Franks sends Paulsen, Bernanke letters asking them to hold off on UIGEA regs

[The Buzz]

Rep. Barney Frank (D-Mass.), the Chairman of the House Financial Services Committee, has sent a letter to Treasury Secretary Henry Paulsen and Chairman of the Federal Reserve Ben Bernanke, asking them to ingore political pressure from the Bush administration and hold of on releasing the regulations for the UIGEA.

The text of the letters follows below.

The Honorable Henry M. Paulson, Jr.
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Mr. Secretary:

I am deeply disappointed to hear that your agency is proceeding with what I consider to be unseemly haste in issuing regulations implementing the Unlawful Internet Gambling Enforcement Act. This midnight rulemaking will tie the hands of the new Administration, burden the financial services industry at a time of economic crisis, and contradict the stated intent of the Financial Services Committee

As you know, at our April hearing, the testimony of your representatives and the industry indicated that it would be particularly difficult to craft workable regulations to effectively enforce the statute without having a substantial adverse effect on the payments system. Subsequently, my colleagues and I introduced legislation (HR 5767, later HR 6870) that would prohibit the implementation of these flawed rules and replace them with a formal rulemaking process that would define the term “unlawful internet gambling,” something the proposed rules fail to do. HR 6870 was passed by the Financial Services Committee on September 16.

The proposed regulations, like the underlying UIGEA statute, fail to define the term “unlawful internet gambling,” leaving it to each financial institution to reconcile conflicting state and federal laws, court decisions and inconsistent Department of Justice interpretations when determining whether to process a transaction. Furthermore, some of the information needed to make this determination would likely be unavailable to banks because customers or financial institutions in foreign jurisdictions will likely be unwilling or unable to provide it.

I strongly urge you to delay implementation of these major, and deeply flawed regulations to permit the incoming Administration the ability to review the consequences of such a significant policy decision, rather than unfairly being denied that opportunity.


BARNEY FRANK

***

November 10, 2008

The Honorable Ben S. Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th & C Streets, NW
Washington, DC 20551

Dear Chairman Bernanke:

I submit to you the letter I sent to Treasury. I realize that the implementation of this flawed statute is not a task you requested. I also appreciate the candor with which your representative answered the questions at our hearing, confirming that this is an impossible task. There is no evidence that these issues have been in any way overcome. I strongly urge you not to burden the new Administration with administering a statute which cannot be carried out


BARNEY FRANK

[The Buzz]

Good editorial in the Las Vegas Review-Journal on the topic ...

http://www.lvrj.com/opinion/34259759.html

Given the current state of the nation's banks and the financial sector in general, it would be hard to imagine a worse time to impose on those institutions an ill-thought-out set of rules which will balloon their compliance costs and expose them to potential fines or prosecution should they fail to divine "legal" from "illegal" transactions (a task better suited to a psychic with a turban and a crystal ball), especially when -- according to all sources -- it probably wouldn't do much to slow down Internet gaming, anyway.

The Bush administration should back off.

[The Buzz]

The AP has weighed in with a story that includes quotes from White House press sectretary Dana Perino. Perino addresses whether the regs are being rushed, and whether White House aid William Wichterman has a conflict of interest on the issue.

Of course, the answers are no and yes, respectively.

http://ap.google.com/article/ALeqM5g...ZgCgAD94D3JU00