
“Congressman, I can assure you that the FDIC was not …I mean what we were trying to do actually with the Operation Choke Point, which actually was not our program it is a DOJ program was to help them to stop illegal activity,” Osterman said in response to a question from Congressman William Clay (D-MO).
He was equally emphatic that FDIC played a distant, supportive role to the DOJ in his answers to Congressman Lynn Westmoreland (R-GA).
“Have you ever told somebody that had a legal business that’s either regulated by the state or federal government that a bank could not do business with them?” Westmoreland asked.
“Not that I’m aware of,” Osterman responded.
“And so the Chokepoint has no reality to it?” Westmoreland persisted.
“The Choke Point, as I’ve said before sir, is a Department of Justice program that was going after illegal activity and we were asked to provide information and that’s what we did to address illegal activity,” Osterman responded.
Congressman Brad Sherman (D-CA) was skeptical of Osterman’s answers to his questions.
“What is the target of Operation Choke Point?” Sherman asked Osterman.
“I’m not in a position to answer that because it’s not an FDIC program,” Osterman responded.
“But it’s your examiners who are putting the pressure on banks to do to certain U.S. businesses what I spent most of my time trying to get done to the government of Iran. Are your examiners pushing banks towards cutting off any us businesses particularly those engaged in consumer credit?” Sherman asked.
“The answer to that is no,” Osterman responded.
“We wouldn’t hear testimony, “ Sherman asked, “from those who deal with our bank examiners saying they were told we will look at you more carefully unless you cut off this or that business?”
Osterman responded, “We have actually put out a policy statement on this issue to make it very clear from the start as long as financial instiutions are properly managing their risks they are neither prohibited nor discouraged from providing these services.”
But in January, a whistle-blower caught a third party processing company executive admitting on an audio recording that “bank examiners had forced him to cut off the whistle-blower’s account.”
As Breitbart News reported earlier this month, that executive was caught on tape saying: “bank examiners can make life miserable for third party payment processors who don’t follow their directions to drop an account.”
“[They say] We’re going to make your life miserable. Instead of auditing you once a year we’re going to audit you four times a year,” the executive is heard saying.
“Now we’re going to come and look at all of this and if we find anything negative we’re going to write it up and then you’re going to incur increased cost, increased focus from your board of directors and from banking regulators,” the executive added.
“And they all run scared because they’re all sheep,” the executive said.
“Frankly,” the executive continued on the tape, “I hate to say it, but it’s [Operation Choke Point] succeeding, because it’s forcing my processing bank and then it’s forcing me to have to respond.”
One month after Osterman’s April testimony, Representative Issa fired off a missive to Gruenberg about that testimony.
“Issa laid out a fresh batch of concerns, including that Richard Osterman, the agency’s acting general counsel, essentially lied in testimony before the Oversight and Reform Committee last month when he repeatedly claimed that Operation Choke Point is a DOJ program,” as the Daily Caller reported in June.
In a subsequent appearance before the Investigations and Oversight subcommittee in July, Osterman modified his story.
“To the extent that the DOJ’s actions were directed at potential illegal activity involving the banks that we supervise, the FDIC has a responsibility to consider the legality of certain actions involving our institutions as well as any potential risks such activities could pose for institutions we regulate,” Osterman said.
“The FDIC frequently coordinates with other agencies — both federal and state — in its supervision of our regulated institutions. Accordingly, FDIC staff communicated and cooperated with DOJ staff involved in Operation Choke Point based on an interest in DOJ’s investigation into potential illegal activity that may involve FDIC-supervised institutions, Osterman added.
In November, the Wall Street Journal reported that the Inspector General of the FDIC has launched an investigation into Mr. Osterman’s testimony before Congress:
The FDIC’s inspector general, Fred Gibson, in a letter sent this month to Rep. Blaine Luetkemeyer (R., Mo.), said he would review the conduct of agency personnel to find if the “actions and policies of the FDIC were consistent with applicable laws, regulations and policy,” as well as the regulator’s mission. . . .
Mr. Gibson also said he would examine lawmakers’ allegations that FDIC General Counsel Richard Osterman provided false testimony to Congress earlier this year when discussing the FDIC’s activities. Mr. Osterman, testifying to House lawmakers, rejected assertions that the FDIC wanted to cut off legitimate businesses’ access to the financial system.
Tuesday’s subcommittee hearing on Operation Choke Point is likely to be just the beginning of even stronger efforts by members of Congress to call executive agencies to account for their ongoing abuses of power as part of Operation Choke Point.
Whether Congress will choose to exercise its constitutional authority and fire out-of-control executive bureaucrats as a first step in reasserting its legitimate powers remains to be seen.
Martin J. Gruenberg is the chairman for the Federal Deposit Insurance Corporation (FDIC), and was Paul S. Sarbanes senior counsel.
Note: Paul S. Sarbanes’s senior counsel was Martin J. Gruenberg, and a governor for the Roosevelt Institute.
Foundation to Promote Open Society was a funder for the Roosevelt Institute.
George Soros was the chairman for the Foundation to Promote Open Society, is Jonathan Soros’s father, and a member of the Bretton Woods Committee.
Jonathan Soros was the vice chairman for the Foundation to Promote Open Society, is George Soros’s son, and a senior fellow at the Roosevelt Institute.
Cantwell F. Muckenfuss III is a director at the Roosevelt Institute, and was a counsel to the chairman for the Federal Deposit Insurance Corporation (FDIC).
William M. Isaac was the chairman for the Federal Deposit Insurance Corporation (FDIC), and is a member of the Bretton Woods Committee.
Robert L. Clarke was a director at the Federal Deposit Insurance Corporation (FDIC), and is a member of the Bretton Woods Committee.
John C. Dugan was a director at the Federal Deposit Insurance Corporation (FDIC), is a member of the Bretton Woods Committee, and a partner at Covington & Burling LLP.
Eric H. Holder Jr. was a partner at Covington & Burling LLP, and is the attorney general at the U.S. Department of Justice for the Barack Obama administration.
Posted by Sam and Bunny Sewell at 2:12 AM