CPD IN THE NEWS

Hillary Clinton is taking on the United States Federal Reserve System, but in a wonky, bottom's-up way that shows her understanding of a complex and widely misunderstood organization. This is not "End the Fed" or even "audit the Fed" — she wants to rebuild it from its fundamentals at the regional level.

To paraphrase Mitt Romney, the Federal Reserve is people, my friend. Hillary Clinton's recent proposal to change the roster of Fed officials who ultimately make monetary policy and regulatory decisions might be the most effective Fed-reform idea since the financial crisis. Generally, the public pays attention to little more than the face of the organization — the Fed's chairperson, currently Janet Yellen — who announces and explains the Fed's decisions. But beneath Yellen functions an intricate and influential bureaucracy that's dominated by interests from the financial sector, the vast majority of them white men, and may well be blind to the reality of a vast majority of Americans.

The Federal Reserve was set up in 1917, in the wake of a financial crisis, as a private national bank that could serve as lender of last resort to other banks. If a bank needed money to make good on deposits, it could go to the Fed for a short-term loan. It was, since its inception, a bankers' institution, run for banks, by banks. But its role has clearly evolved as credit markets have developed and as the Fed's mandate was changed to pursue price stability (low inflation) and full employment at the same time, while helping to regulate the sector for which it also serves as lender.

As the Fed's mission has expanded, its governance has not. The Fed is run by a seven-member board in Washington, D.C., and a dozen regional bank presidents based in financial centers throughout the country (New York, St. Louis, Kansas City and Cleveland, among others). While the crew in D.C. is selected by the president and vetted by Congress, the regional bank presidents are chosen by the financial industry and tend to be either bankers or career Fed employees. Of the 12 bank presidents, two are women and only one is not white.

New York's regional president is Willian C. Dudley, previously a Goldman Sachs managing director. Robert S. Kaplan of Dallas was a former vice chairman at Goldman. Neel Kashkari, a known financial reformer, is nonetheless a former employee of PIMCO, one of the world's largest asset managers and a subsidiary of German financial behemoth Allianz. Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta is a former Citigroup executive.

Clinton's proposal would remove bankers from the regional boards of directors. Those boards choose the regional presidents and generate most of the information and perspective that the Federal Reserve governors use to set monetary policy. Clinton clearly understands how the Fed functions. Donald Trump has said he would not reappoint Janet Yellen as chair. Fine. But appointing the Fed chair is merely the most high-profile action a president can take in this regard. It doesn't change the system, and the Fed is known as the Federal Reserve System for a reason.

This is Clinton at her best – she knows how the government works. The region Federal Reserve boards do not get a lot of press. Most people do not know that they are staffed with chief executives from Morgan Stanley, Comerica, KeyCorp and private-equity firms like Silver Lake, and if they do know it, they do not understand its importance.

The Fed is generally a topic of political bluster. "I appointed him and he disappointed me," complained George H.W. Bush about Alan Greenspan, when the Fed chair refused to cut interest rates in the face of a recession that probably cost Bush his re-election in 1992. Before that, Ronald Reagan had to endure Chairman Paul Volcker raising interest rates so high in an effort to combat inflation that out-of-work construction workers were mailing bricks and wooden beams to the Fed in protest.

The idea that the Fed often acts contrary to the interests of working people is not new, but aside from requiring the Fed to pursue full employment in addition to price stability in 1977, presidents who are unhappy with the Fed have done little more than complain. Even after Greenspan disappointed Bush, Bill Clinton reappointed him to the post. When Greenspan retired, Ben Bernanke, an intellectual heir, took the helm. When he retired, Yellen, also an intellectual heir, took over. The power to appoint the Fed chair and governors is not, clearly, the power to change things.

Clinton is digging deeper. Changing the roster of the regional boards will hopefully help more accurate economic information trickle up to the chairperson and the federal governors. Perhaps, even, a labor representative or somebody with closer ties to the common American experience could become a regional bank president.

