OK, I'm game

The Guardian reports that a creationist has put up $10,000 for anyone who can prove in a mock-trial that evolution is true.  OK, I can use an extra ten grand, so I went to see how I could sign up.  The Guardian didn't have a link, but through the comments on Reddit I found the guy's web site.  What I could not find were instructions on how to accept the $10,000 challenge.  I looked at all of the obvious places, including the FAQ, and I couldn't find anything.  Compare that to the very straightforward instructions on how to apply for the James Randi prize for demonstrating paranormal phenomena.

I did find Joseph Mastropaolo's email address.  Maybe I'll just drop him a line.

[UPDATE] What the heck, I had a little down time this morning, so I sent Joe this note:

Hello,

My name is Ron Garret.  I want to accept your $10,000 evolution mini-trial challenge: 

http://www.lifescienceprize.org/

But I can't find any indication of how one goes about doing it.  For example, the James Randi foundation has very straightforward instructions for anyone who wants to accept their challenge: 

http://www.randi.org/site/index.php/1m-challenge.html 

but I can't find anything analogous on your site.  What am I missing? 

Thank you, 

Ron Garret, Ph.D.

Anyone want to lay odds on whether he responds?

[UPDATE2] Heh, that didn't take long. "Undeliverable mail -- invalid mailbox."

What a surprise.

OK, Joseph Mastropaolo, I'm calling you out: I want to accept your Life Science Prize min-trial challenge.  How do I do it?

Disgusting concessions from the proponents of gay marriage

I'm on the road so I don't have time to give this the thorough treatment it deserves, but I had a little down time that I used to read the transcript of today's oral arguments in Proposition 8 Supreme Court case.  I was completely disgusted by the arguments on both sides, but mostly by the concessions made by the proponents of gay marriage.

Justice Alito:  Traditional marriage has been around for thousands of years. Same-sex marriage is 25 very new. I think it was first adopted in The Netherlands in 2000. So there isn't a lot of data about 2 its effect. And it may turn out to be a -- a good thing; it may turn out not to be a good thing,...But you want us to step in and render a decision based on an assessment of the effects of this institution which is newer than cell phones or the Internet?

The proper response to this is: No, gay marriage cannot possibly turn out to be a bad thing even if we concede the erroneous assumption we have only thirteen years of actual data to go by.  How do we know this?  Well, first, because we have thirteen years of actual data to go by, and if there were even the slightest hint that gay marriage had deleterious effects the opponents would long ago have seized on those and trumpeted them as a prominent part of their case.  But they haven't, because there aren't any.  But more than that, opponents of gay marriage have not even been able to put forth any credible hypothetical scenario whereby gay marriage might have any harmful effects on society.  The only argument against gay marriage is tradition, and some possible harmful effects that no one has actually been able to imagine, let alone demonstrate.

That argument didn't get made.  Not only that, but one of the advocates for gay marriage actually conceded that states could legitimately ban gay marriage, but only if they had not already granted gays other rights like civil unions.  I won't even try to extract the twisted reasoning behind this.  Go read the transcript if you really want to know.

The case of Loving v. Virginia, the case the legalized interracial marriage, was brought up, but no one has drawn the correct analogy: it is actually possible to raise a much more legitimate argument against interracial marriage than against gay marriage.  That people of color are discriminated against in the United States is a demonstrable fact.  That marriages that involve people of color tend to produce children of color is also a demonstrable fact.  Therefore the state has a legitimate interest in preventing people of color from marrying white people in the interests of preventing the production of children who will be the subject of societal discrimination.

Are you disgusted by that argument?  You should be.  It is a disgusting argument.  No one but the most hardened racist bigot would raise that argument in today's world.  And yet, that is exactly the argument that is being danced around in the Supreme Court today.

