Banks frequently extend more debt to people than they can afford to repay. These people tend to default. Normally banks write off the losses associated with this debt. Today is no different. But in recent years they out did themselves in their largess. Banks gave out piles of debt to anyone with a pulse. Unsurprisingly, this worked poorly for banks. Credit card related write-offs are now at record levels.

The debt that banks wrote off no longer competes with individuals’ savings and income. This helps people trying to save their income and live without going further into debt.

On the other hand, this is terrible for the financial industry’s profits. Clearly Washington DC needs to do something, right? Congress and the President to the rescue!

MSN reports that on “May 22, President Barack Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act of 2009.” The bill has the following ominous detail (emphasis mine):

Under the new law, no one under age 21 can get a credit card unless a parent, guardian or spouse is willing to co-sign or unless the young adult has proof of sufficient income to cover the credit obligations.

The bill claims to stop young people from getting into debt. But will it work? The world is full of propaganda encouraging parents to get their children addicted to debt:

Waiting until age 21 to have a credit card has drawbacks. Length of credit history, regardless of age, matters when determining a credit score. And those without a credit history will find that renting an apartment or leasing a car on their own is next to impossible. What’s more, once someone obtains a credit card, there’s a six-month period before the person’s credit is considered “scoreable.”

Even some defenders of the new requirements agree that it’s important to start building a credit history early. “If you can’t qualify on your own, get a part-time job,” advises Campbell.

Many families will continue giving their children credit cards. And thanks to this bill, the families will suffer much more whenever these kids make poor financial decisions:

The bank considers the young person and the parent to be equal players. Now you have two people on hook to the payment rather than just one

In other words, no longer can a child who runs into financial trouble just declare bankruptcy and start fresh. The parent, guardian or spouse must now declare bankruptcy as well. If the parents want to avoid bankruptcy, the parents must repay all the debt the bank gave the child. Or the child must continue living in financial ruin.

Hopefully this scares parents and children away from credit cards. Doubtful. More likely, this law will prevent children from using bankruptcy to repair their financial situation out of concern for their parents. This law will reduce families’ financial redundancy; parents will find themselves with the same financial problems as their children.

It is strange to see Dave Reichert’s (WA-8) absence from the list of congressmen cosponsoring the Federal Reserve Transparency Act of 2009 (HR 1207). Based on his previous comments as a member of the Ways and Means Subcommittee on Oversight, one would expect to find him an energetic supporter of the bill.

What is causing the delay?

I have heard from many of his constituents in Bellevue, Mercer Island, Issaquah and the rest of the 8th congressional district. They want him to cosponsor the bill. They have been calling his office, reaching out to their neighbors and delivering petitions in an attempt to get it. Reichert’s response? Nothing. He has declined to make any statement: nothing in support, nothing in opposition to the bill.

This silence is very surprising. He is on the record voicing the importance of transparency and fact collection. In March he made opening relevant remarks to this bill during a hearing on TARP oversight. From Reichert’s official YouTube channel:

one particularly troubling change is the apparent transfer of authority from treasury to the federal reserve without any new congressional oversight

without transparency we are left with outrageous abuses like bailout bonuses for companies surviving on the backs of taxpayers alone.

we have an obligation to [taxpayers] to find answers, to collect facts and data and to hold accountable the policies and people that lead to the abuses like those at aig

He voices the right words. Consider contacting Reichert and reminding him of those words.

Let him know that The Federal Reserve Transparency Act of 2009 is a great opportunity for Reichert to join his colleagues and convert those words into action.

The latest Washington state congressman to announce his intention to cosponsor the Federal Reserve Transparency Act of 2009 (HR 1207) is Jay Inslee from Washington’s 1st congressional district.

Inslee held two town halls this weekend. The first town hall was in Shoreline. Numerous people wanted to know whether he intended to cosponsor HR 1207, but I heard that he made no commitment either way in Shoreline.

I attended the second town hall in Woodinville. A man representing a group of local Democrats expressed his anger about the banking oligarchy. This received a huge applause line, as well as a laugh when Inslee remarked that there must have been few oligarchs in attendance.

The next questioner reminded Inslee of the Democrat’s pledge of greater government transparency. The questioner said this should include the Federal Reserve, and suggested HR-1207 would be a great way to demonstrate his commitment to that pledge. Inslee agreed and promised that she would find his name on the list of cosponsors by 10am Tuesday morning.

