Banking Law

Since the US Congress spends a great deal of its time making life miserable for financial institutions in this country, your ears perk up when legislators on both sides of the aisle make noises about easing the regulatory compliance burden on banks, especially when the bi-partisan effort concerns legislation that was passed relatively recently.

Members of the U.S. House Committee on Financial Services are trying to pass legislation that would stop the federal government from implementing regulations requiring financial institutions to police Internet gambling.

Committee Chairman Barney Frank, D-Mass.; ranking member Ron Paul, R-Texas; and committee members Luis V. Gutierrez, D-Ill., and Peter King, R-N.Y., sent a letter to all members of Congress seeking support. They said that representatives from the regulatory agencies have admitted there are "substantial problems" with creating regulations under the Unlawful Internet Gambling Enforcement Act of 2006 without hindering payment systems.

The UIGEA requires civil and/or criminal penalties for banks, credit card companies, and others who process Americans' payments to gambling Web sites. Supporters say it would prevent underage and compulsive gambling. Opponents argue that it violates U.S. citizens' constitutional rights and sets a dangerous precedent for Web commerce by criminalizing the transfer of funds if the end result is illegal.

Frank and Paul introduced H.R. 5767 earlier this month. The bill would stop the Department of the Treasury and the Federal Reserve System from proposing, prescribing, or implementing regulations required by UIGEA. Frank, Paul, Gutierrez, and King also asked the Treasury and Federal Reserve System to stop creating and enforcing regulations related to UIGEA.

"Given the many other priorities that are pending at your agencies ... we believe it would be imprudent for you to devote additional agency resources to this Sisyphean task," they explained in letters to the leaders of the Treasury and Federal Reserve.

Bankers and their trade groups have been moaning about this expected burden for some time. It's bad enough that the government expects banks to be cops where terrorists and organized (and disorganized) criminals are using the financial system to commit serious crimes, but expecting them to crack down on college kids playing No Limit Texas Hold 'Em over the Internet with the likes of Phil Laak and Jennifer Tilly is too much. At least, Ron Paul and Barney Frank agree that it's too much. We'll see where this goes. 

It's obvious that the US Government would like to sing its fangs into the neck of online gambling in some fashion, and it's obvious why.

PricewaterhouseCoopers predicted that regulated Internet gambling could generate between $8.7 billion and $42.8 billion in federal tax revenue during the first 10 years.

You could fund a lot of pork with such a tidy sum.

Just think how much they could raise if they decided to legalize and regulate Internet sales of weed?

Even if Congress fails to launch the "final solution" to the subprime mortgage "crisis" before the election, let's hope that they can at least continue a bi-partisan effort to gut this bad  piece of legislation before banks actually have to comply with it.