I thought I was entering some type of parallel-universe earlier today when I read who was taking the lead in proposing legislation to end the federal government’s shameful prohibition of internet gambling:

Rep. Barney Frank said on Thursday he will give details in the coming weeks on possible legislation to repeal a ban imposed last year on online gambling.

Of course, Rep. Frank goes on to say there’s no hurry about his proposed legislation. Guess he hasn’t spoken with any of these folks.
But to bring me back to reality, this NY Times article that Rep. Frank at the same time couldn’t resist taking one of his more typical stances toward business:

Senior Democrats in Congress, worried that the rising number of homeowners who cannot repay their mortgages could cause broader economic problems, have begun drafting legislation to curtail predatory lending practices. [. . .]
Representative Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, said in an interview on Friday that he intended to move legislation in the coming weeks. He said the measure he was preparing would discourage abusive loans by imposing legal liability ìup the chain.î It would give borrowers and others the ability to sue the Wall Street firms that package those mortgages and then sell them as mortgage-backed securities, as well as the purchasers of those securities in the secondary market.
ìAnybody, including the original borrower, can make a claim, and the liability would go up the chain,î he said. ìPeople say it may discourage certain kinds of lending. But thatís precisely what we want to do. We will pass a bill that wonít allow companies to loan people more money than they can pay back or loans for more than the value of the house.î

Ted Frank sizes this one up adroitly:

This sort of deep-pocket/innocent-bystander legislation is dumbfounding. These mortgage-backed securities consist of hundreds or thousands of mortgages, and the banks receive only a transaction fee for their services. If the process of repackaging means that one is liable for alleged wrongdoing in each and every of the mortgages, it just means that repackaging won’t happen any more as due diligence requirements and the risk of litigation for the entire value of the mortgage (plus punitive damages?) make transactions costs skyrocket, which means the mortgage market will become less liquid, which means a tremendous shock to the economy.
Most upsetting is to see that one of the senators behind this is Chuck Schumer. It seems to have taken him less than two months to pull back from his observation that the litigation risks Wall Street faces are unduly damaging the economy, and that what is really needed is to expose them to more parasitic wealth transfers.