Wednesday, July 09, 2014

the cash window closes

The rule of unintended consequences is working overtime these days.

At least, when it comes to people who want to legally transfer money from The States to Mexico. 

Please note that adverb -- legally.  As an ideal, law-abiding folk favor restricting the ability of narco-terrorists and tax cheats to shift money across borders for illegal purposes.  Focusing on those two groups is simply a straw man argument to cover up some terrible consequences of recent banking regulations.

Several Mexican blogs (including Mexpatriate) have already discussed how one of the Obama administration's banking laws has adversely affected Americans living in Mexico.  FATCA, designed to capture information and taxes on American income overseas, has had the perverse affect of cutting off expatriates from the banking system.

My account at Banamex USA, the account that I used to turn my already-taxed pension dollars into pesos, was closed by the bank as a result of the FATCA reporting procedures.  But there have been some even more perverse results.

Banamex USA was set up primarily to assist Mexicans who work in The States and send remittances to their families in Mexico.  It was one of the few banks that took an interest in introducing banking services to people whose income was too low to be of interest to most other banks.

No more.  Not only has Banamex USA closed the cash window for expatriates, it is also phasing out its remittance service.  It is not alone.  Bank of America and JP Morgan Chase have eliminated their remittance services.

The reason?  The costs imposed on the bank by such laws as FATCA (and its draconian reporting regulations) make the services too costly to maintain.  In an attempt to catch whales and sharks, the US government is strangling minnows.  And, of course, the whales and sharks are too clever to be captured by such a lumbering leviathan as the American nanny state.

With the banks out of the way, high-cost remittance services are setting up shop.  And charging large fees to do exactly the same things that the banks did for pennies.

The bottom line is that workers who have sold their labor (usually at the lowest end of the pay scale) must now spend an inordinate portion of their income to get money in the hands of their families because the federal government was shooting at a completely different target.  In warfare, we call that collateral damage.  In life, we call it morally reprehensible.

Of course, once the government sees what it has done, it will try to solve the problem with more regulations that will simply put the new businesses out of operation.  And the cycle will continue.

Collateral damage in warfare can stop wars.  (Think of the First Gulf war.)  And that is what should happen here.  Starting with a repeal and re-thinking of FATCA.

That snowball in Lucifer's hand has a better chance.

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