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The Federal Reserve Bank of Dallas is taking its time picking a new president, leaving the position vacant for more than four months and leaving the institution without a strong public voice at a time of intense debate over when the central bank should start raising interest rates.

Former president Richard Fisher stepped down March 19, leaving the bank’s first vice president Helen Holcomb to serve as interim president. His exit was long anticipated: he faced mandatory retirement due to his age. The bank formally announced Mr. Fisher’s impending exit in November. Executive search firm Heidrick & Struggles was tapped to find a successor.

Other regional Fed banks, in contrast, have filled their top vacancies more briskly in recent years. For instance, Philadelphia Fed President Charles Plosser retired March 1 and his replacement, Patrick Harker, was announced the next day.

The duration of the Dallas vacancy has surprised many central bank watchers. Some of them say the bank’s board of directors appears to want a clone of Mr. Fisher—a strong voice on major issues with deep ties to the Lone Star state.

“It’s beyond bizarre” a new president hasn’t been named yet, said Danielle DiMartino Booth, who served as a close adviser to Mr. Fisher when they were both at the bank. Ms. Booth, who left the Dallas Fed in June and is now a strategist with the Liscio Report, said what the bank appears to want is a rare commodity.

“Richard Fisher rose to the status of being a deity in Texas,” Ms. Booth said. “People associate the success of the state” with him, and it is “very difficult” to find a new leader who can maintain that sort of profile, she said.

The Dallas Fed responded to questions about the search process by producing a description of what the bank seeks in a new leader. It said candidates should have “recognized stature” in economics and finance and preferably hold a Ph.D. The “ideal candidate will exhibit a strong combination of economic/market/policy expertise, integrity (and willingness to satisfy financial interest and disclosure requirements), leadership, communication skills, interpersonal skills, and community involvement,” it said.

Before joining the Dallas Fed, Mr. Fisher was a wealthy hedge-fund operator and diplomat. He was known for a brash public style as president. He made his case against the Fed’s easy money policies in speeches invoking high and pop culture, warning repeatedly about frothy financial markets and arguing in vain for higher interest rates.

His predecessor Robert McTeer, operating under the nickname of the “Lonesome Dove,” was known for opposing rate rises—sometimes via haiku.

The Dallas Fed has “a tradition of having an outspoken leader,” said Ethan Harris, chief economist at Bank of American Merrill Lynch.

Those with knowledge of the process say the Dallas Fed is seeking a replacement who will carry on that tradition.

Heidrick & Struggles didn’t respond to questions about the search process.

The Dallas Fed president is chosen by the bank’s board of directors, subject to approval by the Federal Reserve’s Washington-based board of governors. The Dallas board members drawn from the financial industry are prohibited by law from participating in the search. The other Dallas board members who are involved declined to comment.

In recent years, regional Fed bank presidents have tended to be insiders. For example, San Francisco Fed President John Williams was previously the bank’s research director. Cleveland Fed President Loretta Mester was previously research director at the Philadelphia Fed. Mr. Harker served on the Philadelphia Fed’s board before taking the top job. Now, only current Atlanta Fed chief Dennis Lockhart had no formal connection to the central bank before joining. Mr. Fisher was the rare bird who came in cold.

“Recent history has shown that the regional banks conduct a thorough and broad review of candidates that almost exclusively ends with the insider being selected,” said Aaron Klein, director of the financial regulatory reform initiative with the Bipartisan Policy Center in Washington.

Mr. Harris said central bank insiders, shaped by a Fed culture that often rewards a gray public persona, tend to lack the dramatic flair of the past two Dallas Fed chiefs.

Some critics from labor unions and local community groups say they are disappointed by the lack of openness surrounding the selection process given that the regional Fed bank presidents are government officials who participate in important central bank policy decisions.

“We are very disappointed in what we’ve run into” trying to have a voice in the process, said Mark York, secretary-treasurer of the Dallas AFL-CIO. He said a letter from the union and other local groups asked for names under consideration to be made public in a bid to allow the public to weigh in, among other requests.

That said, not all think the bright light of transparency is a cure all. Lou Crandall, chief economist for Wrightson ICAP, said wanting to know more about the process is a “fair point.” But he warned “you don’t want a lot of public jockeying over this.”

