In Fifty Days, Payments Innovation Will Stop In Silicon Valley • Hacker News Board

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#131

Post by tptacek » Wed, May 11, 2011, 3:27 PM UTC

anamax wrote: post #125

bugsbunnyak wrote: post #87

Earlier quoted context omitted.

You were alive three years ago; no? AIG, "AAA" rated CDOs, any of that ringing a bell?

You weren't paying attention. The ratings were issued by companies that had been given a monopoly by govt. Securitized mortgages were a creation of govt. The idea that you're missing is regulatory capture combined with govt encouraging transactions that didn't make economic sense otherwise. (One of the underappreciated consequences of RC is that it amplifies "private" bad behavior and shuts out good behavior.)

That's not fair. The major ratings agencies were unregulated, all were founded privately, and were only designated NRSRO's after they had captured the market. Meanwhile, companies can apply to be designated NRSRO's, and many companies have been so designated.

The government didn't corrupt Moody's. Commerce did. The government supplied no oversight, and Moody's sold its ratings to the highest bidder.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#132

Post by duke_sam » Wed, May 11, 2011, 3:28 PM UTC

lhnn wrote: post #126

ra wrote: post #74

Earlier quoted context omitted.

Thanks for clarifying. I'd like to add that this is a good practice in the financial industry, and isn't a bad thing at all. It's consumer protection. And, $500k is actually a pretty low figure for this type of 'bond'. For example, in Australia I believe you would need a banking license (or a guarantor with a banking license) which requires a deposit of at least $40M in to an escrow account which is managed by the ce…

I'd like to say this should not be legislated, and people should choose who to do business with on their own. If they offer the government a bond to cover losses, then people might go to that business instead of some startup. OTOH, perhaps I don't care when all I'm investing in my "Silicon Valley Facespacecash" bank is $20. Another reason to use alternative currencies...

The problem with the market judging is a bank is worth your money or not is that by the time everybody decides that bank X is going under it's probably too late to get your money out (e.g. a run on the bank). This is why we have the FDIC.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#133

Post by tptacek » Wed, May 11, 2011, 3:29 PM UTC

olalonde wrote: post #109

jonknee wrote: post #104

Earlier quoted context omitted.

> All this law does is guarantee that from now on, only rich people are allowed to commit fraud. So you're fighting for the little guy to be able to commit fraud too? FWIW the rich guy is not just risking losing the bond, but also going to jail. That's the threat, the bond is just so customers can get paid.

> So you're fighting for the little guy to be able to commit fraud too? Absolutely. Given that this regulation doesn't help with fraud, why not at least encourage competition.

Why require bonds for anything? Bonds aren't going to keep construction companies from committing fraud. They won't keep movers from making off with people's goods, or folding up shop when they get in traffic accidents. For that matter, why require millions of dollars of insurance coverage to work on infrastructure projects? It won't keep me from committing fraud, if that's my real goal.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#134

Post by olalonde » Wed, May 11, 2011, 3:41 PM UTC

yequalsx wrote: post #114

dpatru wrote: post #67

Earlier quoted context omitted.

Government regulation is in just about every case either not needed at all or better provided through non-coercive institutions. Since government innovates more slowly than private industries, government regulation tends to become outdated, going from common-sense prudence to arbitrary burden on innovation. For example, right now the Mississippi River in the US is flooding, destroying many homes. This is a huge loss…

You wrote: "Since government innovates more slowly than private industries, government regulation tends to become outdated, going from common-sense prudence to arbitrary burden on innovation. " The space program spawned a tremendous amount of innovation. Public research universities throughout the nation innovate on a grand scale. The internet is an example of government innovation. Regulation does not reflect a lack…

http://www.youtube.com/watch?v=cD0dmRJ0oWg

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#135

Post by natrius » Wed, May 11, 2011, 3:44 PM UTC

eropple wrote: post #122

gokka wrote: post #19

Here goes one more reason to use Bitcoin, that's where the real innovation is.

Sure is! A great reason to use a rapidly inflationary currency with no promises of stability or reliability. Oh, wait. Those are reasons not to use it. My bad.

You've mixed up deflation and inflation.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#136

Post by drndown2007 » Wed, May 11, 2011, 3:45 PM UTC

lhnn wrote: post #126

ra wrote: post #74

Earlier quoted context omitted.

