People shouldn't be deprived of their own money
On Oct. 3 at 1:22 a.m., PayPal posted a new “Acceptable Use Policy” on its website. In the first paragraph of the seven-page pdf document, it declared, “Violation of this Acceptable
Use Policy constitutes a violation of the PayPal User Agreement and may subject you to damages, including liquidated damages of $2,500.00 U.S. dollars per violation, which may be debited directly from your PayPal account(s).”
The policy said it was not an “acceptable use” of the company's services to engage in activities that, among other things, “promote misinformation.”
After the new policy was reported by the Daily Wire and other outlets, the company's stock price slid by nearly 6%. USA Today reported that internet searches for how to “delete PayPal” were up by 1,400%.
On Monday, the payment processing company said it was just an error.
“PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy,” the spokesperson said. “We're sorry for the confusion this has caused.”
Another financial institution that's “sorry” is Scotiabank in Canada, which froze the bank accounts of truckers participating in the Freedom Convoy in February. In March, Scotiabank CEO Brian Porter sent a letter apologizing for the “frustration and inconvenience this situation may have caused” and to thank the truckers for their “patience.”
Patience? Inconvenience? For participating in the truck convoy protest, 257 truckers had their own money made inaccessible to them. “We couldn't buy medicine, couldn't buy food, had zero access to any sort of financial means of transacting,” Benjamin Dichter, a spokesperson for the Freedom Convoy, told a TV news interviewer.
How long could you hold out if your bank suddenly did that to you?
Confidence and trust in the banking system is absolutely indispensable to a functioning economy. That's the reason banks and other financial services companies must never or freeze or confiscate their customers' funds over something as subjective and vague as “misinformation.”
In 1929, at the start of the Great Depression, 650 banks failed. In the fall of 1930, there was a run on a bank in Nashville, and that triggered a wave of bank runs in the Southeast United States.
During a bank run, depositors who have lost confidence all
show up at once to withdraw their money, forcing the bank to liquidate loans and assets, often at a steep loss that can push the bank into insolvency. This, of course, triggers more panic.
More bank runs occurred in 1931, in 1932 and into the start of 1933. When Franklin Delano Roosevelt was sworn in as president in March 1933 (presidential inaugurations were held in March back then), he declared a national “bank holiday,” closing all the banks in the country until federal inspections could prove they were solvent and trustworthy. “I can assure you, my friends, that it is safer to keep your money in a reopened bank than it is to keep it under the mattress,” FDR told Americans.
The Federal Deposit Insurance Corporation was established that year, putting the full faith and credit of the U.S. government on the line to assure distrustful depositors that if they put money in a bank, they'd always be able to take it out again.
Today we have our money zipping around electronically from one new technology to another, paying for things with apps and taps and getting paid with electronic transfers from big banks and non-banks. It's all fun and games until some government official declares that a disputed or controversial statement on social media is “domestic terrorism” and then financial institutions freeze the accounts of the suspected “terrorists.”
It's one thing for a financial services company to prohibit users from engaging in fraud, crime, violence or obscenity. It's something else to prohibit “misinformation.” How is PayPal, or any financial services company, supposed to know the truth or falsehood of what appears in a book or is stitched on a hat? The answer is, they can't. They can only know what someone else, likely in the government or tied to it, has declared to be misinformation.
PayPal and Scotiabank, no doubt burned by customer anger, backtracked and tried to restore confidence in their services, but that's not enough. It can't be optional. Financial services companies must be prohibited from freezing or seizing their customers' accounts over the content of their customers' speech.
A modern banking panic could not only cause millions of people to close their accounts and demand their funds at the same time, it could cause countless people to stop online buying and selling to avoid any risk of confiscation or disruption. If banks declare that they might freeze customers' accounts to stop “misinformation,” millions of Americans might also stop direct deposits, cut up their debit cards and use cash.
Panic happens when risk is unlimited. Financial services customers who have never had a problem complying with terms and conditions prohibiting activities that are fraudulent, criminal, violent or obscene may wonder if the government or its agents would view any of their words as misinformation, and how long they could survive if they were locked out of their accounts.
It wasn't so long ago that companies of all kinds had to work very hard to convince customers to trust online commerce. Even today, companies are still urging holdouts to go “paperless” and trust that their records and their money will be just as reliably available online as they would be in a bedroom wall safe.
If that trust is shattered, the crash will be heard around the world.