Congress's Fingerprint Fine Print

Congress's Fingerprint Fine Print

Berlau Op-Ed in the Wall Street Journal
June 23, 2008

Fingerprints have long been considered to be among the most personal of information. Proposals for creating fingerprint databases are usually controversial and often lead to a spirited public debate. Even when a fingerprint registry will likely help fight terrorism or crime, many still fear it will lead to a surveillance state.

Yet this week a measure creating a federal fingerprint registry totally unrelated to national security or violent crime may clear the Senate with little debate. The legislation would require thousands of individuals not suspected of any wrongdoing to send their prints to the feds.

What issue is so important that it warrants creating a fingerprint database without public debate? Believe it or not, the housing slowdown. The database and fingerprint mandates are contained in the housing bailout bill that will likely come to a vote on Tuesday.

Tucked into a broad, 537-page bill (not counting tax provisions yet to be added) mostly concerned with government backing of mortgage modifications is a requirement for a registration of "loan originators." The provision says that "an individual may not engage in the business of a loan originator without first . . . obtaining a unique identifier." To obtain this "identifier," an individual is required to "furnish" to the newly created Nationwide Mortgage Licensing System and Registry "information concerning the applicant's identity, including fingerprints," that will be sent to the FBI and other government agencies.

The bill's definition of "loan originator" could cover a broad swath of employees working for mortgage lenders and brokers and real estate firms, including clerical employees, part-time and seasonal workers. An "originator" is defined as anyone who "takes a residential loan application; and offers or negotiates terms of a residential mortgage loan for compensation or gain." Real estate agents are also covered if they receive any type of compensation from "originators."

The rationale for this new fingerprint registry is thin. Were a significant number of bad loans made by ex-convicts? And how would the targeting of lower-level employees – rather than executives like Countrywide Financial CEO Angelo Mozilo – stem the creation of problematic mortgages?

But one searches the Congressional Record in vain for any justification. As tech-policy columnist Declan McCullagh recently wrote in CNET.com, "What's a little odd is the lack of public discussion about this new fingerprint database." The fingerprinting requirements are not mentioned in bill summaries and press releases, or even in the table of contents of the Senate bill. Queries to the Senate Banking Committee and various senators haven't been answered.

What is clear is that many senators who fancy themselves champions of civil liberties on national security aren't as troubled in this case. The fingerprint provisions were originally contained in the Senate's S.A.F.E. Mortgage Licensing Act introduced in February. Among the 14 sponsors are two Republicans – Mel Martinez of Florida and Elizabeth Dole of North Carolina – and 12 Democrats. Among the Democratic co-sponsors are Hillary Clinton and Barack Obama.

There were also few objections when Senate Banking Chairman Chris Dodd (D., Conn.) and Ranking Member Richard Shelby (R., Ala.) folded this legislation into the bill that cleared the committee in May. That bill, with the fingerprint provisions, was voted out 19-2, without a single Democrat voting "nay." Perhaps most of the senators haven't read the fingerprint provisions. But if so, what kind of example is that for the lenders and borrowers they are supposedly trying to encourage to use due diligence?

Meanwhile, the free-market activist group FreedomWorks points to a provision of the Senate's housing tax package that would require payment settlement entities, such as eBay and Amazon, to report customer transactions over a certain threshold to the IRS. This would be done as an offset to pay for the housing tax breaks. The Center for Democracy and Technology, a liberal policy group, has testified that a similar proposal "raises serious privacy and data security concerns that are especially significant in the small business context."

As word about these provisions has spread, so has bipartisan outrage. When I wrote on the fingerprint mandate for the Competitive Enterprise Institute-affiliated blog site OpenMarket.org in late May, the post received almost 400 comments. Thom Hartmann, one of the premiere talk radio hosts of the left, has also blasted the database proposal.

But will this outrage be heard by members of Congress hell-bent on "doing something" – anything – on housing? The perverse lesson of these provisions may be that the more trivial the justification for legislation compromising privacy, the easier it is to get through.