Barney Frank: Gambling is a Financial Service.

On Wednesday, the House Financial Services Committee approved two bills to legalize Internet gambling. The committee is supposed to oversee Wall Street. They are the same body that rubber stamped much of the financial deregulation that lead to the 2001 and 2008 stock market panics. These same people spearheaded the loophole-riddled financial regulatory reform Barack Obama just signed into law.

So now gambling is a “financial service”. Barney Frank (D of Massachusetts) and Democrats on the committee lead this charge. Only a minority of Republicans joined them in approving the bills.

Why would Congress reverse a law they just passed in 2006 banning Internet gambling? The answer is money. By taxing Internet gambling, our representatives hope to raise $40 billion over the next decade. In the corridors of Washington, money is more important than ethics.

But this gets worse. Guess who will be running casinos on every iPhone and iPad? Wall Street. Internet gambling won’t be a business opportunity for mom and pop entrepreneurs. Tim Geithner’s Treasury Department—the folks who oversaw the TARP bailout—will license Internet casino providers. Gambling, which has been the province of indian tribes and state lotteries, will now migrate to banks. Banks, by the way, have lobbied heavily in support of these bills.

Would Obama sign the bills into law? I hope not. But the 2009 Nobel Peace Prize winner has disappointed us enough times over the past eighteen months. The bills have momentum, but Congress faces a cluttered legislative calendar between now and the November elections. One thing is certain. Democrats in Congress have a distorted sense of what constitutes legitimate “financial services”.