Thanks for clarifying. I'd like to add that this is a good practice in the financial industry, and isn't a bad thing at all. It's consumer protection. And, $500k is actually a pretty low figure for this type of 'bond'. For example, in Australia I believe you would need a banking license (or a guarantor with a banking license) which requires a deposit of at least $40M in to an escrow account which is managed by the ce…

I'd like to say this should not be legislated, and people should choose who to do business with on their own. If they offer the government a bond to cover losses, then people might go to that business instead of some startup. OTOH, perhaps I don't care when all I'm investing in my "Silicon Valley Facespacecash" bank is $20. Another reason to use alternative currencies...

That works in theory. But have YOU read all the fine print when opening an account with your bank? I haven't either -- everything we do is based on some common sense and trust. If we had to verify everything we did with everyone we did it, our way of life would end.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#137

Post by dpatru » Wed, May 11, 2011, 3:52 PM UTC

sp332 wrote: post #105

dpatru wrote: post #70

Earlier quoted context omitted.

An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment. The difference between non-coercive (private) entities and government is that non-coercive entities adapt better. So, for example, if you'…

An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Well of course, how else do you think democratic governments were invented? The market created them.

You're right. Governments have gained the power they have because they offered people a better alternative. I read somewhere that Napoleon was welcomed as a conquerer into parts of Italy because his government was a lot better than the local government. The problem with governments, though, is that they are fairly easy to establish, but, because they claim a monopoly on coercion, they are hard to replace when a better alternative appears.

For example, all of a city's private garbage collectors may do a poor job, so a very capable mayor may convince residents to allow the city to do the collecting. Years later, when situation is reversed and the city is doing a poor job in comparison with private collectors, it will be a lot harder to replace the government collectors with private ones. The correct response to poor private-sector service is not to bring in the government, but to bring in more private competition.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#138

Post by olalonde » Wed, May 11, 2011, 4:07 PM UTC

tptacek wrote: post #133

olalonde wrote: post #109

Earlier quoted context omitted.

> So you're fighting for the little guy to be able to commit fraud too? Absolutely. Given that this regulation doesn't help with fraud, why not at least encourage competition.

Why require bonds for anything? Bonds aren't going to keep construction companies from committing fraud. They won't keep movers from making off with people's goods, or folding up shop when they get in traffic accidents. For that matter, why require millions of dollars of insurance coverage to work on infrastructure projects? It won't keep me from committing fraud, if that's my real goal.

I have nothing against private insurance. I have something against laws which make it mandatory. I think people should be free to decide for themselves what risk they are willing to take. For instance, the choice to do business with a relatively unknown payment service which offers low transaction fees or great customer support, at the risk of losing money.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#139

Post by tzs » Wed, May 11, 2011, 4:08 PM UTC

His argument makes no sense. He says that 43 other states have such regulations, so that if you want to do business nationally you have to get licensed in each, at costs ranging from less than California's new cost to more than California's new cost.

So what is the significance of California making it 44 states? I doubt a new payment system that only works in a handful of states has much of a chance, so if regulation kills payment innovation it would have have been killed long ago, when the majority of other states adopted regulation.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#140

Post by tptacek » Wed, May 11, 2011, 4:09 PM UTC

olalonde wrote: post #138

tptacek wrote: post #133

Earlier quoted context omitted.

Why require bonds for anything? Bonds aren't going to keep construction companies from committing fraud. They won't keep movers from making off with people's goods, or folding up shop when they get in traffic accidents. For that matter, why require millions of dollars of insurance coverage to work on infrastructure projects? It won't keep me from committing fraud, if that's my real goal.

I have nothing against private insurance. I have something against laws which make it mandatory. I think people should be free to decide for themselves what risk they are willing to take. For instance, the choice to do business with a relatively unknown payment service which offers low transaction fees or great customer support, at the risk of losing money.

I have a hard time getting too worked up about the prospect of squelching the money transfer company that can't afford 1/10th of 1 FTE to post a bond. That same company can't afford to secure their software (software security for a money transfer application is almost certainly more expensive than the cost of a 500k surety bond).

Meanwhile, if you're against basically all licensing and bonding, you're naturally going to be against this one too. Personally, I think that if we're going to require bonds to move furniture, it seems sane to require a bond to move cash.