Here's a question I wish one of the justices would pose to the opponents of gay marriage:  "Please rank the following parental situation in order of their desirability for the children:

1.  One father, one mother, married
2.  One father, one mother, unmarried, but in a committed relationship
3.  A single parent
4.  A gay couple, married
5.  A gay couple, unmarried but in a committed relationship
6.  Foster care by a straight couple

Can you seriously imagine anyone going on the record rating foster care or single parenthood over a gay couple in today's world?  Honestly, what else is there to say?

That Christian Nation Nonsense

Dr. Richard Carrier utterly destroys the notion that the United States is a Christian nation.  Not that this should have been news to anyone, but the thoroughness of his takedown is truly awesome.  Long, but well worth reading, even if you already believe the conclusion.

Join CRMTL to repeal the California MTA

Following up on my earlier call to action to repeal the California Money Transmission Act (MTA), I have helped form a group called the Coalition for the Reform of Money Transfer Law (CRMTL, pronounced Core-Metal).  We have written a letter that we are submitting as formal testimony for the hearings on March 11.  We would welcome additional signatories to this letter.  If you want to add your voice to ours please send an email to Mark Farouk: Mark.Farouk@asm.ca.gov.  Here is some suggested language:

Re: Assembly Bill 786 

To Whom It May Concern:

[Company/Individual Name] submits the following comments for consideration at the Committee's March 11, 2013 hearing regarding the the California Money Transmission Act of 2010.

We are aware that the Coalition for the Reform of Money Transmission Laws submitted comments supporting the Committee’s efforts to reconsider the Act.  [We/I] support the Coalition's comments and encourage the Assembly to strongly consider the Coalition’s suggested modifications to the law. Once these needed modifications have been made to the Committee's draft legislation, we urge the Assembly to act quickly to provide the relief that is necessary to ensuring that consumers derive the full benefits of a competitive payments marketplace.

[In addition, [ADD ANY ADDITIONAL COMMENTS THAT YOU WISH TO MAKE ON BEHALF OF YOUR COMPANY, IF DESIRED. IF YOU DO NOT WISH TO MAKE ADDITIONAL COMMENTS, PLEASE DELETE THIS SECTION.]]

Thank you for the opportunity to provide these comments and we strongly encourage the Committee to proceed to adopt the Coalition's proposed alternatives as soon as possible. 

Respectfully submitted,

[Name, Title and Company Name]

Thank you for your support.  Please note that input for the hearings is due by COB tomorrow, March 6.  Sorry for the late notice, but we only today finalized the text of the letter.

A simple solution to credit card fraud, part 6: It's the protocol, stupid

This is part 6 of a long series.  This post is another technical post.  Some people have been (justifiably) pressing me for more details on the "simple solution" I've been promising in the title.  That's what this post is about.

Let us start by observing that credit cards don't actually require either credit or cards.  What matters is not the card, but the information on the card.  This is particularly evident in e-commerce transactions.  If you possess the right information, you can type that information in to a web browser and a few days later stuff will magically appear on your doorstep.  The fundamental problem is that the information you have to type in is not bound to a particular transaction.  It is reusable.  So you have to trust everyone you do business with.  Sooner or later that trust will fail.  Some random e-commerce web site that you place an order from will turn out to be a well crafted phishing site, or their database will get hacked, or a waiter in a restaurant or cashier at the shop will skim your card or just write down the number on a Post-It note.  Something.  If you use credit cards, it is a question of when, not if, you will get hacked.

Despite consumer protections, getting a card hacked can be a major hassle, especially if, like me, you have a lot of your regular bills set up to auto-pay.  I get hacked every few years, and as you might imagine I am extremely careful.  The last time it happened I was just on my way out of the country for six weeks, so they couldn't even send me a replacement card.  I didn't lose any money, but it was a colossal pain in the ass.

Debit cards, of course, have all the same problems as credit cards, except that they lack a layer of protection.  When you authorize a transaction with a debit card, you authorize the merchant to reach directly into your checking or savings account and extract money.  There are two reasons you don't hear as much about debit card fraud as credit card fraud.  First, people use credit cards a lot more than they use debit cards.  And second, debit cards typically have an extra layer of protection: the PIN.  Consumers have been effectively trained to guard their PINs closely, but the fact that a compromised debit card gives the fraudster direct access to cash makes debit card fraud lucrative enough that fraudsters go to considerable effort and expense to steal them.

