CPD IN THE NEWS

The Wall Street Journal - August 22, 2014, by Pedro Nicolaci Da Costa - A group of activists has descended on the Kansas City Federal Reserve Bank’s annual conference in Jackson Hole, Wyo.,  to tell central bank officials that any move to raise interest rates soon could wreak havoc on the lives of Americans still struggling with a weak economic recovery.

U.S. unemployment has fallen fairly rapidly in recent months, to 6.2% in July, down from its post-recession peak of 10%. However, the activists said those numbers mask much deeper troubles in the country’s poorer neighborhoods. The unemployment rate for African-Americans, for instance, was 11.1% in July.

Reggie Rounds, 57 years old, came to the conference from Ferguson, Mo., the site of recent violent protests following the killing of an unarmed teenager by a police officer. During a brief conversation here with Federal Reserve Vice Chairman Stanley Fischer, Mr. Rounds, who is unemployed and says he hasn’t had regular work for years, urged the central bank to keep poor Americans on their minds as they make policy decisions.

“I deal with people who have educated themselves. These people, sir, are inundated with student loans. They’re making just not livable wages or not wages at all,” Mr. Rounds told Mr. Fischer. “We’re desperately needing a stimulant into this economy, and job creation, to get us going.”

Mr. Fischer responded: “That’s what the Fed has been trying to do and will continue to try to do.”

The Fed has kept interest rates near zero since December 2008 and bought more than $3 trillion in government and mortgage bonds to keep long-term rates low, spur investment and boost hiring.

However, recent improvements in the job market and a pickup in inflation have revived debate about when the central bank should begin lifting interest rates from rock-bottom lows. In her speech here Friday, Fed Chairwoman Janet Yellen said if the labor market keeps improving faster than the Fed forecasts the central bank could raise rates sooner than expected. Many investors anticipate the first move in the summer of next year, a perception some top Fed officials have encouraged.

Representatives of the Center for Popular Democracy, a left-leaning national nonprofit organization, said they organized the activists’ trip to Jackson Hole. The participants argued that near-term rate increases could have a deep negative impact on the most vulnerable sectors of the population.

Reuben Eckels, 51, a reverend from Wichita, Kan., said he had come to the conference to tell policy makers “how raising interest rates would affect the community in which I serve.” He and other activists played down the notion of a “skills gap” where workers might not have the qualifications for the jobs available.

“We have young people who are college students in our church who have a 4.0 [grade average], Dean’s list, they can’t find jobs,” he said. “So this is not about just raising the rates so we can offset an imbalance for those elderly who are trying to save their portfolio. This is about people on the street, everyday people … who are just trying to live a good quality of life.”

Shemethia Butler, 34, is one such individual. Hailing from Washington, D.C. the mother of two says she is dealing with extreme stress because the wages she earns at McDonald’s aren’t enough to cover her rent, much less basic expenses like food, electricity and transportation.

“I have no vehicle. My housing situation is stressful. I’m about to lose my apartment. I’m struggling really hard,” she said. “Things may be fine on Wall Street, but they’re not fine on my street.”

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Pressure mounted on Wells Fargo & Co. Friday following its fake-accounts scandal, as the bank faced new calls to allow affected customers to file lawsuits and for the board of directors to rescind the pay of a key senior executive.

The demands came just one day after Chief Executive John Stumpf resigned from a Federal Reserve advisory panel.

Senators had pushed for Stumpf not to be reappointed, saying it was inappropriate for someone who presided over improper sales tactics to be giving advice to an agency involved with bank regulation.

Stumpf has been under intense fire since the bank this month agreed to pay $185 million to settle investigations by Los Angeles City Atty. Mike Feuer, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency into an aggressive sales culture that led bank employees to open as many as 2 million accounts that customers didn’t authorize.

The Justice Department is investigating possible criminal charges, and some senators have called for a Labor Department investigation into whether the bank failed to pay employees overtime when they worked late nights and weekend to meet sales quotas.

A group of Senate Democrats continued to attack Wells Fargo on Friday, publicly calling on Stumpf to stop enforcing mandatory arbitration clauses in the agreements for customer accounts that were not authorized.

Sen. Sherrod Brown (D-Ohio) had pressed Stumpf on the matter at a Senate Banking, Housing and Urban Affairs Committee hearing Tuesday, arguing that it was unfair not to allow those customers the ability to file lawsuits against the bank.

Stumpf said at the time that he would have to “talk to my legal team.”

Brown said Friday that he and his colleagues want relief for bank customers and more answers from Wells Fargo.

“If Wells Fargo really does want to look out for the customers, if they really are in fact sorry, as the CEO said, for these unauthorized accounts, they ought to let the court system work if these people who were wronged want to bring suit,” he said.

