Dear Santa, I'd like more regulation for Christmas

   I once heard a a government official make the statement that sooner or later everything in Washington gets regulated. So it only makes sense as we get ready to observe Hanukkah and Christmas that the next thing to fall under the regulator's microscope is holiday shopping. Prepaid cards to be exact. On this past Saturday Sen. Robert Menendez (D, NJ) introduced with great fanfare Senate Bill 2030, titled The  Prepaid Card Consumer Protection Act.

     Let me admit up front: I think prepaid cards are one of the greatest inventions of the modern era. Let's face it, outside of anyone living under your roof, whom do you really feel comfortable buying presents for? Probably not that many people. If you're like most folks you've probably spent too much time agonizing over a present for someone, only to see her stare at an opened gift box with a look somewhere between "Oh, my God," and "What do I do now?" Trust me, when she says, "You shouldn't have," she really means it.

   A network branded prepaid card cuts through all that. At a minimum it says "I at least love you enough to have stopped by the courtesy counter at the Garden State Plaza on my way home from work." Okay, it's not a trip to Paris or diamond earrings. But it can be used at the travel agent, the jewelry story or anywhere that network's cards are accepted, and it's as good as cash. In these times, who can't use a little cash?

   And since they're as good as cash, prepaid cards are valuable as a shopping instrument, especially with kids. Kids learn how to pay with plastic, how to safeguard their cards, and how to meter out their money. I'd rather have my kids wandering that Garden State Plaza with a prepaid card, rather than a Tony Soprano wad of cash.

Sen. Robert Menendez (D, NJ), on
one of the busiest shopping days
of the year,  blocking
the concourse of a busy NJ shopping
mall as he announces his
proposal to regulate prepaid cards.

  Sen Menendez was joined in his announcement by a cohort of "consumer" groups. These are people I feel sorry for. They must be the most depressed, miserable feeling,  anti-consumer people in the country. Because it seems to me that these self-appointed consumer saviors actually have very little faith in the American consumer. They seem to hold consumers in such low regard that unless they step in to help, even when they weren't asked, consumers will be rendered financially destitute by big business.

   So Sen. Menendez and merry band of consumerists seem to think that prepaid cards are just another scam by the financial industry to get rich quick, one fee at a time.  Their answer is a very prescriptive piece of legislation. The bill requires "full disclosure" of fees prior to card purchase. It prohibits a variety of fees being charged, and provides protection of Regulation E of the Electronic Funds Transfer Act.

   Now, I'm all for full disclosure, and it might surprise Sen. Menendez and his buddies who take it upon themselves to speak for all consumers, that so are most people in the financial services industry. In fact JPMorgan Chase even received props this week from Sen. Richard Durbin (D, IL), an industry nemesis, for its policy on consumer-friendly, plainly written disclosures.

   But Sen. Menendez apparently shares none of his colleague's new found rosy optimism towards the financial services industry. His bill would micromanage the fee issue down to specifying the size of the disclosure statement. I say, why stop there? Why not specify the type face, size and font? How about Times Roman 10 in PMS 363?

   Perhaps the most troubling aspect of the bill is placing prepaid cards under the umbrella of Reg E. Debit cards, which are tied to a bank acccount differ from prepaid cards. Congress, in its wisdom in the 1970s, protected debit cards against loss since an unauthorized user of a debit card could potentially clean out the account to which it was tied.

   Prepaid cards are like cash. If Tony Soprano loses his wad of cash, ill-gotten or not, he's out of luck. There's no Reg E for cash. Sen. Menendez and his fellow travelers on the road to irresponsibility would like to extend a banking protection to something that's not a bank function. But I say, why stop there? After all, one of the consumerists at Sen. Menendez' announcement said, echoing the earlier point about regulation, "now that prepaid cards are becoming increasingly popular," it's time to regulate them. Apparently, whether they need to be regulated or not.

   So why not regulate everything that's become popular? Take eating. It's popular. We all do it. When someone steals my son's lunch at school, why not have Reg E protection for that? $5.95 for the turkey sandwich, $1.69 for the Snapple and a quarter for the apple.

   Or Justin Bieber? He's popular. Why not regulate him?

   In the payments world,  how about simply doing away with all cards and just applying Reg E to cash? If Tony Soprano drops that wad, he can just apply to Treasury for a replacement. If I need money, I'll just tell the Treasury I lost it and I need more. Kind of like a universal entitlement program. No cards, no eligibility requirements, no work, just universal Reg E protection. When you need money, go to Uncle, tell him what you "lost" and what you need, and you're on your way.