Regular paper checks, by the way, are even worse.  Unlike debit cards, they actually expose your account number, and they don't have a PIN.  Anyone to whom you have ever given a check could, if they chose to, take all the money from your account.  Electronic checks, of course, are the worst of all.  They are completely insecure.  An electronic check has no security at all.  Writing an electronic check is effectively the same as opening up your bank account and saying, "Here, help yourself to whatever you like any time you like."  This is the reason you don't see electronic checks as a payment option very often.  They are so insecure that you have to be carefully vetted before you can gain official access to the electronic check system.

All of these problems could be solved at a stroke using secure digital signatures.  Instead of making a payment by handing over your account details, you would instead write and sign a digital check (not to be confused with an electronic check).  A digital check would be just some text in some standard format, e.g.:

Transaction ID: 1234

Pay to the order of: Joe Merchant

Account ID: 4321

Amount: $123.45

Expires: 4 March 2013

The digital check itself could be generated either by you or the merchant.  To authorize the transaction you would simply generate a digital signature for that text and give that to the merchant.  The merchant would then "cash" the check by presenting the check and your digital signature to the bank.

That's it.  That's the simple solution to not only credit card fraud but check fraud and debit card fraud and just about any other kind of financial fraud that involves stealing credentials.  It works because digital signatures are unforgeable and non-reusable.  The merchant can't change any of the information on the check because that would make the signature invalid.  The merchant can't cash the check twice because it contains a transaction identifier.

Now, there are some real-world complications.  The most serious is that users have to be trained to manage their secret keys.  Keeping a secret key secret is not a trivial matter, but at least it is possible.  Keeping your credit card number secret is not possible because the protocol requires you to disclose it for every transaction.

So what would the user experience be like?  (Are you paying attention, pbreit?)  There are myriad possibilities.  The most straightforward is what is already out there.  Chip-and-pin systems in use in Asia and Europe already implement a similar protocol.  But it doesn't have to be a chip-and-pin card.  It can be a dongle, or a smartphone app, or a browser plug-in.

To give you some concrete examples, here is an actual digital signature for the digital check shown above:

---MSGID---
149302O5AAVHKAEC7N5IPIGDPJAC8MBOJ2T0E6M8LQ3M40BABREI
---PUBLIC KEY---
1RBNESSNAFFOD4G05MJPTK9TLGS95QHOEBK3CD6O1KIOV5GHKAQT
---SIGNATURE---
1EQEB9T51UDVGHFVGMTANQS3JQVLV17H5HAOECHSRDJ67H4MNT1M
29SDNR6V8VCH1C3TICVDDDIA67GTG0V46H4ST2Q7IP4LF8GM548

For you hard-core geeks, this signature was generated using the Ed25519 elliptic curve digital signature algorithm.  The message ID is the SHA512 hash of the ascii text of the check, truncated to 256 bits.  All values are rendered as base 32 big-endian numbers.  You can verify that this signature is valid here.  And you can generate your own Ed25519 signatures here.  As a proof-of-concept for a standalone security dongle, I have implemented Ed25519 on a Teensy3, which costs $19 in single quantities.  So no, pbreit, distributing new hardware is not hard, and it is not expensive.  Not any more.

The physical manifestations of this protocol are endless.  Here, for example, is the above signature rendered as a QR code:

You can scan this image with any QR code reader to verify that the signature is valid.  Or, if you don't trust my verification web site, you can use a standalone verification app written by someone else.  There is nothing at all proprietary about this protocol.  It is entirely open.  The only secret is your secret key.

Again I have to stress that what matters here is the protocol, not any of the implementation details.  I happen to like Ed25519 because it generates highly secure signatures that are short enough to render as reasonable-looking QR codes, but that is a detail.  The point is that by changing the protocol you can solve the fraud problem.