Source: The Wall Street Journal

The Jersey Journal - January 24, 2014, by Terrence McDonald - When Jersey City in September 2012 became the first New Jersey municipality to mandate that most private businesses provide paid sick leave for its workers, Mayor Steve Fulop predicted a legal fight.

Four months later, and no lawsuit filed, the measure is now law.

Fulop called today “very exciting.”

“I think it’s going to help tens of thousands of working families in Jersey City,” he said at an event at Saint Peter's University.

Jersey City is the sixth city in the nation to force private businesses to provide paid sick time. The law affects employers with 10 or more workers, and was opposed by state- and countywide business groups.

Paid sick time laws have become a favored cause of liberals and labor unions. Both groups hailed Jersey City when Fulop first proposed the measure last year, and they extolled the city again today.

“This law respects the dignity of workers, protects the public health and will mean savings for businesses big and small. When workers can earn sick days, everybody wins,” said Phyllis Salowe-Kaye, executive director of the New Jersey Citizen Action and spokesperson for the New Jersey Time to Care Coalition.

Other cities that have implemented similar mandates include Washington, D.C., San Francisco and Seattle. New York City, which passed a similar law last year, is set to strengthen it under its new, more liberal mayor.

Business groups have opposed the mandate wherever it's been implemented, but in San Francisco, which in 2006 became the first in the nation to require paid sick leave, thanks to a voter referendum, some who opposed the requirement subsequently said it hadn't affected businesses much, if at all.

An audit in Washington, D.C., found the law had not led to fewer businesses opening, though local businesses owners said they had cut back on hours.

Michael Egenton, a senior vice president at the New Jersey Chamber of Commerce, fears that paid sick leave, together with new health-care regulations and the state’s new minimum-wage increase, could convince businesses to relocate.

Egenton also expressed concern about local governments implementing these types of regulations.

“Whatever happened to the freedom of enterprise?” he said today, adding that he believes business owners will reward employees with benefits like paid sick time even if the government doesn’t force them to.

“If you’re a good worker, your boss will give you sick time,” Egenton said.

Source

The Federal Reserve announced on Wednesday that it will keep its benchmark interest rate at current levels in response to lackluster job creation in recent months and other discouraging economic data.

The decision will shield American consumers from higher borrowing costs, but it also reflects the fragility and unpredictability of the current economic recovery, some seven years after the Great Recession officially ended.

The central bank’s Federal Open Market Committee is keeping the influential target federal funds rate — the Fed-set interest rate banks charge one another for overnight lending — at a range of 0.25 to 0.5 percent. Since the rate is a benchmark for lending throughout the economy, leaving it unchanged will likely prevent higher interest rates on mortgages, car loans and other household debts.

The Fed has a dual mandate to craft monetary policy that both maximizes employment and keeps inflation in check. The FOMC lowers the federal funds rate to accelerate job growth by reducing borrowing costs. It raises the rate to limit price inflation by slowing the pace of job growth.

The FOMC’s decision not to do the latter in June was widely expected. Fed officials signaled earlier this month that disappointing job creation had undermined the case for a rate hike. The economy created just 38,000 jobs in May, and new data show that the preceding two months produced fewer jobs than previously believed, according to the Bureau of Labor Statistics.

The central bank is also responding to tepid inflation. The price of consumer goods, excluding food and energy, rose 1.6 percent in the 12 months ending in April, according to the price index favored by the Fed — well below the Fed’s 2-percent target. And a University of Michigan survey revealed on Friday that U.S. households’ expectations of long-term inflation are lower than they have been at any point since the survey began collecting data in 1979.

In a press conference following the announcement, Federal Reserve Chairwoman Janet Yellen acknowledged the role that those developments played in the central bank’s decision, noting that “recent economic indicators have been mixed.”

Yellen also said that the prospect of a “Brexit,” or British exit from the European Union, was “one of the factors” that led the central bank to hold off on an interest rate hike. The United Kingdom will vote on the country’s membership in the EU on June 23.

