Skip to main content
Menu

Main navigation

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
    LOADING...
  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit
    LOADING...
  • Publications
    • Studies
    • Commentary
    • Books
    • Reviews and Journals
    • Public Filings
    LOADING...
  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving

Issues

  • Constitution and Law
    • Constitutional Law
    • Criminal Justice
    • Free Speech and Civil Liberties
  • Economics
    • Banking and Finance
    • Monetary Policy
    • Regulation
    • Tax and Budget Policy
  • Politics and Society
    • Education
    • Government and Politics
    • Health Care
    • Poverty and Social Welfare
    • Technology and Privacy
  • International
    • Defense and Foreign Policy
    • Global Freedom
    • Immigration
    • Trade Policy
Live Now

Blog


  • Blog Home
  • RSS

Email Signup

Sign up to have blog posts delivered straight to your inbox!

Topics
  • Banking and Finance
  • Constitutional Law
  • Criminal Justice
  • Defense and Foreign Policy
  • Education
  • Free Speech and Civil Liberties
  • Global Freedom
  • Government and Politics
  • Health Care
  • Immigration
  • Monetary Policy
  • Poverty and Social Welfare
  • Regulation
  • Tax and Budget Policy
  • Technology and Privacy
  • Trade Policy
Archives
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • Show More
April 30, 2010 8:16AM

Planned Economy, Privacy Problems

By Jim Harper

SHARE

If someone asked you what's wrong with a planned economy, your first answer might not be "privacy." But it should be. For proof, look no further than the financial regulation bill the Senate is debating. Its 1,400 pages contain strong prescriptions for a government-micromanaged economy---and the undoing of your financial privacy. Here's a look at some of the personal data collection this revamp of financial services regulation will produce.

The "Office of Financial Research" (sec. 152) will have a "Data Center" (sec. 154) that requires submisson of data on any financial activity that poses a threat to financial stability.

Use your noggin, now: Will government researchers know in advance what might cause financial instability? Will they home in on precisely that? No.

This is government entrée into any financial activities federal bureaucrats suspect might cause instability. It's carte blanche to examine all financial transactions---including yours. (Confidentiality rules? The better view is that privacy is lost when the government takes data from your control, but we'll come back to confidentiality.)

The Office of Financial Research is also a sop to industry. Morgan Stanley estimates that it will save the company 20 to 30 percent of its operating costs. The advocates for this bureaucracy want to replace the competitive environment for financial data with a uniform government data platform. Students of technology will instantly recognize what this data monoculture means: If the government's data and assumptions are bad, everyone's data and assumptions are bad, and all players in the financial services system fall together. The Office of Financial Research itself poses a threat to financial stability.

But all that's about money. On with privacy...

The "Bureau of Consumer Financial Protection" (sec. 1011) in the bill is another beetle boring into your personal financial life. Among its mandates is to "gather information . . . regarding the organization, business conduct, markets, and activities of persons operating in consumer financial services markets" (sec. 1022(c)(4)).

In case you're wondering, the definition of "person" includes "an individual" (sec. 1002(17)). The Bureau of Consumer Financial Protection can investigate your business conduct and activities.

Come now. All this private data gathering can't possibly be what they mean to do, can it?

Section 1071(b) requires any deposit-taking financial institution to geo-code customer addresses and maintain records of deposits for at least three years. Think of the government having its own Google map of where you and your neighbors do your banking. The Bureau may "use the data for any other purpose as permitted by law," such as handing it off to other bureaus, like the Federal Bureau of Investigation.

Still, that's really not what the Bureau of Consumer Financial Protection is supposed to be about, is it? It can't be!

It's not. Nor was the Social Security number about creating a uniform national identifier that facilitates both lawful (excessive) data collection and identity fraud. The construction of surveillance infrastructure doesn't turn on the intentions of its builders. They're just giving another turn to the wheels that crush privacy.

Promises of confidentiality and "de-identified" data are not reassuring. It's getting harder and harder to collect data that are not personally identifiable. Latanya Sweeney's 2002 "k-anonymity" paper is best known for establishing how anonymous data can be "re-identified," unraveling promised confidentiality and privacy.

Just a few "anonymous" data points can pick out individuals. Data-driven triangulation on individuals will get easier as data collection grows society-wide. Confidentiality rules in the bill will tend to fail over time, if they're not simply reversed when some future exigency demands it. If we're to maintain privacy, government data collection should be shrinking, not growing.

How do you manage an economy from the top? You collect data. Thanks to computing and communications, there are lots of data available nowadays. Maybe the failed Progressive-Era dream of "scientific government" has been revitalized by the idea that data can shore up regulation's natural defects.

My colleague Mark Calabria has investigated and drawn into question whether it was a lack of consumer protection that caused the financial crisis. But Washington, D.C. has determined that Washington, D.C. should manage the financial services industry. Your personal and private financial affairs will be managed there too.

Related Tags
Finance, Banking & Monetary Policy, Technology and Privacy

Stay Connected to Cato

Sign up for the newsletter to receive periodic updates on Cato research, events, and publications.

View All Newsletters

1000 Massachusetts Ave, NW,
Washington, DC 20001-5403
(202) 842-0200
Contact Us
Privacy

Footer 1

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact

Footer 2

  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit

Footer 3

  • Publications
    • Books
    • Cato Journal
    • Regulation
    • Cato Policy Report
    • Cato Supreme Court Review
    • Cato’s Letter
    • Human Freedom Index
    • Economic Freedom of the World
    • Cato Handbook for Policymakers

Footer 4

  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
Also from Cato Institute:
Libertarianism.org
|
Humanprogress.org
|
Downsizinggovernment.org