And you can solve lots of other problems too.  More on that in a future post.

Murray Rothbard was an Idiot

This post is not part of the series on credit card fraud.  I just felt the need to vent.  Some anonymous coward posted a comment that pressed one of my buttons.

I'd suggest: Rothbard

It just so happens I have read a bit of Rothbard.  About five years ago I took a deep dive into libertarianism (lower-case l) and anarcho-capitalism.  Both theories had always struck me as obviously utopian and unworkable, and yet a lot of people I respected seemed to subscribe to one or the other (or both) so I wanted to find out if I was missing something.

I wasn't.

On the recommendation of some of the members of a mailing list that contained the word "freedom" in its name, I read The Ethics of Liberty and found it completely, utterly, and transparently intellectually bankrupt.  I wrote up a critique back then, but never published it outside that mailing list.  The response from the list was not unlike the response I used to get when I debated with religious fundamentalists.  It was, in essence: we can't rebut any of your arguments.  But we believe it anyway.

Bah.

Here, then, is a lightly edited version of the essay I wrote back in 2008.

---


A couple of preliminary disclaimers:


First, I have not read even a small fraction of Rothbard's writings, and I never will.  Rothbard is too prolific, I'm too busy, and life is too short.  This is a critique of the work that [names deleted] pointed me to as representative of their positions [The Ethics of Liberty].  I've so far read about half of it thoroughly, and skimmed about another fourth.  A pretty clear picture emerges even from this incomplete perusal.  In particular, Rothbard bases his entire argument on premises which I reject.  So it is not necessary to look into all the details of his reasoning to know that he is wrong, just as it is not necessary to read the entire Bible to convince onesself that it is not the inerrant word of God.  Garbage in, garbage out.  But it is interesting to follow some of the lines of thought nonetheless.
To give Rothbard credit, he doesn't actually run off the rails until chapter 2:

The natural law, then, elucidates what is best for man—what ends man should pursue that are most harmonious with, and best tend to fulfill, his nature. In a significant sense, then, natural law provides man with a “science of happiness,” with the paths which will lead to his real happiness.

This, of course, begs the question of what "real happiness" means, and Rothbard struggles to define it because he doesn't want to use the common economic definition and thereby become a utilitarian.  The problem is, Rothbard gets it wrong.  It is hard to summarize Rothbard's definition of "man's nature" and "true happiness" because it is so incoherent, but it is easy to tell what it is not, and what it is not is the right answer.

Man's true nature is that he is an animal.  I mean that in the strictly scientific sense of the word, i.e. a living thing that is not a plant, the product of a few billion years of evolution.  Each instance of man is constructed by natural processes involving DNA being transcribed into RNA and thence into proteins by ribosomes, which then assemble themselves into a startlingly complex array of structures including a frontal cortex.  Which is where all the trouble starts.  :-)

The problem is that our capacity for rational thought is only a small part of our true nature.  Not only are we (at least potentially) rational, we are also alive, and our being alive is antecedent to our being rational, and therefore a much more fundamental part of our true nature than our rationality is.  We don't even know if being alive is even a prerequisite for being rational.  It is not out of the realm of possibility that there could exist rational entities that are not alive.  So there is no reason to believe a priori that being alive is just an incidental detail that is subsumed by being rational, and can therefore be safely ignored.  Indeed, there is reason to believe that being alive and being rational are in active conflict with each other, perhaps even necessarily so.  But this is a tangent.  If you're really interested in pursuing this line of thought, go read "The Robot's Rebellion" by Keith E Stanovich.  (I don't particularly recommend this book because I think what it says is patently obvious.  But if you don't agree you'll find extensive supporting arguments there.)

What is it, then, to be alive, and specifically to be an animal rather than, say, a plant or a fungus?  It means that sexual reproduction is fundamental to our nature.  And I don't just mean the act of sexual intercourse, I mean the entire end-to-end cyclical process of being born, surviving long enough to reach adulthood, and having and (usually, at least for mammals like us) raising children.