In her quiet way, tinkering with the inner workings of a near-century old quasi-government institution that is arcane to most, Clinton has a chance to achieve radical, lasting financial reform.

BY MICHAEL MAIELLO

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The comments, uncoordinated but generally consistent, suggested that some investors and analysts had been too quick to discount a September rate increase, particularly as global markets finished the week on a relatively quiet note on Friday.

“We haven’t made a decision yet, and I don’t think we should,” Stanley Fischer, the Fed’s vice chairman and a close adviser to the Fed chairwoman, Janet L. Yellen, said in an interview with the cable network CNBC. “We’ve got time to wait and see the incoming data and see what exactly is going on now in the economy.”

The Fed’s policy-making committee is scheduled to meet Sept. 16 and 17.

Mr. Fischer offered an upbeat assessment of the domestic economy. He described job growth as “impressive” and said there had been a “pretty strong case” to raise rates in September before the latest round of global turmoil. He did not sound inclined to wait much longer than September to start raising rates.

“We’re getting back to normal and at some point we will want to show that, by beginning to normalize interest rates,” he said, speaking during a break at the annual conference hosted here by the Federal Reserve Bank of Kansas City.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta and a centrist on the Federal Open Market Committee, told Bloomberg that he saw roughly even odds of a September rate increase. But if the Fed did choose to wait, he said it wouldn’t be for long — he suggested that it could raise rates at its next meeting in October.

James Bullard, president of the Federal Reserve Bank of St. Louis, said in an interview that he was reserving final judgment, but that he did not see strong reasons for the Fed to delay. “I would like to see the whole panoply of data before I make a decision but I’m certainly leaning in that direction,” Mr. Bullard said.

The march toward higher rates has inflamed some critics who argue that the central bank should continue or even expand its stimulus campaign.

Joseph Stiglitz, a Columbia University economist and Nobel laureate, said Thursday that the Fed was on the verge of repeating an old mistake by raising interest rates sooner than necessary to control inflation. He pointed out that the share of Americans with jobs remained unusually small and wages were rising only slowly.

“There hasn’t been a recovery for the majority of Americans and so to me this is a no-brainer,” Mr. Stiglitz told a coalition of community groups who call themselves “Fed Up” that met just outside the main conference to advocate against a rate increase. “I don’t even know why we’re talking about” tightening monetary policy, he said.

The Fed’s preferred measure of inflation was updated on Friday. The new data showed that prices rose just 0.3 percent during the 12 months that ended in July. A narrower measure excluding food and oil prices, which the Fed regards as more predictive, increased by 1.2 percent over that period. The Fed aims to maintain inflation at a 2 percent annual pace, a goal it has not achieved for several years.

Mr. Stiglitz said the Fed should try to keep inflation at about 4 percent a year. Even with a stated target of 2 percent a year, he said, actual inflation is significantly lower. “We wind up with a monetary policy that has been consistently too tight,” he said.

Most Fed officials say they expect inflation to increase as the economy expands. Mr. Fischer said on Friday that his confidence was “pretty high” that inflation would rebound.

Still, Mr. Fischer said there was a continuing “discussion” among Fed officials, some of whom see the strength of domestic growth as a reason to raise rates, while others argue the sluggishness of inflation means there is no reason to rush.

Mr. Bullard, a member of the first camp, said that he viewed recent global economic developments as unlikely to change his economic forecast. The sharp fall of oil prices and the decline of long-term interest rates should increase growth, while a stronger dollar and a weaker global economy are likely to have an offsetting impact.

“I want to take the time I have between now and the September meeting to evaluate all the economic information that’s come in, including recent volatility in markets and the reasons behind that,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, told The Wall Street Journal. “But it hasn’t so far changed my basic outlook that the U.S. economy is solid and it could support an increase in interest rates.”

Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, reiterated his contrasting view that the Fed should not raise interest rates this year. Instead, he argued, the central bank should consider expanding its stimulus campaign to address the persistence of low inflation, which can harm consumer spending and business plans for expansion. Mr. Kocherlakota said the volatility of financial markets should be seen as further evidence of the weakness of the economy.

