Magazine article American Banker

Congress Lets Banks out of the Doghouse

Magazine article American Banker

Congress Lets Banks out of the Doghouse

Article excerpt

Byline: John McMickle

Congress has had a lot of sharp words for the financial industry in the years since the financial crisis. But the tenor of questions from Republicans in the recent nomination hearing of attorney general nominee Loretta Lynch could herald a shift in some legislators' approach to the banking industry.

In written questions and answers posed during her nomination hearing, Lynch received several questions from Republican senators critical of the Justice Department's efforts to pressure banks to cut ties with certain categories of customers. President Obama's administration has been criticized for attempting to indirectly stamp out legal but controversial businesses such as payday lenders and gun sellers by suggesting to banks that these were high-risk customers.

Justice Department officials dubbed the effort Operation Choke Point in recognition of the fact that, by compelling regulated financial services firms to effectively deny disfavored businesses access to banking services, those businesses would be unable to operate in the modern economy.

The chairman of the Senate Judiciary Committee, Sen. Chuck Grassley, asked Lynch if she "would agree that DOJ should not use its authority to discourage legal enterprises from operating, even if some administration officials consider them 'morally unacceptable.'"

Lynch answered that the DOJ "must make sure to prevent any potential misunderstanding of its efforts" and that the agency will "inform financial institutions that any investigations are based on specific evidence that a financial institution is breaking the law, and not on the institution's relationships with lawful industries or companies."

In other words -- at least during her nomination process -- the incoming attorney general has promised to avoid some of the hardball tactics criticized in a 2014 report from the House Oversight and Government Reform Committee. …

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