If the U.K. chooses to leave the EU, which functions as a single market, it could ultimately have adverse effects on the U.S. economic outlook, Yellen suggested. A higher percentage of British voters supported Brexit than opposed it in a poll released on Monday.

The Fed last raised the federal funds rate by one-quarter of a percentage point in December, the first increase since the financial crisis. The rate had been at or near zero — 0 to 0.25 percent — since December 2008.

With the December interest rate increase, the Fed seemed to express confidence that the economic recovery had entered a new phase, indicating it was time to pivot to the work of preventing inflation. Yellen predicted that the move would be the first in a series of small interest rate hikes that would gradually raise rates to levels that are more historically normal.

Since then, however, disappointing economic data have repeatedly delayed the pace of those increases. Slower global demand reduced the availability of credit, and wage growth remained sluggish, prompting the Fed not to raise the federal funds rate in March.

Fed officials suggested in May that economic conditions would finally permit them to raise the rate again in June. But the May job creation data, released on June 3, rapidly dashed those plans.

The central bank’s next opportunity to announce a rate hike will be July 27, after a meeting of the FOMC.

Wednesday’s announcement will come as welcome news to many progressive economists and activists who have long argued that the job market has much more room to grow before inflation becomes a serious problem.

While the official unemployment rate is 4.7 percent, much of its recent decline is due to people dropping out of the workforce altogether. The labor force participation rate, which measures the percentage of people actively seeking work in addition to those who are working, is significantly lower than it was in 2000.

In fact, when you exclude workers 55 or older who may have retired voluntarily, labor force participation is lower now than it was at its worst point during the past two business cycles, according to an analysis by the Economic Policy Institute.

A job market where people continue to give up on finding work is part of the reason wage growth has failed to meet expectations, since employers still have little reason to compete for workers, progressive economists argue. Average hourly pay rose 2.5 percent in the 12-month period ending in May, not enough for a significant boost in most Americans’ paychecks.

The Fed Up campaign, a coalition of progressive groups that advocates for Fed policy that is favorable to workers and communities of color, cites figures like those when pleading with the Fed to hold off on raising rates. Fed Up has called on the Fed not to raise the benchmark interest rate until “the economic recovery reaches all communities,” said Jordan Haedtler, Fed Up campaign manager.

Progressives were overjoyed when presumptive Democratic presidential nominee Hillary Clinton expressed her sympathy with these concerns last month. The campaign said in a statement that as president, Clinton would appoint Fed officials who take seriously the central bank’s mandate to maximize employment, in addition to its duty to tamp down inflation.

Clinton stands to benefit politically from Wednesday’s announcement, since voters typically judge the candidate of the incumbent party for the economy’s performance. A rate increase would have squeezed economic demand, risking even slower job growth in the months ahead of the general election.

Donald Trump, the presumptive Republican presidential nominee, has expressed a wide variety of views about the Fed. He most recently suggested that he supports low interest rates, but that he plans to replace Yellen as Fed chair.

Yellen said Wednesday that the central bank will act based on economic data in the coming months, even if its actions are perceived as affecting the general election in November. “We are very focused on assessing the economic outlook and making changes that are appropriate without taking politics into account,” she said.

This piece has been updated with Yellen’s comments.

By Daniel Marans

Source

KIM BROWN, TRNN: Welcome to the Real News Network. I’m Kim Brown in Baltimore.

Interests rates will remain unchanged. That coming out of this week’s meeting of the Federal Reserve in DC. The official word from the feds, per their own statement, was that job gains have been “solid”, that household spending has been growing strongly, and inflation is running below expectations. But does this mean that the economy is actually doing well or are we still in a recession dressed up to appear better than what it actually is?

Joining us today from New York City is Jerald Epstein. Jerald is the co-director of the Political Economy Research Institute. He’s also professor of economics at the University of Massachusetts at Amherst. Jerald welcome back.

JERALD EPSTEIN: Thanks a lot Kim.

BROWN: Jerald let’s start with the basics and then we can delve a little bit deeper. If the economy is showing the signs of strength as the Fed has indicated, then why didn’t they raise interest rates now and do you think that they are likely to do so at all this year?