Both camps, however, agree that the Fed should not start raising rates in the middle of market volatility. William C. Dudley, the president of the Federal Reserve Bank of New York, said this week that the gyrations of financial markets made the case for raising rates in September “less compelling.”

Mr. Fischer in his interview Friday said he did not want to judge the current situation, because it was new. But if volatility persisted, the Fed would be less likely to move.

“If you don’t understand the market volatility, and I’m sure we don’t fully understand it now — there are many, many analyses of what’s going on — then yes, it does affect the timing of a decision you might want to make,” he said.

Both Mr. Dudley and Mr. Fischer, however, noted that the current situation might be fleeting. Mr. Fischer said markets “could settle down fairly quickly.”

And Mr. Fischer emphasized that Fed officials could not afford to wait until all of their questions were answered and all of their doubts resolved. “When the case is overwhelming,” he said, “if you wait that long, then you’ve waited too long.”

Source: New York Times

Amsterdam News - October 9, 2014, by Stephon Johnson - Last week, New York City Mayor Bill de Blasio signed an executive order to increase and expand the living wage to benefit more New Yorkers.

At City Hall, while announcing the signing of his executive order, De Blasio said “$13.13 for those without benefits, $11.50 for those who have health insurance and other benefits. This applies to employers, excuse me, employees, I should say, of large groups of employers who do business with the city. Meaning, there’s a lot of companies that do business with the city, that come to the city for subsidies. We think if you want a subsidy, you can prove the need for a subsidy. We want to help you achieve your goals, but we have a standard we hold.”

De Blasio continued, “We need to make sure people are paid a living wage. That’s a fair exchange for that subsidy. What it means—let me put this in real terms—what this means, is the difference between the $8-an-hour minimum wage right now, and the $13.13 that will take effect immediately for those employees of companies that get subsidies going forward. That is a difference of over $10,000 dollars in earnings a year. $10,000. Someone who would have made $16,000—not enough to get by—will now make over $27,000 a year. And that’s a difference maker.”

According to de Blasio, any project that gets more than a million dollars in city subsidies qualifies, stating that it will reach people in lines of work like retail, food services and construction.

Advocates for a raise in the minimum wage have said this action was a long time coming. Shantel Walker, a Papa John’s employee who makes $8.50 an hour and who is a member of Fast Food Forward, praised de Blasio’s actions.

“Nearly two years ago, 200 fast-food workers in New York City walked off our jobs, calling for $15 and union rights,” said Walker in a statement. “Our demand may have sounded crazy at the time, but more and more, $15 is becoming a reality for workers across the country. As we’ve gone on strike again and again and a movement that started here in New York has spread to 150 cities, $15 suddenly doesn’t seem so impossible. From Seattle to Los Angeles to San Francisco and now New York, cities are raising wages so we don’t have to rely on public assistance to support our families.”

Walker also stated that the recent developments are a sign, to her, that minimum wage advocates are on the right side of history.

“While he works with Gov. Cuomo to raise wages for all New Yorkers, Mayor de Blasio’s move today to put workers at city-subsidized projects on a path to $15 is a sign that we are winning,” Walker said. “It’s a step in the right direction and helps push us forward in our fight for $15 for workers across the entire country.”

While the city’s working class has achieved a major victory, the state’s working class is still making the push collectively. Andrew Friedman, co-executive director of the Center for Popular Democracy, pushed for Albany to follow suit in a statement.

“The Albany wage board should eliminate the tipped minimum wage to make this vision a reality and end the wage segregation that traps workers in poverty—workers who are overwhelmingly female and of color,” said Friedman. “Partnering with progressive local, state and federal leadership means we can work together to afford a dignified life for all residents, which means comprehensive policies that include a $15 minimum hourly wage, a predictable and fair workweek, paid sick days and a healthy macro-economy that nurtures equity, creates viable new jobs and protects us from risk-taking by financial institutions.”

