It’s Time to Fold: Frank & Co. Tell Feds to Cease “Sisyphean Task” of Finalizing UIGEA Regulations

Following the April 2 hearing of a subcommittee of the House Financial Services Committee, Rep. Barney Frank (D-MA) and Rep. Ron Paul (R-TX) jointly introduced a new bill, H.R. 5767, designed to prohibit the Federal Reserve and Treasury Dept. from finalizing and implementing the UIGEA regulations. At the hearing, representatives of the Board of Governors of the Federal Reserve System and the Treasury Department (the authors of the regulations) as well as the American banking systems overwhelmingly demonstrated how unworkable the regulations were in their present state, and together suggested strongly they could never be made to work, practically speaking.

The newly-proposed bill is still at the very beginning of the legislative process, having only been introduced and, at the moment, only having Frank and Paul as co-sponsors. (It would likely require many more co-sponsors before being scheduled for debate and a subsequent vote.) However, Frank, Paul, and two other House members have decided to go ahead and recommend the regulators stop their work of revising the regulations now.

Along with Luis Gutierrez (D-IL), chairman of the subcommittee that held the April 2 hearing, and Peter King (R-NY), Frank and Paul have written letters to the Secretary of the Treasury Department and the Chairman of the Board of Governors of the Federal Reserve System asking both to consider abandoning the business of finalizing the UIGEA regs in favor of other pressing matters. The press release and the letters can be found here. Both letters recognize how the respective groups “have been struggling to issue these regulations,” and to each the foursome suggest the following:

“[A]s the [April 2] hearing made clear, the underlying statute makes your job extremely difficult, if not impossible. Given the many other priorities that are pending at your agencies, including the mortgage crisis, HOEPA [the Home Ownership and Equity Protection Act], and UDAP [Unfair Deceptive Acts and Practices] rulewriting and many other issues, we believe it would be imprudent for you to devote additional agency resources to this Sisyphean task, especially as we intend to vigorously pursue legislation to prevent the implementation of these regulations.”

In other words, Frank, et al. are telling the feds to stop betting their thin draw and fold now. There’s very little hope you’re going to win, they say, so avoid increasing your already substantial loss of effort and expense and let the UIGEA go gentle into that good night.

Nobody likes to have their work characterized as “Sisyphean.” Except for masochists. And perhaps those who genuinely believe their work is not futile, but will actually bear fruit. The fact is, both of the federal representatives who spoke at the April 2 hearing did anything but suggest they believed their assigned task to be achievable. It would be difficult to imagine the feds not understanding the logic of the argument presented in these letters.

Doesn’t mean the work to finalize the regs won’t continue. But it does look like the big UIGEA ball might’ve rolled back down to the bottom of the Hill for now.