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MSNBC The ED Show - May 9, 2014 - John Boehner pushed the charter school agenda one step further by supporting legislation to pour even more funding into the program. Ed Schultz, Ruth Conniff, and St. Rep. Dwight Bullard discuss.

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The Federal Reserve offered a slightly more upbeat assessment of the economy but provided little insight into when it will raise its benchmark interest rate for the first time in nearly a decade.

Fed officials voted unanimously to keep the target rate at zero for now, after wrapping up their regular two-day policy-setting meeting in Washington on Wednesday afternoon. In a carefully worded statement, the central bank noted that the economy has expanded “moderately.” It pointed to solid job gains and lower unemployment as signs that the labor market has improved, adding that underemployment has also diminished.

Perhaps most important, the Fed characterized the risks to its outlook for the economy as “nearly balanced” — the same description it used after its previous meeting. Some analysts believe that the Fed will move once the risks are weighted more evenly.

U.S. stock markets spiked after the release of the Fed statement but quickly settled back down. Both the blue-chip Dow Jones Industrial Average and the broader Standard & Poor's 500 average were up about half a percentage point in mid-afternoon trading.

Fed Chair Janet Yellen has said several times that she expects the central bank will raise its benchmark federal funds rate before the end of the year, a move that would herald the end of the central bank’s unconventional — and controversial — efforts to resuscitate the American economy.

Many investors and economists believe the moment will come during the Fed’s meeting in September, which would be followed by a news conference allowing Yellen to explain the central bank’s decision more fully. But a vocal minority think the Fed will wait to move in December, the next meeting with a scheduled news conference. A few economists — including two officials within the central bank — believe the Fed should hold off until 2016 to be sure the recovery is solid.

Fed officials have debated how strong of a signal to send as the moment of liftoff nears. But the central bank has repeatedly emphasized that its decision will depend on the evolution of economic data — and so investors should look to the numbers for the green light for action.

A key figure will be the government’s estimate of second quarter economic growth slated for release Thursday. Falling oil prices, a strong dollar and a sharp slowdown in the growth of consumer spending helped drive an unexpected contraction in the economy over the winter. Fed officials are hoping that second quarter GDP growth will prove the dip was merely temporary.

A stronger reading would also align with the pickup in hiring over the past two months. Unemployment is nearing its lowest sustainable level, making some officials antsy for the Fed to start tapping the brakes on the economy.

But others have argued that exceptionally low inflation means the Fed has plenty of time to act. Price growth remains well below the central bank’s 2 percent target, and officials have said they want to be “reasonably confident” it is moving up before tightening policy. In June, the central bank had stated that energy prices “appear to have stabilized.” But on Wednesday, it cited further declines in energy prices, along with the falling price of imports, as reasons inflation has remained low.

The Fed slashed its target interest rate to zero when the country was in the grips of the financial crisis in 2008, and it has stayed there ever since. In addition, it pumped trillions of dollars into the economy in an effort to lower longer-term rates and spur borrowing among consumers and investment among businesses. Unwinding those policies will likely take years.

Meanwhile, the Fed is facing renewed scrutiny in Congress. The House Financial Services committee on Wednesday passed a bill that would require the central bank to explain when it deviates from certain monetary policy models, disclose more information on salaries and allow for audits of the Fed's decision-making process. Another bill sponsored by Texas Republican Rep. Kevin Brady would create a commission to examine the Fed, which recently celebrated its centennial.

“The Fed is trying to do too much,” Brady said in an interview. “It can be the right tool, but not for everything and everybody.”

The central bank is also facing pressure from the other end of the political spectrum. A coalition of community activists and labor groups is urging the Fed to leave its target rate unchanged amid elevated unemployment rates among minorities.

“Until we reach genuine full employment, there is no reason for the Fed to contemplate putting people out of work and slowing down our economy via interest rate hikes,” the Fed Up campaign said in a statement.

Source: The Washington Post

One year after Hurricane Maria made landfall in Puerto Rico, the island is still feeling the effects of the devastating storm. In this special episode, "After the Storm," Tanzina Vega explores questions of status, economic resilience and activism at the ground level. What does it mean to be Puerto Rican post Maria? And is Maria the event that could fundamentally change the trajectory of the island? The Takeaway finds out.

Read the full article here.

Democratic presidential candidate Sen. Bernie Sanders, I-Vt., holds a town hall meeting at the Luis Muñoz Marin Foundation in Trujillo Alto, Puerto Rico, Monday, May 16, 2016. Sanders arrived in Puerto Rico on Monday to talk about the U.S. territory's worsening debt crisis ahead of the June 5 primary.

The race for the Democratic nomination is in its final throes, and Sen. Bernie Sanders (I-VT) and Hillary Clinton are fighting it out for every last remaining delegate. Puerto Rico’s June 5 primary — in which 67 delegates are up for grabs — will carry more political weight than usual, and the campaigns are lavishing attention on the island.

