http://www.freedomworks.org/…

Hidden deep in Senator Christopher Dodd’s 630-page Senate housing legislation is a sweeping provision that affects the privacy and operation of nearly all of America’s small businesses. The provision, which was added by the bill’s managers without debate this week, would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.

Call Congress and Tell Them to Oppose The eBay Reporting Provision in the Housing Bill: 1-866-928-3035

FreedomWorks Chairman Dick Armey commented: “This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay’s PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America’s small businesses are breathtaking.”

“Privacy groups like the Center for Democracy and Technology and small business organizations like the NFIB sharply criticized this idea when it first appeared earlier this year. What is the federal government’s purpose with this kind of detailed data? How will this database be secured, and who will have access? Many small proprietors use their Social Security number as their tax ID. How will their privacy be protected? What compliance costs will this impose on businesses? Why is Sen. Chris Dodd putting this provision in a housing bailout bill? The bill also includes the creation of a new national fingerprint registry for mortgage brokers.

From the Senate Bill Summary:

Payment Card and Third Party Network Information Reporting. The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011. This proposal is estimated to raise $9.802 billion over ten years.

That third party exception appears to apply to places like Paypal but don’t many people use credit cards for their money source? Seems the government would end up getting that info anyway from the first party sources. Not to diminish how serious this proposal is but even if that isn’t the case having this on the books would just give them an incentive to expand on the idea later. I can see the reasoning now: “We need to make sure that terrorists aren’t laundering money through these payment proxies. Don’t worry… the data will be secure. We won’t use this for anything else. You’ve nothing to worry about if you’ve done nothing wrong. Right?”

We’re from the Government, and We’re Here to Help You Buy a House

There has been some good analysis of this week’s much-hyped agreement between the U.S. Treasury Department – which facilitated the meeting, we are told, but didn’t use any form of coercion – and mortgage lenders to bail out assist homeowners in danger of being slammed with a much higher monthly payment on their subprime mortgage come January. But there are some elements of the deal that haven’t been greeted with much skepticism – or, indeed, haven’t been reported much at all.

When the market started to melt down a few weeks ago one firm released a statement about their multi-billion dollar write off to the affect: “In the financial field you have to make calculated risks… and this time we lost.” It infuriated me. These people knew damn well that what they were doing was extremely risky and there was a very high chance of failure. As the first article cited in the above there are NINJA loans. Now while that may sound really cool (unless you are a pirate supporter) it’s really an amazingly stupid business transaction. NINJA stands for “No Income, No Job or Assets.” A hobo who’d taken a shower could have gotten a loan for a few hundred thousand dollars and the lender wouldn’t have bothered to even check if any of the info provided was accurate. Why would these otherwise reasonable businesses take such great risk?

Because of the corporate nanny state. For nearly 100 years the Federal Reserve has been the lender of last resort, the link between government debt and the banking system and the controller of interest rates. These all distort the market and redistribute wealth. Wall Street knew that all these risks could ultimately be pawned off. Sure they may take a hit but by lowering interest rates and inflating the money supply the contraction and resulting deflation that should be happening… and needs to happen… will be pushed out into the future. Perhaps the biggest issue here is the obviousness of the corporate bailout. This can only add to the existing deflated risk by allowing investors to believe the government will so easily provide a way out when they dig themselves a hole. Reminds me of the suspension of specie payments enacted by the federal government throughout our history. The banks didn’t have the specie on hand to cover the redemption requests so the government allowed for the redemption contract that is a paper bank note to be postponed.

So now we have this secondary bailout. This time by the federal government on behalf of those debtors who are at risk of defaulting on their loan. While they claim it won’t cost tax payers money… this CATO article shows how that could change. Worse than that however is that the government will now be seen by the public as the great protector when they make poor investments in housing too. It creates a moral hazard and will only lead to more bad investments and dependency. Also the stepping in to request contracts be rewritten is an affront to contract law. Down the road this disrespect will only worsen. This nanny state response will be thrown on the stack of other ’safety nets’ like SSI, Medicare, etc. and become an expected role of government. Seems to me the next step is more explicit government  subsidies for the average individual looking to own a home and after that government granted or guaranteed homes.

Looks like I’m not the only one who thinks this is a bad idea. Also Dick Army of FreedomWorks can be seen arguing Hillary Clinton’s plan on CNBC.

While I have money invested in the market and would rather not lose a large chunk of it to this adjustment, it needs to happen. We have a couple hundred years of evidence showing how the distortion of the market creates these problems and more government interference almost always results in more.  When will they learn? Perhaps Rothbard’s A History of Money and Banking in the United States should be required reading for members of our government.