November 16, 2008

Republicans Try to Tie Obama's Hands by Rushing in UIGEA Regulations

Congressman Barney Frank has written to US Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, asking them to postpone the issuing of regulations relating to the implementation of the UIGEA. Frank's letter comes in response to reports that the Bush Administration is trying to push through regulations to enforce the ban before President-elect Barack Obama takes office in January.

In his letter, House Financial Services Committee Chairman Barney Frank says: "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."

Mr Frank urged Mr Paulson 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."

The Bush Administration is said to be working to finalise the regulations at the last minute before they can be stopped by the new Democratic Administration, an orchestrated move being linked to a former National Football League lobbyist now working for the Republicans. The NFL has actively campaigned against online gaming and any clarification of the UIGEA and has opposed legislation introduced by Rep. Barney Frank to regulate the industry.

Last week Congressman Steve Cohen asked White House Counsel Fred Fielding to detail what role former lobbyist William Wichterman, now Deputy Director of Public Liaison, played in the Treasury's decision to send the proposed UIGEA rules to the Office of Management and Budget for final review on October 20th. In a November 7th letter to Mr Fielding, Mr Cohen said he had been told that Mr Wichterman "has been a source of considerable political pressure to speed this regulation through.''

Mr Wichterman recently left the law firm of Covington and Burling, which represents the NFL, to serve as a political appointee in the few remaining months of the Bush Administration.

"At a time when the financial system is in crisis, it is irresponsible for the Bush Administration to rush through a fundamentally flawed regulation that even representatives of the Treasury Department and Federal Reserve have stated on record is unworkable," said Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative. "We are sceptical of the Administration's motivation to get this done at the very last minute, especially given the apparent involvement of a NFL lobbyist turned Bush appointee."

The Bush Administration had previously made a commitment not to issue final regulations after November 1st 2008 except in "extraordinary circumstances." A delay in issuance of the final regulations was also expected given the September passage of the Payment System Protection Act by the House Financial Services Committee. The legislation would have delayed UIGEA implementation in order to develop regulations that do not harm the payments system.

"The Bush Administration is setting a horrible precedent of pushing through flawed regulations at the very last minute to deliberately circumvent the in-coming administration, leaving already struggling banks and financial companies to implement costly and poorly crafted regulations,” said Mr Sandman.

Representatives of the Department of the Treasury and Federal Reserve System had previously acknowledged the challenges U.S financial institutions will face in attempting to comply with UIGEA in testimony before Congress in April.
Since most payment systems are not designed to comply with this law, "it will be very difficult to shut off payment systems for use of Internet gambling transactions," said Ms Louise Roseman, Director, Division of Federal Reserve Bank Operations and Payment Systems, Board of Governors of the Federal Reserve System. "The implementing statute will not be iron clad at all."

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