   The problem with Sen. Menendez' legislation, along with laws like Dodd Frank, the Durbin Amendment and the CARD Act are that they stem from a world view where there are big guys and there are little guys. And the big guys are big guys because they're always taking advantage of the little guys. So the little guys need a bigger guy to take care of the big guys.

   But the problem with that--other than its blissful simplicity--is that most often the big guys know they need the little guys. So they treat the little guys right. But when the bigger guy decides he's going to kick around the big guys anyway, pretty soon a lot of big guys become little guys. And eventually the bigger guy starts picking on the little guys.

   Senator, do yourself a favor and focus on something a little more important this holiday season. Like getting people back to work. Have a little faith in us. We're a nation that put men on the moon. I think we can figure out for ourselves that a five dollar fee is more expensive than a four dollar fee. And if a card issuer charges one of us too much, it risks losing us as a customer. And I think we can keep our cards and cash safe. If we lose them, as my son did this summer, we'll learn from the experience.
  
   That's my view. What's yours?

Dueling Piano Players

Anyone who has been to New Orlean's French Quarter, San Antonio's Riverwalk, or any of a number of other tourist traps, er, destinations, is familiar with the dueling piano players. These are musicians who took Billy Joel's Piano Man way too seriously. They set up shop with a couple of grand pianos in bars and play a series of pop songs, show tunes, naughty nursery rhymes and other ditties that well liquored tourists sing along to. It's a non-techno version of karaoke.

So we had dueling piano players this week in the Senate Banking Committee following the Democrat's unsuccessful vote to break the Republican's filibuster over the nomination of Richard Cordray to head the new Consumer Financial Products Bureau.

First up was the ever intemperate Dick Durbin (D, IL) who chairs the Banking Committee. Sen. Durbin decried the Republican's successful filibuster of Mr. Cordray's confirmation. In full throat and a belligerent baritone Sen. Durbin rounded up the usual suspects on which to pin the blame: "...the big banks and their backers in Congress have done all they can to hamstring [the CFPB] and prevent it from having the tools and leadership necessary to be an effective consumer watchdog."

Not so! Not so! mellifluously sang Alabama's Richard Shelby, the ranking Republican on the Committee chaired by Sen Durbin. On the Senate floor he sang a woeful tale of a Bureau with nearly unlimited power, funding that amounts to a virtual unchallenged blank check, and a Titan director to whom lesser gods would answer.

"It should be common sense that the more power an agency has the more accountable it needs to be," sang out Sen. Shelby.

But in a second verse, Sen. Durbin accused his opposite number and the Republican conference of voting "to protect the status quo rather than...putting consumers interests first."

Not to be outdone Sen. Shelby's baleful rejoinder told of the need to broaden the governance of the Bureau by replacing the sole Director with a Board of Directors and to make the funding of the agency more transparent and less CIA-like. " In light of the reasonableness of the reforms we have requested, the question remains: why are the Administration and the [Democrats] so insistent that the Bureau be unaccountable?" he crooned. 

I think I can answer that. The Administration and the Senate Majority have little faith that the American people know what's in their best interest. They believe that consumers need a deus ex machina, on standby 24/7, to swoop down and save us from ourselves.

I'll go even further. I think the CFPB shows how little respect some in Congress have for the American people and, frankly, for the institution of the Congress itself. By their design of the agency and by their attempt to jam Richard Cordray through the confirmation process, they are telling American financial consumers and their elected representatives, we're going to put a bunch of smart people in a room and they're going to figure all this out. Don't bother your pretty little heads about it.

Well, we don't need more regulation and we don't necessarily need less regulation. We need the right regulation. And a bunch of smart people unanswerable to the institution of the Congress and led by a Director answerable to no one ain't it.

And the boys and girls gathered round Sen. Shelby's keyboard don't get a pass here. Granted, there's nothing more limiting than being the minority party in the House or Senate, but they're in the minority right now for a reason. They were sent to Washington to govern, not to tickle their keys.  This he sang-she sang, dueling piano routine gets old fast.

So pardon me if I don't stick around. I'll do my drinking elsewhere. Maybe a little dive where there's an old guy with 12 teeth and a beat up Gibson belting out the blues from somewhere between his gut and his heart.

That's my opinion. What's yours?