We’re Americans, hear us yell: “baa, baa, baa”

Americans are wolves on the world stage, boldly invading 3rd world nations.  But we are sheep at home, cowering before our government.  Its power expands quietly like a moving cat.  Slowly and relentlessly, like the incoming tide.  This is the second in a series giving a different perspective on what we have become (see chapter one here).

On 30 July 2008 President Bush signed into law HR 3221:  Foreclosure Prevention Act of 2008.  Here are some details of the bill that your favorite media source might not have mentioned.  It greatly — massively — expands reporting of credit card and payment transactions to the federal government.  The full text of the new law appears at the end of this post.

Press release from Freedomworks, 19 June 2008

Hidden deep in Senator Christopher Dodd’s 630-page Senate housing legislation is a sweeping provision that affects the privacy and operation of nearly all of America’s small businesses. The provision, which was added by the bill’s managers without debate this week, would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.

FreedomWorks Chairman Dick Armey commented: “This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay’s PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America’s small businesses are breathtaking.”

“Privacy groups like the Center for Democracy and Technology and small business organizations like the NFIB sharply criticized this idea when it first appeared earlier this year. What is the federal government’s purpose with this kind of detailed data? How will this database be secured, and who will have access? Many small proprietors use their Social Security number as their tax ID. How will their privacy be protected? What compliance costs will this impose on businesses? Why is Sen. Chris Dodd putting this provision in a housing bailout bill? The bill also includes the creation of a new national fingerprint registry for mortgage brokers.

“At a time when concerns about both identity theft and government spying are paramount, Congress wants to create a new honey pot of private data that includes Social Security numbers. This bill reduces privacy across America’s payment processing systems and treats every American small business or eBay power seller like a criminal on parole by requiring an unprecedented level of reporting to the federal government. This outrageous idea is another reason to delay the housing bailout legislation so that Senators and the public at large have time to examine its full implications.”

Critics Decry a Costly Merchant-Reporting Rule, But It’s Now the Law“, Digital Transaction, 5 August 2008 — Excerpt:

Under the merchant-reporting requirement, any organization that processes credit or debit cards or third-party network transactions must report to the Internal Revenue Service the total number of credit and debit card transactions for each merchant that has more than $20,000 in transaction volume and more than 200 transactions per year. Reporting will be done by taxpayer identification number (TIN).

Reportable transactions include any payment card transaction, regardless of whether the card is physically present, and any third-party network transactions, including automated clearing house, PayPal, and Google Checkout transactions. The merchant-reporting requirement has been criticized by everyone from privacy advocates to small businesses and merchant processors worried about implementation costs and penalties for mistakes.

“It’s going to cost the industry upwards of hundreds of millions of dollars,” says Larry Seyfried, senior tax legislative representative for the American Bankers Association. “This is not a simple industry, this is not something that can be done by adding a column to an Excel spreadsheet. This is going to require a lot of time and effort by acquirers across the country taking important personnel away profit-generating ideas and forcing them to work on this.”

Legislative Notice, Senate Republican Policy Committee, 18 June 2008

H.R. 3221 – Foreclosure Prevention Act of 2008:  Payment Card and Third Party Network Information Reporting

The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction.

Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010.

Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

Other posts in this series about America, how we got here and how we can recover it

  1. Forecast: Death of the American Constitution, 4 July 2006
  2. Diagnosing the Eagle, Chapter III – reclaiming the Constitution, 3 January 2008
  3. A report card for the Republic: are we still capable of self-government?, 3 July 2008
  4. Americans, now a subservient people (listen to the Founders sigh in disappointment), 20 July 2008
  5. de Tocqueville warns us not to become weak and servile, 21 July 2008
  6. A soft despotism for America?, 22 July 2008
  7. The American spirit speaks: “Baa, Baa, Baa”, 5 August 2008
  8. We’re Americans, hear us yell: “baa, baa, baa”, 6 August 2008
  9. Obama describes the first step to America’s renewal, 8 August 2008
  10. Let’s look at America in the mirror, the first step to reform, 14 August 2008
  11. Fixing America: elections, revolt, or passivity?, 16 August 2008
  12. Fixing American: taking responsibility is the first step, 17 August 2008
  13. Fixing America: solutions — elections, revolt, passivity, 18 August 2008
  14. The intelligentsia takes easy steps to abandoning America, 19 August 2008 

For all posts on this subject see America – how can we reform it?.