Rothbard completely ignores this aspect of our nature, basing his analysis largely on thought experiments involving one or two fully fledged and functional adult human beings capable of surviving and even prospering on desert island without any outside assistance whatsoever, not even tools and other vestiges of civilization salvaged from a shipwreck.  Having established the dynamics of such a fantasy world he then, with no justification whatsoever, extrapolates his results to the real world as if the principle of mathematical induction could be applied to humans.  He then tacks on children as an afterthought -- in chapter 14! -- continuing to completely ignore the fundamental role of children in human nature, and the fact that people have deeply rooted visceral -- which is to say irrational -- reactions when children come into play.  Because we are animals.

It is, frankly, a completely ridiculous line of argument.

[UPDATE in 2013]: I am re-reading chapter 14 now and it is every bit as -- words fail me -- untenable?  idiotic? horrific? -- as I remember it.  Here's a choice quote:

Applying our theory to parents and children, this means that a parent does not have the right to aggress against his children, but also that the parent should not have a legal obligation to feed, clothe, or educate his children, since such obligations would entail positive acts coerced upon the parent and depriving the parent of his rights. The parent therefore may not murder or mutilate his child, and the law properly outlaws a parent from doing so. But the parent should have the legal right not to feed the child, i.e., to allow it to die.[4] The law, therefore, may not properly compel the parent to feed a child or to keep it alive.  [Emphasis added.]

If I have to explain to you the problem with that then you are beyond help. [End update.]

Even if you ignore all that and accept Rothbard's premises at face value, his argument still falls apart because it hinges on two completely arbitrary and ultimately untenable definitions.  The first is his definition of property and ownership.  Rothbard defines the "natural" owner of a resource as the first person to transform that resource into something else.  So destroying nature is a pre-requisite to ownership.  One person's desire to enjoy the pleasure of hiking through virgin forest is axiomatically subjugated to someone else's desire to cut down the trees and burn them for fuel.

It's even worse than that.  Not only does the logger axiomatically get preferential treatment over the hiker, he also gets axiomatic preference over all other living beings on the planet.  Although Rothbard claims to be taking a scientific approach, he tacitly appropriates the Biblical license for man's dominion over the fish of the sea and over the fowl of the air and over the cattle and over every creeping thing that creepeth upon the earth.

Now, it is not the case that in Rothbard's world there will not be a single tree left standing, because (chapter 10):

Note that we are not saying that, in order for property in land to be valid, it must be continually in use. The only requirement is that the land be once put into use, and thus become the property of the one who has mixed his labor with, who imprinted the stamp of his personal energy upon, the land. After that use, there is no more reason to disallow the land’s remaining idle than there is to disown someone for storing his watch in a desk drawer.

So environmentalists do have a leg to stand on, but perversely, in order to stake their claim to a virgin forest they first have to cut down all the trees in order to stake their claim to the land.  Only then may they let the land rest fallow and let the trees regrow secure in the knowledge that they are the "rightful" owner of the land.

To prevent the history of anarcho-capitalism from being one of a single mad rush to cut down every tree on the planet as quickly as possible in one vast primordial land-grab, he introduces the concept of abandonment.  But now we are right back where we started because now we have to decide when "lying fallow" ends and "abandonment" begins, and such a delineation cannot be anything but completely arbitrary.

The second arbitrary and untenable definition upon which Rothbard's theory rests is that of "violence."  Violence is the axiomtic evil, and Rothbard never really defines it explicitly, but implicitly he seems to restrict the definition to direct physical violence against another person's property, which axiomatically includes their own body.  As an aside, Rothbard axiomatically precludes people from voluntarily selling themselves into slavery.  Exactly how this differs from, say, entering into a long-term contract for their labor is not clear, but even that aside, this is a very peculiar position to take from someone who presumably would not axiomatically preclude someone from selling off pieces of themselves -- like kidneys -- even if it lead to their death.  So people can voluntarily kill themselves, but they cannot voluntarily enter into long-term labor contracts.  Weird.

