by Gus Pribnow
On January 29, the U.S. Congress’ Committee on Financial Services will hold a hearing on whether the Office of the Comptroller of the Currency (OCC) is undermining the effectiveness of the Community Reinvestment Act (CRA), which helps low- and moderate-income communities secure loans. At this hearing, it is critical that Members of Congress speak out against the decisionmakers who have thus far ignored the renaissance of Operation Choke Point throughout the country. The resurrection of this practice, sometimes referred to as biased banking, violates both the CRA and official OCC policy, and, if not stopped soon, will have severe ramifications for Memphis and the State of Tennessee at large.
The Operation Choke Point movement first began earlier in the decade, when well-connected political operatives worked with the Federal Deposit Insurance Corporation and the Department of Justice to ensure banks defunded those whose politics and other personal beliefs did not line up with their own. Vulnerable, low-income Tennesseans who depend on specialized lending companies to make ends meet for their families, were among the victims, along with many legal private businesses that provide loans to hardworking Volunteer State residents.
It quickly became clear that Operation Choke Point violated OCC policy, which states that lending discrimination in any form is not permissible. It also violated the CRA, which requires banks to demonstrate they are adequately meeting the needs of the communities they serve.
Thanks in large part to the leadership of Sen. Marsha Blackburn (R-Tenn.), Washington terminated this illegal, discriminatory behavior. It resulted in significant financial settlements between the FDIC and the innocent businesses affected by the anti-consumer choice activity, including for many in Memphis’ backyard.
In politics, though, bad ideas never die. Today, biased banking is back, just on a different scale. Rather than the federal government intervening to stifle consumer choice and short-circuit small businesses, political operatives are now dealing with the big banks directly, pressuring them through strong-arm tactics to cut off funding to their disfavored industries.
Recently, the practice has found its way back home to Memphis. Operatives have turned their sites to a Tennessee-based company that operates private corrections and detentions facilities. Such companies have become targets as a result of certain contracts they service with the federal government.
The political outrage mob is moving full speed ahead with a defunding pressure campaign. Their hope is that the lack of liquidity and funding will wipe out the industry. Memphis’ decision-makers would be wise not to take the bait.
Knowing the damage that Operation Choke Point caused to Tennessee’s working-class last time around, even those who oppose private companies’ offering of correctional services should worry about the anti-consumer slippery slope that the next wave of biased banking can cause.
Once the illicit bank defunding precedent is set again, the tactics could be applied to any individual or industry that is unfavorable to the motivated and well-funded political mob. In many states, biased banking has already spread, including to the energy industry and financial industry. Such a path is corrosive to America’s basic principles of liberty and decency. America is a country built upon freedom of association and civil discourse. Operation Choke Point 2.0, however, is antithetical to both.
For the banks’ part, they would do well to remember why businesses have been so reluctant to inject their brands into such political conversations. There are generally two highly motivated audiences in every fight. In the business world, giving into one makes an enemy of the others.
The people of Memphis deserve the right to make their own decisions. Special interest groups and runaway bureaucrats should not be making the calls for them. Here’s hoping that, at this upcoming Financial Services hearing concerning the Community Reinvestment Act and Office of the Comptroller of the Currency, Members of Congress stand up for what both the CRA and OCC policy explicitly say and ensure just that.
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Gus Pribnow (pictured above) serves as the Recording Secretary of the East Shelby County Republican Club.