EPSTEIN: Well I think Janet Yellen who’s the chair of the Fed, is aware that even though it’s been showing strength and the economy has been growing moderately for several years now, that there’s still much more room to go. That is that wage growth has gone up a tiny bit more than inflation recently, it’s still pretty stagnant, pretty flat line and she knows there’s still a number of workers out that who are so discouraged that they haven’t joined the labor force. So Janet Yellen is concerned about the labor force and the growth of wages but the problem is twofold. First of all, it’s always dangerous to raise interest rates around election time. So traditionally the federal reserve, they’ll try not to do that, move interest rates right around an election. So that’s one factor leading them not to do anything.

The second factor leading them not to do anything is that keeping inflation under control is one of their main mandates. They have two. Maintaining inflation at a low rate and they have a 2% target, and reaching high employment. Inflation is still below 2%. There’s really no signs of inflation going up. So there’s no compelling reason from the point of view of the macro economy to raise interest rates.

BROWN: It’s funny that you mention that the Fed is less likely to raise interest rates or even mess with the interest rate around election time because the Republican nominee for president, Donald Trump has already accused Chairwoman Yellen of keeping the interest rates unchanged in order to appease the Obama administration. She of course has denied this. What are your thoughts?

EPSTEIN: Well I don’t think she did it for Clinton or Obama. But it is I think a tradition and it’s common for Federal Reserves not to raise and certainly change interest rates right before an election. So she is in sort of a tradition of what the Federal Reserve typically does. And it’s also typical especially recently for politicians to make the Federal Reserve the whipping boy or girl for political reasons. Sometimes there’s good reasons. For that.

But there was something kind of unusual for this meeting. In the recent meetings it’s been unanimous to keep interest rates the same or to mostly do what the Federal Reserve has done. But this time it was quite contentious. There were actually 3 people on the federal open market committee, the ones who make this decision who voted to raise interest rates.

This is kind of challenge to Janet Yellen’s leadership in this regard and it also shows what kind of pressure the Federal Reserve is under, particularly from the banks and the mutual fund industry, the insurance industry because with interest rates being so low, it’s very difficult for them to eek out much of a profit. And is typically the case when interest rates are very low for a very long period of time. Some sectors and very powerful important sectors of the financial industry push very hard for interest rates to be raised and they usually get a pretty good hearing at the Federal Reserve [be]cause the Federal Reserve has traditionally done pretty much what the banks have wanted them to do.

BROWN: Jerald it seems as if there’s not enough agreement between the Federal Reserve and among every day Americans on how well this economic recovery is going. So let’s unpack some of the elements of this. Starting with Chairwoman Janet Yellen’s comments on labor markets.

JANET YELLEN: We’re generally pleased with the progress of the economy and the decision not to raise rates today and to wait for some further evidence that we’re continuing on this course is largely based on the judgement that we’re not seeing evidence that the economy is overheating and that we are seeing evidence that people are being drawn in in larger numbers than what I would’ve expected into the labor market and that that’s healthy to continue.

BROWN: So the unemployment rate was under 5% in August and the caveat to that is more Americans are working part-time jobs. Plus, the gig economy is one way that people are surviving and supplementing their income. So is unemployment published monthly by the Bureau of Labor statistics, giving us an accurate figure on the number of Americans who are out of the labor force?

EPSTEIN: They don’t have an accurate number. They have estimates and I think it’s true that there’s still quite a few so called discouraged workers who are out of the labor force. It’s also the case like we said in the beginning that wage growth has been stagnant. Look, the Federal Reserve has a real dilemma here. On the one hand and this is typically the case with Janet Yellen who I think does want to indicate that their policies have had some effect, otherwise nobody will want them to continue these policies. And she thinks that they have had some positive effect on employment and I think they have.

But on the other hand their policies cannot turn around the long run decline of our economy. We need much different kinds, much bigger, much more radical policies in terms of public investment to generate jobs, hiking the minimum wage to a living wage, providing much more in a way of a safety net for workers, protecting pensions and other investments. So the list is very, very broad and very deep. And the Federal Reserve has been pretty reluctant to go further down that list.

The Federal Reserve could do more. They could use different tools to invest directly in the economy. There’s a group called Fed Up which has proposed that they do this. But Janet Yellen and her committee want to stay pretty close to their broader toolkit that they’ve developed and are really afraid to, I think take more radical action which they plausibly could take.