But the problem of what constitutes violence is very thorny even in Rothbard's oversimplified fantasy world.  He paints a picture of Crusoe happily fishing and Friday happily raising wheat and both of them happily exchanging wheat for fish, but what if Crusoe decides that his version of paradise is a high-rise condominium development that casts a permanent shadow over Friday's wheat field?  Or a dam upstream of Friday's fields that produces electricity, but stops the seasonal flooding that made Friday's wheat fields fertile?  Of such sticky situations we hear nothing.  It is possible that Rothbard deals with the problem of externalities somewhere, but I can find no hint of it.  The word "externality" does not appear anywhere in the book, and that's a pretty clear indication that Rothbard has simply swept this crucial issue under the rug.

On Rothbard's view, then, it is a perfectly moral act for Crusoe to cut a ring of trees around the island and thereby stake his claim to the land, and then deny Friday access to the sea (or, if he were clever, to start charging tolls) because Friday can no longer get there without trespassing on Crusoe's property.  On Rothbard's view this act is not just legal but moral.  Exactly what Friday is supposed to do to defend himself is not clear; perhaps cut down a few trees of his own before Crusoe gets to them in order to stake his own claim to a right-of-way.

But these difficulties pale in comparison to an even more fundamental flaw in Rothbard's theory.  The problem is that the idea of violence as the ultimate evil is not supportable on the basis of human nature.  It might be supportable on the basis of rationalism (relative to some quality metric, of course), but as I pointed out earlier, being rational is not the totality of our nature.  We are not only rational, but living animals with a powerful and altogether irrational drive to reproduce (inherited from our parents who, if they lacked this drive, tended not to reproduce).  When push comes to shove, and one is faced with a choice of starvation or doing violence against another person's person or property, violence will often -- indeed usually -- win, because the person who will starve to death rather than steal a loaf of bread will tend not to reproduce as well as someone who doesn't buy in to Rothbard's theories.

Now, Rothbard doesn't actually address this problem (as far as I can tell) so I'll do it for him: because rational people are aware that evolution tends to produce creatures that will resort to violence before they allow themselves to starve to death, they will recognize that it is in their own interest to prevent people around them from starving to death.  Hence, people will engage in charitable acts of gift-giving precisely to prevent the violence that Darwin predicts.  (Rothbard does not actually make this argument. The only justification that Rothbard can come up with for engaging in charitable gift-giving is the "psychic [sic] satisfaction" that such acts provide. [chapter 7])

The problem with this approach to dealing with the poor is that there is a reverse-externality.  If I feed a poor person and thereby prevent him from doing violence, everyone benefits from my good deed, and yet only I have borne the cost.  This is the classic prisoner's dilemma.  Individually, everyone's rational decision is to wait for someone else to feed the poor.  And yet, if everyone acts on this reasoning, the result is, at least potentially, food riots.

And this, I submit, is the fundamental reason why government is necessary from both a rational and a moral point of view.  The fact of the matter is that humans are more than just rational beings, society is more than just the sum of its parts, and nature has intrinsic value which is destroyed when someone transforms it for some other use.  As a consequence of these self-evident facts, there are things that humans must work on collectively if we are to live in peace.  I submit that the best mechanism yet devised for organizing such collective action is democratic government.  There is certainly room for improvement, but anarchism is throwing out the baby with the bath water.

All this brings me to an answer to the question [name deleted] posed: How much tax do you think Warren Buffet should be required to pay to make you say that he's not doing you harm?

This question is based on a false assumption, namely, that the reason for paying taxes is to mitigate the harm that my externalities cause other people.  It isn't.  The reason for paying taxes is to bear your fair share of the burden of conducting society's collective actions, whether they be feeding the poor to prevent food riots, or building transportation infrastructure, a pre-requisite for industrialization, by the way, that Rothbard completely ignores.

