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.

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?

From the Seattle Times:

Backers of Seattle’s convention center say the time is right for a $766 million expansion to lure more free-spending conventioneers downtown.

Despite the state’s $5 billion deficit, they’re asking the Legislature to give a quick go-ahead to the project, which would double the exhibit space at the Washington State Convention & Trade Center (WSCTC). A coalition of downtown business interests and Seattle Mayor Greg Nickels are solidly behind the idea.

Business is declining everywhere. Business profits are declining, requiring lower costs to survive. Commercial Real Estate is crashing.

Now sounds like the worst time to make business centers more expensive. What is Mayor Nickels thinking?

More from the same article:

Seattle’s Convention and Visitors Bureau estimates the city has lost $1.7 billion in potential visitor spending since 2004 because the convention center was booked or too small.

This means Seattle has mismanaged the property since 2004, keeping usage fees too low. Why reward their failure with nearly a billion dollars?

the expansion would be paid for entirely out of an existing tax on hotel rooms in King County — money already dedicated to the center — so it wouldn’t add to the state’s budget worries.

Hotels are struggling. What about helping them lower prices by removing the tax? The more travelers pay on the room, the less they have to spend on other activities like sight-seeing, shopping and eating.

In other words Washington State has three choices:

1. Solve part of its $5 billion deficit by directing this tax to reduce the deficit.
2. Rescind the tax to make hotel more affordable for increasingly frugal travelers.
3. Spend the money to double convention center floor when CRE construction costs are at their peak.

The first two options make a lot more sense to me. How about you?

Deflation makes a night at the theatre more affordable:

The nonprofit operator of Seattle’s Moore and Paramount theaters is dropping Ticketmaster and signing with Tickets.com [...] the switch will reduce ticket surcharges an average of 20 percent and give buyers more options such as using their mobile phones as tickets and printing from home for free.

A 20% lower surcharge is great news for people struggling to pay the bills and still buy theatre tickets.

On the other hand, have you noticed gas prices at the pump increasing again? Did you notice restaurants — like Claim Jumper — remove many of their recently reduced menu items?

This is because the Federal Reserve and US Treasury are fighting hard to making things more expensive:

The Federal Reserve Bank of New York today [started] purchasing fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.
[...]
Q: How will purchases under the agency MBS program [to buy Fannie/Freddie debt] be financed?
A: Purchases will be financed through the creation of additional bank reserves.

This means that prices are higher than people can afford to buy or repay. The logical solution is to lower prices to what people can.

The Fed’s solution? Create labor and credit shortages to support higher prices for favored firms:

propping up failed banks and extending them huge amounts of credit has made business more difficult for the people and companies that had nothing to do with creating the mess. Perfectly solvent companies are being squeezed out of business by their creditors precisely because they are not in the Treasury’s fold. With so much lending effectively federally guaranteed, lenders are fleeing anything that is not.

Do the Fed’s actions help JPMorgan and Goldman Sachs? Yes, but precious few others.

Abolish the Federal Reserve.

The Federal Reserve bailed out JP Morgan when Bear Stearns collapsed. They received another bailout when Washington Mutual collapsed. JP Morgan defaulted on all of Washington Mutual’s debts but kept all the deposits.

JPMorgan keeps what is profitable and let’s the public suffer the consequences of the rest:

JPMorgan Chase & Co. will officially tell Seattle property owners [they] will not be taking over the bank’s thousands of feet of downtown office space.
The move will leave a gaping hole in Seattle’s commercial real estate market. [...] WaMu leases about 543,000 square feet and subleases an additional 185,000, according to Seattle-based Flinn Ferguson Corporate Real Estate [...] JPMorgan (NYSE: JPM) will move all of WaMu’s remaining employees and those on its transition team to WaMu Center, the 42-story high-rise tower that Washington Mutual built in partnership with the Seattle Art Museum [...] WaMu employed 4,200 people downtown but JPMorgan is cutting 3,400 of those jobs.

Why give JPMorgan the right to keep the retail buildings and deposits it wants but default on Seattle’s pensions, leases and anything else? Why should Seattle’s Commercial Real Estate suffer for JPMorgan’s benefit?

Reminder: Murray voted to hand hundreds of billions to these vultures. Senator Patty Murray sold out Seattle and Washington State. Replace her at the earliest opportunity.

