Campaign News

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

Source

Every year, millions of workers suffer from wage theft when employers or companies do not pay them what they are owed.

Read the full article here.

The Federal Reserve has kept its main interest rates, which banks use to lend to one another and determine the cost of credit throughout the rest of the economy, at or near zero since December 2008. The central bank has maintained the low rates so as not to disrupt the country's recovery from the largest financial crisis and recession in decades.

But several current and former senior economic officials told the Wall Street Journal earlier this month that the virtually unprecedented, prolonged period of near-zero rates risks depriving the Fed of the “ammunition” to address the next recession -- let alone another financial crisis. The Fed's primary method of economic stimulus, they note, has traditionally been cutting interest rates, something that is not possible if rates are already so low.

That could force the government to rely disproportionately on fiscal stimulus, these experts warn, holding a recovery hostage to a partisan ideological divide that has paralyzed Congress and shows no signs of abating. 

None of the officials who spoke to the Wall Street Journal explicitly called for an interest rate increase in order to keep the Fed’s options open for the next crisis. The main reason that Fed officials publicly provide for a rate hike is still that they believe price inflation is on track to hit the Fed’s 2 percent target. (William Dudley, president of the Federal Reserve Bank of New York, signaled on Wednesday that the the Fed was reconsidering a September interest rate hike after several days of volatility in the stock market.)

But Fed watchers believe that a desire to replenish the Fed’s proverbial firepower for the next recession is part of the motivation of Fed officials who want to “normalize” -- i.e., increase -- rates.

Narayana Kocherlakota, the outgoing president of the Federal Reserve Bank of Minneapolis,vehemently opposes an interest rate hike in the near future. Kocherlakota nonetheless believesthat his central bank colleagues’ perception that low interest rates have given the Fed less “monetary policy ‘space’” will prompt them to raise rates sooner and higher than is desirable.

Jack McIntyre, a portfolio manager and senior research analyst at Brandywine Global, a Philadelphia-based asset management firm, also said those concerns are part of the Fed’s calculus. “Yes, the [Fed would] like to remove emergency-level monetary stimulus to build up ammunition for the next slowdown in the U.S. economy,” McIntyre told The Huffington Post. “It would be a net positive to move us off of zero interest rates to build up some ammunition so they can cut them when it slows down.” 

Many economists insist, however, that these fears are misplaced. They instead argue that the best way for the Fed to prepare for the next recession is to prevent the economy from slowing down too soon in the near term.

“I would much rather have the Fed engage in slowdown and recession prevention by getting us to reach levels at which a rate hike would not be premature,” Josh Bivens, research and policy director at the left-leaning Economic Policy Institute, said earlier this week.

If the Fed raises rates in the coming months to give itself leeway for the next recession, Bivens warned, it risks “creating the crisis you are trying to have tools to fight against.”

Bivens is one of a number of liberal-leaning economists and activists who argue that the economy is still far from full employment. They want the Fed to wait for widespread wage growth to take hold before raising rates, and they were in Jackson Hole, Wyoming, on Thursday and Friday to make their case to Fed officials directly.

When the economy slows down more substantially, Bivens said, the Fed could still stimulate growth using quantitative easing, the massive asset purchasing program it initiated during the most recent recession after interest rates had already bottomed out. 

There are other even less conventional techniques available to the central bank, like instituting negative interest rates, which would effectively charge banks for depositing their money rather than lending. It is an idea that former Fed chair Ben Bernanke told The Wall Street Journal has merit.

Richard Parker, an economist at Harvard, agrees with Bivens and other economists that middle- and lower-income workers have yet to share in the gains of the current recovery, but is less worried about the damaging effect of a rate hike.

Instead, Parker believes that lawmakers and activists concerned about low wage growth should focus on changing the regulatory and fiscal policies that he believes would have a bigger impact. 

Parker supports a “retained earnings tax” that would penalize corporations for hoarding cash for stock buybacks and other actions “meant to bolster share prices (and hence bonuses)” that do little for the real economy.

And while Parker acknowledges that partisan gridlock makes the prospects of pro-growth fiscal policy dim at the federal level, he sees the success of efforts to raise the minimum wage at the state and local level as a model for incremental progress. 

“It is beginning to look like the early Progressive Era, when states were the laboratories for democracy,” he said. 

Source: Huffington Post

The China Post - November 16, 2014 - In a rarity for a U.S. central bank chief, Federal Reserve Chair Janet Yellen met Friday with activist groups calling for a fairer economic recovery and a more transparent Fed.

About 20 representatives of community and labor organizations met with Yellen for an hour in the meeting room of the policy-setting Federal Open Market Committee, the activists said.

The groups were banded together as “Fed Up: The National Campaign for a Strong Economy,” lobbying Yellen and her team to orient Fed policy to boost employment and wages.

In addition to Yellen, Fed Vice Chairman Stanley Fischer and board members Lael Brainard and Jerome Powell participated in the meeting.

“We had a very good conversation,” said Ady Barkan, representing the Center for Popular Democracy.

The activists presented their views about conditions in the economy to the Fed officials and “they listened very carefully,” Barkan said.

Yellen “asked people questions about their personal experiences in the economy,” he added.

The coalition gave the Fed officials a list of six proposals to make the central bank more transparent and democratic.

“The economy is not working for the vast majority of people,” Barkan said.

“The Federal Reserve has huge influence over the number of people who have jobs, over our wages ... and yet we don't have discussion and engagement over what Fed policy should be.”

Wearing T-shirts emblazoned with “What recovery?” the activists criticized the Fed's isolation from the general public.

“Our wages are on a flat line for 30 years,” said Anthony Newby, director of Minnesota Neighborhoods Organizing for Change, which wants the Fed to give interest-free loans to cities so they can create jobs in infrastructure projects.

With two regional Fed bank presidents preparing to step down — Charles Plosser for the Philadelphia Fed and Richard Fisher at the Dallas Fed — the coalition is pressing for a transparent process for selecting their successors.

The Philadelphia Fed said on its website Friday that the executive search firm it hired has set up an email address to receive inquiries in the interest of helping the bank “in a broad search for its next president.”

“Philadelphia has hovered around eight percent unemployment for all of 2014; in the black community it's over 14 percent,” said Kati Sipp, head of Pennsylvania Working Families and a “Fed Up” activist.

“We want the Fed to spend some time in the neighborhoods where regular working people live.”

Source