Text of the new bill

H.R. 3221: Foreclosure Prevention Act of 2008

SEC. 3091. RETURNS RELATING TO PAYMENTS MADE IN SETTLEMENT OF PAYMENT CARD AND THIRD PARTY NETWORK TRANSACTIONS.

(a) In General- Subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following new section:

‘SEC. 6050W. RETURNS RELATING TO PAYMENTS MADE IN SETTLEMENT OF PAYMENT CARD AND THIRD PARTY NETWORK TRANSACTIONS.

‘(a) In General- Each payment settlement entity shall make a return for each calendar year setting forth–

‘(1) the name, address, and TIN of each participating payee to whom one or more payments in settlement of reportable payment transactions are made, and

‘(2) the gross amount of the reportable payment transactions with respect to each such participating payee.

Such return shall be made at such time and in such form and manner as the Secretary may require by regulations.

‘(b) Payment Settlement Entity- For purposes of this section–

‘(1) IN GENERAL- The term ‘payment settlement entity’ means–

‘(A) in the case of a payment card transaction, the merchant acquiring entity, and

‘(B) in the case of a third party network transaction, the third party settlement organization.

‘(2) MERCHANT ACQUIRING ENTITY- The term ‘merchant acquiring entity’ means the bank or other organization which has the contractual obligation to make payment to participating payees in settlement of payment card transactions.

‘(3) THIRD PARTY SETTLEMENT ORGANIZATION- The term ‘third party settlement organization’ means the central organization which has the contractual obligation to make payment to participating payees of third party network transactions.

‘(4) SPECIAL RULES RELATED TO INTERMEDIARIES- For purposes of this section–

‘(A) AGGREGATED PAYEES- In any case where reportable payment transactions of more than one participating payee are settled through an intermediary–

  • ‘(i) such intermediary shall be treated as the participating payee for purposes of determining the reporting obligations of the payment settlement entity with respect to such transactions, and
  • ‘(ii) such intermediary shall be treated as the payment settlement entity with respect to the settlement of such transactions with the participating payees.

‘(B) ELECTRONIC PAYMENT FACILITATORS- In any case where an electronic payment facilitator or other third party makes payments in settlement of reportable payment transactions on behalf of the payment settlement entity, the return under subsection (a) shall be made by such electronic payment facilitator or other third party in lieu of the payment settlement entity.

‘(c) Reportable Payment Transaction- For purposes of this section–

‘(1) IN GENERAL- The term ‘reportable payment transaction’ means any payment card transaction and any third party network transaction.

‘(2) PAYMENT CARD TRANSACTION- The term ‘payment card transaction’ means any transaction in which a payment card is accepted as payment.

‘(3) THIRD PARTY NETWORK TRANSACTION- The term ‘third party network transaction’ means any transaction which is settled through a third party payment network.

‘(d) Other Definitions- For purposes of this section–

‘(1) PARTICIPATING PAYEE-

‘(A) IN GENERAL- The term ‘participating payee’ means–

  • ‘(i) in the case of a payment card transaction, any person who accepts a payment card as payment, and
  • ‘(ii) in the case of a third party network transaction, any person who accepts payment from a third party settlement organization in settlement of such transaction.

‘(B) EXCLUSION OF FOREIGN PERSONS- Except as provided by the Secretary in regulations or other guidance, such term shall not include any person with a foreign address.