The crowd erupted into applause. Watch the TheConcernedVoter’s movie and see it for yourself:

It was a great moment for Inslee, the Campaign for Liberty and the Democratic process.

I am looking forward to finding Inslee’s name on the list of HR 1207 cosponsors. He will be in good company.

It is official. Both Republicans and Democrats in Washington State are now cosponsors to the Federal Reserve Transparency Act of 2009.

Congratulations eastern Washington! Republican Congresswoman Cathy McMorris Rodgers joins her peers from the Democrat caucus: Jim McDermott (WA-7, Seattle) and Adam Smith (WA-9, Renton to Olympia) as cosponsors of the bill.

As a “member of the Republican Leadership team” let us hope she can lead the rest of Washington’s congressional representatives to join her! That means you, Dave Reichert. They will be in like company: the bill has 134 cosponsors as of the time of this writing.

Do you want her to do this? Send her a line and your thanks for supporting the great Washington state.

Representative Jim McDermott was the only Democrat in the house to change his vote on the bailout from Yes to No. This made me optimistic that he would listen to his constituents again.

What risks does Bernanke take with our tax dollars? Which banks benefit from his credit programs? We deserve to know. In April we asked him for greater transparency into the Federal Reserve.

We received that support. Recently Congressman McDermott made the wonderful decision to join Ron Paul, Adam Smith (WA-9) and 120 of his congressional peers in cosponsoring the Federal Reserve Transparency Act of 2009 (HR-1207):

SECTION 1. SHORT TITLE.

This Act may be cited as the `Federal Reserve Transparency Act of 2009′.
SEC. 2. AUDIT REFORM AND TRANSPARENCY FOR THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

(a) In General- Subsection (b) of section 714 of title 31, United States Code, is amended by striking all after `shall audit an agency’ and inserting a period.
(b) Audit- Section 714 of title 31, United States Code, is amended by adding at the end the following new subsection:
`(e) Audit and Report of the Federal Reserve System-
`(1) IN GENERAL- The audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks under subsection (b) shall be completed before the end of 2010.
`(2) REPORT-
`(A) REQUIRED- A report on the audit referred to in paragraph (1) shall be submitted by the Comptroller General to the Congress before the end of the 90-day period beginning on the date on which such audit is completed and made available to the Speaker of the House, the majority and minority leaders of the House of Representatives, the majority and minority leaders of the Senate, the Chairman and Ranking Member of the committee and each subcommittee of jurisdiction in the House of Representatives and the Senate, and any other Member of Congress who requests it.
`(B) CONTENTS- The report under subparagraph (A) shall include a detailed description of the findings and conclusion of the Comptroller General with respect to the audit that is the subject of the report, together with such recommendations for legislative or administrative action as the Comptroller General may determine to be appropriate.’.

I know the Campaign for Liberty members in the 8th congressional district delivered many petitions to Rep. Reichert. Why is his support still missing?

And what is preventing Inslee from joining his colleagues? Luckily he is holding townhalls in Shoreline and Woodinville this weekend. We intend to ask him.

I read a report today that Massachusetts Representative Bill Delahunt and Wyoming Senator Mike Enzi seek to use the federal government to force our local businesses to comply with 49 other states’ draconian tax laws.

There are 7,000 different tax agencies in the United States. Who do you think can better afford to comply with these myriad regulations: A large, multinational company like Wal-Mart or someone starting up in his West Seattle basement or Queen Anne apartment?

It is hard enough for local, Seattle businesses to get by in this troubled economy. The last thing we need are distant governments making it too expensive for our new businesses to grow and provide new jobs to Seattle residents. Is not unemployment high enough already?

If Enzi and Delahunt believe their local constituents pay too little taxes, fine. They can go to their constituents and collect any necessary taxes. But they have no right to place this burden of collection and compliance on our local businessmen, thousands of miles from their localities.

Seattle needs to concentrate on what we are best at: providing great products and service for the best value. Learning how to comply with Wyoming tax law prevents this.

Please contact your representatives and let them know you feel the same.

The Seattle Tea party rally at Westlake Center was massive! I’ll add some audio clips soon. Meanwhile, check out the pictures of the protest:

More pictures after my comments.

Here are my observations:

Lots of anger at the unconstitutional Federal Reserve System.

• People passed around fliers supporting Ron Paul’s efforts to Audit the Fed.
• Lots of people talking about the evils of fiat currency.
• People talking about gold. Have they been reading Mises?