As he campaigned in the territory’s capital on Monday, Sanders laid out a bold proposal to help Puerto Rico dig itself out from $72 billion dollars in debt, but economists and former government officials tell ThinkProgress the plan is legally impossible.

Both Sanders and Clinton have urged Congress to pass a bill giving Puerto Rico the ability to declare bankruptcy and restructure its debt. But Sanders went further this week, demanding that the Federal Reserve act unilaterally to help the island if Congress continues to drag its feet on a bill to restructure the massive debt the Puerto Rican government says it cannot pay.

Ironically, the reforms Congress passed to rein in Wall Street following the 2008 financial crisis — reforms Sanders supported — are part of why the Federal Reserve can’t do what Sanders is now demanding.

“If the Federal Reserve could bail out Wall Street, it can help the 3.5 million American citizens in Puerto Rico improve its economy and lift its children out of poverty,” he said. “Under current law, the Federal Reserve has the authority.”

Some progressive groups, like the Center for Popular Democracy, are voicing support for Sanders’ plan. In an e-mail to ThinkProgress, the director of the CPD’s “Fed Up” campaign said that if the U.S. government could find a way to prop up Wall Street during the 2008 crash, it can do the same for Puerto Rico.

“When the financial crisis hit Wall Street, they used all of their most creative legal minds and institutional power to design solutions that would protect the big banks from collapse; if they wanted to, Fed officials could similarly find appropriate solutions here.”

But other economic experts and former Federal Reserve board members told ThinkProgress that Sanders is mistaken. Ironically, the reforms Congress passed to rein in Wall Street following the 2008 financial crisis — reforms Sanders supported — are part of why the Federal Reserve can’t do what Sanders is now demanding.

“The type of assistance Senator Sanders is asking the Fed to provide would not be legally possible,” said Donald Kohn, who served on the Federal Reserve’s Board of Governors from 2002 to 2010. “[It is] not what the Congress intended. Among other things, [the law] requires that any facility be broadly based and not intended for a particular troubled borrower.”

The reforms in the 2010 Dodd-Frank bill sharply curtailed the central bank’s ability to make emergency loans to struggling banks, partnerships, or corporations in order to keep them afloat. While questioning whether the Puerto Rican government counts as a bank, partnership, or corporation in the first place, Kohn also cited another section of the law saying the Federal Reserve must “prohibit borrowing from programs and facilities by borrowers that are insolvent,” as Puerto Rico will soon be, and that emergency lending powers are “not to aid a failing financial company.”

The Federal Reserve has given Congress the same message, and other fiscal policy experts agree. University of Pennsylvania professor Peter Conti-Brown, an expert on the Fed’s legal authority, told the Washington Examiner that Dodd-Frank “specifically forbids this kind of targeted bailout,” while Cato Institute director of financial regulation studies Mark Calabria added that “the intent and clear language forbids ‘one-off’ rescues to single entities.”

Warren Gunnels with the Sanders campaign argued in an e-mail to ThinkProgress that because only a fraction of Dodd-Frank’s reforms have been finalized and implemented, the Federal Reserve can still step in. “The Federal Reserve has the authority to facilitate an orderly restructuring of Puerto Rico’s debt through a reverse auction process that will lead to major haircuts for Wall Street vulture funds,” he said.

Still, most experts say it falls on Congress to act to rescue Puerto Rico. House Republicans introduced a bill this week that would allow Puerto Rico to restructure its debt, but would also implement an un-elected control board to oversee the island’s budget and cut the minimum wage from $7.25 to $4.25 an hour for workers under 25.

We don’t need more austerity for children in Puerto Rico who are going hungry.

Sanders blasted the proposal as undemocratic and a further burden on the poor. “We need austerity for billionaire Wall Street hedge fund managers who have exacerbated the financial crisis in Puerto Rico. We don’t need more austerity for children in Puerto Rico who are going hungry,” he said.

Regardless of the feasibility of Sanders’ Federal Reserve proposal, his pro-sovereignty and anti-austerity message resonated with Puerto Ricans on and off the island. Two prominent officials, including the mayor of the capital of San Juan, rescinded their endorsements for Hillary Clinton after Sanders’ visit, while other community leaders sang his praises.

“Bernie Sanders is the only candidate dedicated to the people of Puerto Rico,” said Jose Nicolas Medina, an attorney in San Juan. “Much of our problems are due the policies of Clinton. As first lady and as Senator, Hillary did nothing to help the situation of Puerto Rico. So we punish the Clintons with our votes.”

Others watching Sanders’ speeches told ThinkProgress they were inspired by his promise to allow Puerto Ricans to vote for either independence or statehood during his first year in the White House, and his characterization of the current U.S.-Puerto Rican relationship as “colonial-like treatment.”

“To have a candidate for president finally admit that Puerto Rico is a colony is historic,” said Phillip Arroyo, the former chair of the Young Democrats of America’s Hispanic Caucus and a Puerto Rican living in Florida. “He has planted a seed in the mind of the new generation. It will ultimately bear fruit regardless of whether he’s elected.”

BY ALICE OLLSTEIN

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