‘(C) INCLUSION OF GOVERNMENTAL UNITS- The term ‘person’ includes any governmental unit (and any agency or instrumentality thereof).

‘(2) PAYMENT CARD- The term ‘payment card’ means any card which is issued pursuant to an agreement or arrangement which provides for–

‘(A) one or more issuers of such cards,

‘(B) a network of persons unrelated to each other, and to the issuer, who agree to accept such cards as payment, and

‘(C) standards and mechanisms for settling the transactions between the merchant acquiring entities and the persons who agree to accept such cards as payment.

The acceptance as payment of any account number or other indicia associated with a payment card shall be treated for purposes of this section in the same manner as accepting such payment card as payment.

‘(3) THIRD PARTY PAYMENT NETWORK- The term ‘third party payment network’ means any agreement or arrangement–

‘(A) which involves the establishment of accounts with a central organization by a substantial number of persons who–

  • ‘(i) are unrelated to such organization,
  • ‘(ii) provide goods or services, and
  • ‘(iii) have agreed to settle transactions for the provision of such goods or services pursuant to such agreement or arrangement,

‘(B) which provides for standards and mechanisms for settling such transactions, and

‘(C) which guarantees persons providing goods or services pursuant to such agreement or arrangement that such persons will be paid for providing such goods or services.

Such term shall not include any agreement or arrangement which provides for the issuance of payment cards.

8 thoughts on “We’re Americans, hear us yell: “baa, baa, baa”

  1. First, your failure to identify Dodd as a Dem is a small but real bias.

    On the other hand, the Bush admin has been trying to get this into some bill for a couple of years, so it’s pretty likely to be, in substance, more a scandal against Reps. Power and money hungry Rep elites are as bad ad many Dem elites, sadly.

    It’s a terrible, stupid, anti-privacy bill that seems unlikely to reduce terrorism at all, but both makes small business hurt, and allows shady gov’t more power.

    Ouch. Vote out all incumbents?
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    Fabius Maximus replies: The quote was from Freedomworks, and I suspect you are correct — their failure to identify Dodd’s party affiliation is likely a sign of bias. The mainstream media, as you probably know, does this often. Republicans are identified if it is bad news; Democrats if it is good.

    Yes, voting out as many as necessary seems a good first step.

  2. Not being sarcastic here, but the federal government will not stop until every person is embedded with a “Citizen Chip” with full documentation, personal life file, GPS tracking and remote destruction capability. Welcome to our future.
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    Fabius Maximus replies: Everyone who saw the movie The President’s Analyst (1967) knew this would happen, eventually.

  3. Hidden deep in Senator Christopher Dodd’s 630-page Senate housing legislation is a sweeping provision

    We live in a society in which the average citizen is expected to wade through this dreck. This is so even though most legislators have not even read the bills they are enacting.

    And Congress is not alone in this verbal diarrhea. Court decisions of more than 100 pages are common. Once again, we are expected to drop everything and read them – or else. ( Contrast that with Marbury v. Madison, which is about 15000 words. )

    And I challenge any of you to go to your local courthouse’s law library. Go to where the Code of Federal Regulations are. There are shelves upon shelves of them. Every single word of which you are duty bound to know.

    Once upon a time, this simply was a subsidy for lawyers. You did not have time to read all this, so you had to hire someone to do it for you. Part of the cost of doing business. Overhead.

    But note Bruce Schneir’s recent post Why You Should Never Talk to the Police. You will learn that criminal laws are now so voluminous and complex that even law professors know them.

    You may think you’re a law abiding citizen. You’re not. There’s so much stuff out there you’re probably violating several laws right now. So it’s really a question of whether you’re making enough waves that somebody will bother to find out you’re doing in order to nail you.