But in the end it really raises questions of the Federal Reserve’s legitimacy. Can they take some kind of really radical action without the broader government saying go ahead and do it? And until the political stalemate we have is resolved, I’m afraid the Federal Reserve can’t do much more and that means this kind of stagnation in wages and so forth is going to continue.

BROWN: Jerald you raise an excellent point about wage stagnation and how wages have largely remained flat going back 20, 30, and even 40 years depending on who you ask. But new census data this month says that household income jumped over 5% which is the largest such gain in decades but that top 1% of Americans saw an increase of around 7% rise in their income. If most of the economic recovery gained since the great recession of 2007, 2008--if most of these gains have gone to the top1%, does it still count as a recovery if it’s not being felt by the majority of Americans?

EPSTEIN: No it does and this has been a very lopsided so called recovery and yes there have been some modest gains for the middle class and some working class people. So the Federal Reserve actions have had some positive effect. But until you really change the structure, change the tax policies so that the wealthy have to pay more of their taxes so the multinational corporations can’t park their earnings overseas and not pay any taxes like Apple and other corporations have been doing until you have much more aggressive jobs programs to bring about a Green transition and many other things. We’re not going to have a real recovery. These kind of very small sorts of gains which are gains but aren’t enough are going to be the best we’re going to see.

BROWN: Jerald what’s keeping inflation in check right now? Is it cheap oil prices?

EPSTEIN: It’s several things. First of all, cheap oil prices and other commodity prices are one thing. But they’re also partially related to the headwinds in the global economy against economic growth. China’s not growing as much so they’re not demanding as much oil and other commodities. Many other developing countries aren’t growing so fast. Europe isn’t growing hardly at all.

So this really dampens the demand for all of these commodities and with these prices going down that does keep inflation in check. The other thing is, all of the forces that are keeping wages in check. That is, imports from China, the union busting that’s been going on, the threat of multinational corporations to move abroad. All of these factors plus more are making it very difficult for workers to have their wages go up. Wages are a cost so that to some extent keep inflation in check as well.

And finally you have the retail industry that’s subject to loss of competition that just keeps squeezing and squeezing and squeezing workers more and more. Until we get big increase in the minimum wage, until we get policies to put workers back to work at well-paying jobs, we’re not going to see real wages go up and we’re also not going to see prices go up very much at all.

BROWN: And lastly Jerald, the wealthiest Americans, the top 1% of Americans are fairing very well and we are experiencing income inequality probably at the largest gap since the Gilded Age. We have seen so many sickle economic bubble burst over the past 20 years with the tech bubble bursting in the late 90’s and the housing bubble bursting in the mid 00’s. Are we at risk of another such economic bubble burst on the horizon any time soon.

EPSTEIN: Yes, we’re always at that kind of risk. It’s hard to see where exactly the bubble would come from. There are little bubblets going on all over the place that don’t seem so broad and connected up with debt and the financial system that it seems as so we’re going to have a kind of bubble burst the way we saw in 2007, 2008 but we might have bubblets burst in the high tech industry and so forth. What’s more likely is this slow burn of stagnation and increases in distress effecting so many people in the United States except for the wealthy who will continue to do very well. Not only income inequality at all-time highs, wealth inequality, how much assets people own has grown and grow and grow and grown. If you look for example, if the net wealth, that is assets minus liabilities, minus debt of African Americans in this country. A report recently came out that said, the median net wealth of African Americans is zero. There’s no net wealth. So this system cannot continue to go in this form. It helps to explain a lot of the political disorder that we’re seeing. The political fighting up we’re seeing and it’s just going to keep going unless we have some fundamental changes in the economy.

BROWN: Indeed. We’ve been speaking with Jerald Epstein. Jerald is a co-director of the Political Economy Research Institute. He’s also professor of economics at the University of Massachusetts at Amherst. Jerald as always, we appreciate you joining us here on the Real News.

EPSTEIN: Thank you very much Kim.

BROWN: And thank you for tuning in to the Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a

recording of the program. TRNN cannot guarantee their complete accuracy.

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