Back in the five boroughs, Brooklyn Borough President Eric Adams praised de Blasio for the executive order, citing it as another example of New York City leading the pack. He said that de Blasio had “reaffirmed his commitment to civic innovation and our residents’ welfare by raising the living wage and furthering its reach to thousands more workers. This is a measure that recognizes the cost of living challenges that New Yorkers face and builds a meaningful bridge over the inequality gap we have sought to close across Brooklyn and the rest of the five boroughs.

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Dade Middle School in Dallas has had a history of problems. Some community leaders want the Dallas school district to boost neighborhood involvement and turn Dade into what’s called a community school. Some folks believe more community and parental involvement would make a difference there.

One weekend afternoon last fall, parents and children streamed into the auditorium at Dade Middle School. Music in English and Spanish blared from the speakers.

People from around the country showed up to speak at the school and they talked about getting parents and more of the Dade community involved in improving the school.

Yesenia Rosales was at the school with her two daughters ages 12 and 16. They moved to Texas from Maryland and she said things at Dade seem pretty good so far.

"Teachers seem very interested in helping students," she said.

Not long ago, though, things were pretty rough at Dade. Fights broke out regularly, principals were being replaced frequently and parent involvement was dismal.

Community leaders like Monica Lindsey told parents at that meeting last fall that it was time for a change. Together, she said, they could convince the district to adopt a new model at Dade and other troubled schools.

“And we’re pushing to have 20 schools turned into community schools by 2020. Can you repeat after me? 20 by 2020. 20 by 2020 …, ” Lindsey told the crowd.

So, what is a community school? According to the Coalition for Community Schools, it’s one that’s built on partnerships between the school and community groups.

A district’s best teachers work there and the school offers extra social services, like mental health counseling. There’s also more parent involvement and the school doesn’t automatically suspend students who act up.

The Dallas school district has worked to stabilize Dade by adding higher-paid and more experienced teachers. Texas Organizing Project and others involved in community school reform, however, envision a broader effort.

“At a community school, you would have 100 or 200 folks participate in some way or another in that planning process,” said Allison Brim, organizing director for the Texas Organizing Project. “You get real buy-in and also input from a larger group of parents and teachers at the school and students as well to make sure that we’re really addressing all of the needs of the entire school community.”

For the past school year, Brim and other members have been meeting with parents, Dade’s principal and district staff to talk about turning the school around. They’ve hosted several community dinners in South Dallas. And, Brim has sent school board president Eric Cowan a letter asking him to consider the issue at a future board meeting.

Brim says she sees some progress at Dade.

“I would say while it’s still not officially our standard that we’re working toward in terms of a community school, a lot of the foundation has been laid," Brim said. "And there’s been huge improvement in terms of the academics and a lot of the key indicators at the school as a result," Brim said.

Advocates point to progress with community schools in places like Cincinnati and Los Angeles.

Last month, The Center for Popular Democracy released a report citing two schools in Austin that went from facing closure to becoming two of the district’s highest-performing schools.

At one of the Austin schools – Webb Middle School – enrollment, attendance and the graduation rate went up. The school now has a full-time community school coordinator and a family resource center that offers parenting classes.

Dallas school trustee Miguel Solis said he’d like the board to consider adopting the community school model or some variation of it.

“That’s not to say that the model will be 100 percent effective if it is implemented the exact same way in Dallas as it is in these other school districts,” he said. “But the principles and tenets of the model are, I think, perfect for our community and particularly the areas that are the most underserved and need the most support.”

Even if the Dallas school board takes up the issue sometime soon, Solis said turning Dade or other schools into community schools wouldn’t happen overnight.

“What the board is likely to do is at some point just have a better understanding of exactly what a community school is, what the goals of community schools are … ” Solis said.

In other words, when it comes to making a commitment about community schools, Dallas school trustees will want to do their homework first.

This story is part of KERA’s American Graduate initiative.

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