The movement has many very dedicated, well organized members:

• The MC encouraged everyone to send a text message to help count size of group; doing so also registers people for the “Tax Revolt Coalition”.
• Organizers repeatedly displayed phone numbers for Jim McDermott and Patty Murray — and then everyone left Patty Murray a group voicemail (McDermott has no voicemail).
• When overly partisan speakers left the stage — some prospective Senator who only talked about cutting taxes — the MC reminded everyone that we are tired of people forgetting the need to cut spending; the group has not forgotten the results from the last time the GOP rode the wave of a small-government rebellion and became fraudulent conservatives.
• Some counter-protestors brought some obscene signs. The MC was careful to add distance from the obscenities while respecting their right to free speech.

The Seattle event felt a little more partisan to me. People calling for an end to the trillions we spend murdering

I talked with friends at the Libertarian party, Campaign for Liberty and Committees of Safety. I believe this is a great time to be a libertarian. In fact, one of the C4L members looked like he had a body guard. Of course, the body guard was at the last C4L meeting promoting a marksmanship class. I wanted to say hello but he had that serious, “on duty” attitude.

I saw many Objectivist signs: Ayn Rand was right; Who is John Galt? etc. Bill Herman, one of the leading Objectivists in the area was passing out fliers. I think this is an exciting time to be an Objectivist.

More pictures:

[caption id="attachment_1350" align="alignnone" width="300" caption="Probably my favorite non-Fed related billboard of the evening."][/caption][caption id="attachment_1352" align="alignnone" width="225" caption="How old was this guy? He clearly explained to me why we must abolish the tyrannical Federal Reserve System. Brilliant! Awesome!!"][/caption]

More pictures here.

I just returned from the Bellevue, WA tea party rally.

I observed the following:

• Very loud, powerful rejection of the idea of a state income tax and taxation in general: property taxes, excise taxes, etc.
• Lots of love on the liberty and constitution.
• Most people were libertarian/non-partisan, but partisan sentiment did exist:
  • Repeated attempts to assert the non-partisan nature that went over well.
  • Partisan attacks usually began with an apology, “I know this is not a partisan event but…”
  • Partisan flavor was almost all Republican/Conservative.
  • Far less excitement over partisan attempts to criticize Obama (ie, he’s weak on foreign policy type comments) than on criticism of debt, spending and taxation.

I plan to attend the rally in Seattle this afternoon. I hope to see some of you there!

More pictures:

Microsoft reversed its decision to lease property in South Lake Union:

Microsoft confirmed Wednesday that the software behemoth will not lease Vulcan’s 2201 Westlake building in Seattle’s South Lake Union neighborhood, as many local real estate brokers assumed.
[...]
At 302,000 square feet, 2201 Westlake accounts for less than 1 percent of the 40 million-square-foot Seattle office market

The commercial real estate industry plans to add another 2.5% of space on top of this in 2009:

[...] Vulcan’s project will be competing for tenants against Schnitzer West’s 660,000-square-foot 1918 Eighth building and Touchstone Corp.’s 500,000-square-foot West 8th building.

All this extra capacity will place downward pressure on lease rates. This will make things difficult for over-leveraged commercial real estate speculators. On the other hand businesses need affordable leases:

Businesses need lower prices to stay solvent and avoid laying people off. Lower lease and purchase prices for commercial real estate will make it much easier for someone to grow a current or start a new business and employ people looking for a job.

мебели

Seattle residents have found their homes becoming unaffordable faster than anywhere else in the nation. Puget Sound Business Journal:

Seattle leads the nation, according to Radar Logic, in the category of five-year annualized percentage change with an increase of 6.5 percent, besting New York at 4.9 percent and Philadelphia at 4.6 percent.

The good news from my perspective is that San Francisco and New York are becoming affordable very quickly. SF’s prices improved the fastest in the nation, becoming 34.4% cheaper in October than the year prior.

Not according to the Seattle Times. They like unaffordable housing:

The silver lining? Median sales prices for single family homes in King County crept back above $400,000 for the first time since September

The Puget Sound Business Journal said the same thing yesterday. Neither must read Naked Capitalism:

the Federal budget deficit will come in just shy of $1.2 trillion, and that before any stimulus related deficits are added in, which are now expected to be $775 billion.
[...]
The market-watching crowd that corresponds with me expects unemployment to peak at 10-12% even with a stimulus program

Do you agree with the Seattle Times reporter that higher prices help the many people in Seattle who are about to lose their job and fall deeper into debt?