Questions Raised Over FDIC Officials’ ‘Sincerity And Truthfulness’

Chuck Ross Investigative Reporter
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Rep. Darrell Issa, chairman of the House Committee on Oversight and Government Reform, called into question the “sincerity of truthfulness” of the acting general counsel of the Federal Deposit Insurance Commission (FDIC) on Monday.

Issa is concerned with the FDIC’s coordination with the Department of Justice on Operation Choke Point, a controversial banking initiative that was designed to protect consumers against fraud.

But Issa claims that the DOJ and FDIC have concealed the inner workings of the initiative, including which agencies are working on it.

“In fact, the FDIC has been intimately involved in Operation Choke Point since its inception,” Issa wrote in a letter sent Monday to FDIC Chairman Martin Gruenberg.

The initiative is designed to block criminal businesses from accessing the banking system by forcing banks to closely monitor their customers.

But Issa has said that Operation Choke Point is ensnaring legitimate businesses and that it is being used by the Obama administration to attack industries it deems objectionable, such as payday lenders and gun dealers.

In a letter sent last month, Issa claimed that DOJ officials were aware that banks are “extremely responsive to the threat of a federal investigation.”

“The mere designation of an industry as “high-risk” by the FDIC is causing many banks to terminate all relationships within that industry,” wrote Issa.

In the letter to Gruenberg, 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.

Issa’s conclusion is drawn from documents given to the House committee by the Department of Justice.

The documents “call into question the sincerity and truthfulness of Mr. Osterman’s testimony,” Issa charged.

As evidence that the FDIC helped with Operation Choke Point, Issa points to the program’s initial proposal, which says that the DOJ should take the lead, but adds that “partner agencies should include the [Federal Trade Commission], FDIC, [Office of the Comptroller of the Currency], [Financial Crimes Enforcement Network] (Treasury), Federal Reserve Banks…”

A DOJ 8-week status report reads, “attorneys from the FDIC’s Division of [Depositor and] Consumer Protection contacted us to share ideas about the law relating to payday lending and potential investigative approaches.”

The report said that the DOJ would be meeting with the head of the Compliance and Enforcement group of an FDIC sub-agency, “to continue this discussion.”

According to a four month status report, the FDIC also volunteered to provide two attorneys from its Depositor and Consumer Protection branch to aid the DOJ in a review process to determine whether individual banks’ records indicated a need for further investigation.

A DOJ internal memorandum showed more interaction between the agency and the FDIC, when advisory material from the FDIC and two other federal agencies were included in subpoenas served to banks.

To determine how much input the FDIC has in Operation Choke Point, Issa is asking Gruenberg to turn over records including documents and communications between the FDIC and employees at the Civil Division of the DOJ since Jan. 1, 2011.

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