A few years ago JP Morgan Chase talked about buying Washington Mutual:

Dimon expects the New York powerhouse to be able to make a major purchase in mid-2006. He stops short of saying that’s what he is shooting for.

Dimon likes the West Coast and Southeast banking markets. WaMu is one of the few banks in both areas.

“The only way to get the West Coast is WaMu, unless you think Bank of America or Wells Fargo is for sale,” said Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco.

Those banks are not for sale, and JPMorgan could not afford them if they were.

Neither is WaMu, Killinger said, but the company’s relatively low value on the stock market — $43.8 billion — indicates it could be within reach of the New York financial giant.

If JPMorgan cannot persuade WaMu to sell, other possible acquisition targets include Golden West, U.S. Bancorp and Wachovia

Apparently JPMorgan had a better plan to access the west coast market than spending $40b to purchase Washington Mutual’s assets.

Instead they sent an employee, Steve Rotella, to become president of Washington Mutual in 2005. Rotella went to work and quickly destroyed the company. A mere 3 years after joining, the firm is worthless.

This week, JPMorgan bought WaMu’s branches and assets for 95% less than they could in 2005, a mere $2b. Rotella lost everything for Washington Mutual shareholders. $2b does not even cover their debts. Thousands of WaMu employees will lose their jobs and possibly their promised pensions.

What does Steve Rotella receive for his hard work? A 20 million dollar golden parachute from JPMorgan Chase; thanks for a job well done:

Washington Mutual President Steve Rotella — who joined the bank from JPMorgan Chase — has been ousted as a result of his former company’s acquisition of the Seattle bank.

Rotella, who is eligible for a $19 million cash severance, is part of an executive shuffle announced by JPMorgan Chase & Co.
[...]
Rotella, who could receive millions more in noncash severance, joined WaMu in early 2005 from JPMorgan, where he worked from 1998 until the end of 2004.

Instead of purchasing WaMu for $40 billion they paid one of their employees $0.02 billion after he reduced the price by $38 billion.

I wish I knew how Washington state Senator Patty Murray explains her pro-bailout vote after reading this.

The Puget Sound business journal is reporting some bad news for Seattle and Washington Mutual employees:

Washington Mutual employees will not find out for another two months whether they have a job.
[...]
WaMu employs about 43,000 employees nationwide — including 3,500 in downtown Seattle.
[...]
[JPMorgan Chase’s Retail Financial Services head, Charlie Scharf] said employees’ pension plans are part of WaMu’s business that’s held up in Chapter 11 bankruptcy, so it’s not JPMorgan’s responsibility to honor them.

Thousands of people losing their retirement and job in downtown Seattle will put a lot of downward pressure on the housing market.

Based on the terms of their purchase, JPMorgan estimates that home prices have another 20% to fall:

JPMorgan Chase says it will pay $1.9 billion to the FDIC to acquire WaMu’s deposits, branches and a loan portfolio valued at $176 billion. JP Morgan anticipates write-downs of about $34 billion on the loans. The leftover assets and liabilities, including subordinated debt, corporate debt and shares, along with the $1.9 billion payment from JP Morgan, will remain in the holding company, Seattle-based Washington Mutual Inc.

More info about JPMorgan’s home price projections at Calculated Risk.

JP Morgan will be the biggest beneficiary of President Bush spending tax dollars to inflate Seattle home prices. The more JP Morgan writes down the cost of their mortgages the less you will spend to purchase your next gallon of gas, bag of groceries or home.

The more we support JP Morgan, the harder it will be for WaMu employees to find a new job. Resources a software, industrial or agricultural company spends supporting JP Morgan are resources that firm cannot spend expanding its payroll and business.

It makes no sense for Seattle to support bailing out JP Morgan.

Remember that just like WaMu, Bear Stearns was a bailout of JP Morgan:

the bailout is financed by the Federal Reserve. JP Morgan Chase is buying Bear Stearns’ assets and debts, but they are taking *ZERO* downside risk. If the assets turn out to be worthless, the Federal Reserve will take the loss. When inflation runs its course and JP Morgan Chase profits, all the upside accrues to JP Morgan Chase.
[...]
JP Morgan Chase’s profits aren’t free. They’re paid by everyone else as inflation.

That is not free-market capitalism. It is fascism, the worst kind of socialism: private gain and social loss.