First of all, I’ve got to say that I agree wholeheartedly with Stephen’s sentiments, expressed here and here, that Elliot Spitzer pretty much deserved everything that has, and will, come to him.

During his time as Attorney General of New York, he was a no-holds-barred zealous prosecutor that cared little for the facts or for the lives that he ruined. He was, as someone mentioned on the radio today, what Mike Nifong would have been like if he’d been something much more powerful than a North Carolina District Attorney. If nothing else, this scandal removes the possibility that he will ever by Attorney General of the United States, or, God forbid, President — positions for which his name was mentioned up until Monday, March 10th.

That said, there are a few things about this case that should have libertarians thinking twice.

The first, as Megan McArdle points out, is that relic of the 19th Century, the Mann Act.

That law makes it a federal offense to transport someone across state lines for “immoral purposes” and it is one of the several potential Federal crimes that Spitzer could be charged with. Throughout it’s history, the Mann Act was used in a discriminatory manner. More importantly, though, it’s simply outdated and beyond the scope of powers granted to Congress under the Constitution.

The second lesson involves the manner in which Spitzer’s use of prostitutes was uncovered:

Last July, the North Fork Bank raised a red flag about suspicious financial transactions involving Gov. Eliot Spitzer. But for several months, the electronic report languished unnoticed in a vast Treasury Department database in Detroit. In early fall, however, a separate report was filed by the HSBC bank about suspicious transactions connected to two shell companies, which drew the attention of investigators. That touched off an inquiry that led investigators to discover the July report on Mr. Spitzer, which showed he had made several wire transfers to those companies, according to three people briefed on the inquiry. (…) Following the bank’s alert, agents for the Internal Revenue Service in Hauppauge, on Long Island, began examining the shell companies, which are allegedly connected to a Web-based prostitution service named Emperor’s Club V.I.P. At that time, the agents had no idea how the QAT front companies had collected hundreds of thousands of dollars in revenue. “They still didn’t know what the business was, and they started digging into the account — is it drugs, money laundering?” said one of the people briefed on the inquiry. “They then start to see money from Spitzer.”

In other words, the fact that the Governor of New York was uncovered because of reporting requirements placed on banks as part of War on (Some) Drugs and the War on Terror which are purportedly aimed at uncovering money laundering, suspicious cash transfers, and illegal payments:

As part of the “know your customer” requirements, banks must assess their clients’ financial patterns and set guidelines to ensure that an alarm is sounded if there are unusual transactions, said Bob Serino, a former deputy chief counsel at the Office of the Comptroller of the Currency who now advises banks and individuals on anti-money laundering regulations. (…) Once a bank determines that a transaction is suspicious, it is obligated to file a Suspicious Activity Report with FinCEN, the Financial Crimes Enforcement Network, a division of the Treasury Department. The standard for filing such reports has diminished since 9/11, with banks erring on the side of caution out of fear that the government will later second-guess its decisions, experts said.

Whether you like it or not, your bank has become an agent of the state and is monitoring your deposits and withdrawals for “suspicious” activity, whatever that might be.

As Jack Balkin notes, there is good reason to be concerned about this:

If computing power increases enough, there is no reason why governments might not lower the threshold for reporting of suspicious transactions, or, indeed, require that every transaction over 100 dollars be reported. All this information could later be sifted through by data mining programs, in order to spot patterns of suspicious activity. The only limit is the technology and the manpower that law enforcement is willing to devote to analysis of financial transactions. The Spitzer story shows both the promise and the threat of these developments. On the one hand, reporting financial transactions makes the job of law enforcement easier, and it uncovers crimes (and terrorist plots) that might never be discovered otherwise. Mandatory disclosure (or in this case, voluntary disclosure by banks) of private individual’s financial transactions, and sharing of data between intelligence services, federal, state and local law enforcement helps the state identify patterns of criminal activity, prevent crimes before they occur, and punish them after the fact. These techniques and technologies allow governments to do the jobs entrusted to them more powerfully and more efficiently than ever before. On the other hand, these developments carry all of the potential risks of a powerful National Surveillance State: Governments can make mistakes in assessing levels of criminality and dangerousness; and their data mining models may characterize innocent activity as suspicious. Without sufficient oversight and checking functions, government actors may misuse the additional knowledge they gain, for example, by instigating abusive prosecutions, or creating discriminatory systems for access to public and private services (like banks, airports, government entitlements and so on). And the more powerful government becomes in knowing what its citizens are doing, the easier it becomes for government to control people’s behavior.

It may not be 1984, but Big Brother is watching.