    The flip side of this is that George Bush can literally get away with torture because the rules are so convoluted and tangled that nobody can say for sure what they are.
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    Fabius Maximus replies: You raise two vital points. First, too many laws is in itself a bad thing. From The Federalist Papers #62:

    “The Senate will not only provide stability in government, it will reduce the tendency of the House to pass too many laws. Unnecessary legislation produces chaos and favors the wealthy. The people cannot be expected to keep up with too many new laws and regulations; farmers and merchants will be reluctant to start new business ventures if they feel that new regulations will hurt their investments.”

    Second, what to do when contacted by government investigators or police in an investigation. This is harsh and sad advice, but important for survival in our sad era.

    (1) “Know Your Rights: What to Do If You’re Stopped by the Police“, American Civil Liberties Union, 30 July 2004 — Introduction:

    “To fight police abuse effectively you need to know your rights. There are some things you should do, some things you must do and some things you cannot do. If you are in the middle of a police encounter, you need a handy and quick reference to remind you what your rights and obligations are.

    “Print this page and carry it in your wallet, pocket, or glove compartment to give you quick access to your rights and obligations concerning police encounters.”

    (2) “Talk to Government Investigator, Go to Jail“, posted at Constitution, 20 February 2005 — Opening:

    “The following clauses have been prosecuted against individuals, such as Martha Stewart, by U.S. government agents. It is allegedly authorized by the Commerce Clause, extended not only to all economic activity, even intrastate, but to all activity whatsoever, even noneconomic.”

    (3) Know the basics of police interogation methods. The Reid method works, even on folks like you and me. The controversay about it concerns the significant fraction of false confessions it produces.

    (a) “How Police Interrogation Works
    (b) “The Reid Technique of interviewing and interrogation” posted at Wikipedia

  4. Die Fahne hoch! Die Reihen fest geschlossen!
    Blackwater marschiert mit ruhig festem Schritt.

    Do we get extra points for informing on family members?
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    Fabius Maximus replies: Due to the fortunate outcome of WWII, most of us do not know that these are the opening likes to Horst-Wessel-Lied (“Horst Wessel Song”), also known as Die Fahne hoch (“The flag on high”, from its opening line), the anthem of the Nazi Party from 1930 to 1945. From 1933 to 1945 it was also part of Germany’s national anthem.

  5. Mikyo , I’m not well versed in Deutsche. Anyone with an English translation?
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    Fabius Maximus replies: From Wikipedia (no assurance that this is correct):

    The flag high, the ranks tightly closed,
    The S.A. marches with silent solid steps.
    Comrades shot dead by Red Front and reaction,
    March in spirit within our ranks.
    The street clear for the brown battalions,
    The street clear for the SA man.
    Aready millions are looking to the swastika full of hope.
    The day of freedom and bread is dawning.
    For the last time the rollcall has sounded,
    We are all ready for the fight.
    Soon Hitler flags will fly over every street;
    Slavery will not last long now.
    The flag high, the ranks tightly closed,
    The S.A. marches with silent solid steps.
    Comrades shot dead by Red Front and reaction,
    March in spirit within our ranks.

  6. “First, too many laws is in itself a bad thing.”

    From Nietzsche’s “The Will to Power”: “An old Chinese said he had heard that when empires were doomed, they had many laws.”

    Ein alter Chinese sagte, er habe gehört, wenn Reiche zu Grunde gehen sollen, so hätten sie viele Gesetze.

    Ominous.

  7. For another measure of just how enormous 630 page type legislation is, view the New Deal Era National Labor Relations Act.

    Enacted in 1935, it has served as the basis for American labor law ever since. It’s length speaks for itself. Whatever our viewpoint of New Deal and post-New Deal labor policy, it has been a robust and workable framework.

    Two caveats:

    1) Labor law also includes many decisions of the National Labor Relations Board, knowledge of which is analogous to court case law. So there’s a lot more labor law out there than the four corners of the NLRA text.

    2) The NLRA has been amended several times over the years. But the basic bulk length, overall framework, and general complexity of the statute has remained intact.

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