So the right question to ask is: how much tax should Warren Buffet pay to justly compensate for the benefits that receives from the state?  And I'll answer that question with the answer that Warren Buffet himself gives: more than he is currently required to pay.

---

Some day I'll write a sequel about Ayn Rand.

Cutting to the chase: Repeal the California Money Transmission Act

This is the fifth post in a long series.  I've gotten a lot of complaints about cliffhangers and hidden agendas so I'm going to cut to the chase here and then go back in later posts to fill in some details.  And I should probably say this up-front too: there is no "big reveal" at the end of this story.  I spent three years getting the runaround from various banks, and I don't know why.

However, there are some things that I did learn as a result of this experience.  I'm going to just lay them out here without a whole lot of support because there's a deadline looming.  For now I hope you will give me the benefit of the doubt that these are things that I have come to believe are true as a result of firsthand experience and some fairly extensive research.  If you want some of the gory details, you can find them here.  (Note: this is a very long document, well over 200 pages.  And it was not compiled by me.)

1.  The financial system in the U.S. is horribly inefficient.  Retail transactions conducted with credit cards cost 2-3%, which is a ridiculously high cost given today's technology.  Retail transactions (actually, any money transfer transaction) could be profitably brokered at 0.1% or less.

2.  In a normal free market, competitors would arise to undercut the credit card companies and drive costs down.  This is not happening.  There are a lot of new payment companies out there, but they are all (as far as I can tell) UI veneers over the existing inefficient and expensive infrastructure.  This is not to say that these companies aren't adding value; they are.  But none of them (again AFAICT) are addressing the really fundamental problem, which is that moving money costs much more than it should.

3.  One of the principal reasons that startups don't address this problem is that it is essentially illegal.  The regulatory framework in the U.S. makes it all but impossible for a startup to move money legally except by using the existing, broken, inefficient, expensive infrastructure.  (Just today, Square was hit with a cease-and-desist order in Illinois.)

A prime example of the regulatory framework that makes it impossible for startups to tackle this problem on their own is the California Money Transmission Act (MTA).  The MTA was enacted last year, and it put the final nail in an already pretty sturdy coffin for financial startups.

Why was this innovation-killing law passed?  Because a coalition of existing money transmission businesses formed a coalition called the Money Services Roundtable and convinced the California legislature that this law was needed in order to protect consumers.  It's a plausible theory (which is how they were able to bamboozle the legislature into passing it) but it is wrong.  The theory is that by requiring businesses that move money around on behalf of third parties to get licenses and post large bonds, that this will cut down on fraud.  This theory was almost immediately falsified by the discovery that Moneygram, a licensed money transfer agent, had engaged in a massive fraud.  And this was not an isolated incident.    So the MTA clearly does nothing to prevent fraud.  The only actual effect of the MTA is to make it all but impossible for new competition to enter the market.

My goal in writing all this is to try to enlist your help in getting the MTA repealed.  The California legislature is right now considering modifying the MTA.  Unfortunately, the draft legislation currently on the table is a total sham, and will likely end up making the situation worse.  The good news is that because this legislation is on the table there is a public hearing that will be held on March 11 in Sacramento, and so it is possible to get the draft legislation changed before it is voted on.  You don't have to attend this hearing to have your voice heard, you can submit written comments for the record as well.  I urge you, especially if you are a resident of California, to do so.

You can send your comments via email to Mark Farouk: Mark.Farouk@asm.ca.gov.  Here's some sample verbiage, but you should write it in your own words:

Dear Mr. Farouk: 

I would like to have the following comments entered into the record for the March 11 hearing on the California Money Transmission Act.  I believe that this act does nothing to protect me as a consumer.  To the contrary, it erects barriers to entry that favor existing players, suppress competition, and thus ultimately hurt consumers such as myself.  I urge the legislature to repeal the MTA.

Written input for the hearings is due on March 6.

If you want additional information please feel free to contact me: ron@flownet.com.  And if you do write a letter to Mr. Farouk, if you cc me and give me permission, I will also forward it to the relevant legislators and their staffers on your behalf.