Rep. Issa Accuses Fed of Complicity in Operation Choke Hold

WASHINGTON, D.C.—Rep. Darrell Issa (R-CA Dist. 49), chairman of the House Committee on Oversight and Government Reform, sent a letter last week to Janet Yellen, chairman of the Federal Reserve Board, co-signed with Rep. Jim Jordan, an Ohio Republican and chairman of the House Subcommittee on Economic Growth, Job Creation and Regulatory Affairs, that accuses the Fed of being complicit, along with the Federal Deposit Insurance Corporation (FDIC), in alleged efforts to "pressure banks to terminate relationships with legal yet disfavored industries, without regard to the legitimacy or risk profile of individual companies." Adult entertainment is reportedly on the list of problematic industries targeted by Operation Choke Hold.

In the letter to Yellen, the legislators state, "There is evidence that the Federal Reserve Board may be operating in a similar manner. On August 8, 2014, SunTrust Bank—a state-chartered member  of the Federal Reserve System supervised and regulated  by the Federal  Reserve  Board—issued a statement in response to several well-publicized account closures: "We have decided to discontinue banking relationships with three types of businesses—specifically payday lenders, pawn shops and dedicated check-cashers—due to compliance requirements." [emphasis added] SunTrust Bank is the largest bank in the United States, with more than 400,000 small business clients. The Board's enforcement of a compliance regime that forces banks to sever all relations with legal and legitimate customers is totally unacceptable."

The letter also asks the Fed to provide the Committee with all documentation or communication generated after January 1, 2012 by employees of the Federal Reserve that refer or relate to pawn shops, tobacco-related industries, money services businesses, short-term lenders, or firearms and ammunition businesses. The deadline for the Fed to provide the requested information is Oct. 30.

According to a report on Operation Choke Hold issued in May 2014 by Issa's Committee, and reported on by AVN here, "In 2012, the Federal Deposit Insurance Corporation issued revised guidance for FDIC-supervised institutions concerning their relationships with payment processors. The guidance identified a variety of businesses that pose 'elevated ... legal reputational, and compliance risks' to depository institutions."

Industries identified by the FDIC include "credit repair companies, debt consolidation and forgiveness programs, online-gambling related operations, government grant or will-writing kits, payday or subprime loans, pornography, online tobacco or firearms sales, pharmaceutical sales, sweepstakes, and magazine subscriptions."

The issue because a hot topic last year when adult performers and companies reportedly had accounts closed and loan applications refused by high profile banking institutions.

The Oct. 16 letter to Fed Chair Janet Yellen can be read here.

Image: Rep. Darrell Issa, left, and Fed Chair Janet Yellen.