Wells Fargo's collateral damage: customers' credit scores

Wells Fargo's collateral damage: customers' credit scores

The Democrats sent a letter to Stumpf on Friday, requesting more information about the arbitration clauses, including how many customer complaints about fake accounts were forced into arbitration proceedings.

Brown was among those writing to Stumpf, along with Patrick Leahy of Vermont, Richard Durbin of Illinois, Richard Blumenthal of Connecticut, Al Franken of Minnesota and Elizabeth Warren of Massachusetts.

A spokeswoman for Wells Fargo did not immediately respond to a request for comment.

Also on Friday, an activist investment group that is part of the Change to Win union federation wrote to Wells Fargo’s board, asking it to rescind at least part of the compensation earned by the executive who oversaw the employees who opened unauthorized customer accounts.

The letter from CtW Investment Group, which is a Wells Fargo shareholder, adds to the pressure on the bank to claw back some of the approximately $100 million earned by Carrie Tolstedt, the company’s former head of community banking.

Wells Fargo’s stock has declined by about 8% since the settlement was announced on Sept. 8.

On Thursday, five senators called for Stumpf not to be reappointed to the Federal Advisory Council, a 12-member body that meets four times a year with the Fed’s Board of Governors to discuss banking and economic matters.

Stumpf had represented the Fed’s San Francisco district, where Wells Fargo is based, since 2015.

He “made a personal decision to resign” and notified the Fed on Thursday, Wells Fargo spokeswoman Jennifer Dunn said.

“His top priority is leading Wells Fargo,” she said.

Sen. Angus King, an independent from Maine, organized the letter to the head of the board of directors of the Federal Reserve Bank of San Francisco asking that Stump not be reappointed to the advisory council when his term expires on Dec. 31.

“It would be ironic if the Federal Reserve, a key federal banking regulator tasked in part with ensuring the fair and equitable treatment of consumers in financial transactions, continued to receive special insights and recommendations from senior management of a financial institution that just paid a record-breaking fine to the Consumer Financial Protection Bureau for ‘unfair’ and ‘abusive’ practices that placed consumers at financial risk,” they wrote.

The letter also was signed by Warren and Democratic Sens. Maria Cantwell of Washington and Jeff Merkley and Ron Wyden, both of Oregon.

Their call was backed by Fed Up, a coalition of labor, community and liberal activist groups that has pushed to reduce the influence of bankers on Federal Reserve policies.

“Commercial banks already have too much influence within the Federal Reserve System,” the coalition said Thursday. The coalition also asked its members to sign a petition calling for Stump’s “immediate dismissal” from the advisory panel.

“Stumpf, as the CEO of a bank accused of ‘unfair’ and ‘abusive’ practices, should have no role advising the Federal Reserve’s Board of Governors on policies affecting working families,” Fed Up said.

By Jim Puzzanghera

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New York Times - May 11, 2014, Room for Debate: Connie Razza - Public pensions are under threat from outright fraud as well as the financial sector’s drive to generate higher profits for itself, regardless of the cost to our communities. The public can take simple steps to eliminate this danger. Investments should be put in index funds, which typically outperform actively managed portfolios. A recent comprehensive study of the performance of state pension funds found that the 46 state funds studied could save $6 billion in fees annually, while achieving returns as good or better than their actively managed portfolios. Most privately managed pensions already pursue indexing strategies, through vehicles like Amalgamated Bank’s LongView Funds, and successfully secure strong retirement savings for participants. Public pension funds should index a significant portion of their funds under management to save billions while still generating first-rate returns.

Index funds outperform managed portfolios. Relying on them would save on fees and avoid underhanded behavior.

These funds would also save significant amounts in management fees by hiring talented in-house investment managers for significant portions of actively managed pension assets.

Any investment should be presented in plain language in a standardized, easy-to-read template, so trustees and pension participants know exactly what the product does, how it makes money and what its fees and risks are. Like cell phone agreements, all fees should be disclosed up front. Like credit card bills, actual returns and long-term, historical performance should be clearly presented. Oversight of fiduciaries should be bolstered and any who violate their responsibility to retirement funds should be pursued legally. When the State Employees Association of North Carolina hired a pension forensic investigator, they found that the state treasurer Janet Cowell had invested $30 billion in illegal, high-risk funds, causing $6.8 billion in losses. A more robust standing oversight body could have prevented much of that improper investment. The state should aggressively prosecute both pension trustees and private investment managers who put their own benefit above the interest of pension participants. More eyes on the management of retirement assets would help ensure responsible investment strategies and management. Creating a publicly managed pool of retirement funds would invest more residents in pension management, while ensuring that fewer workers would find themselves insecure in retirement. And, increased pension funds make possible more diverse, responsible investments for the actively managed portions of the funds. For instance, funds can take a decisive role in infrastructure investments that will both improve their communities and provide steady, long-term returns.

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A coalition built on the Black Lives Matter movement has issued its first political agenda demanding reforms in the American justice system and reparations for slavery. Some 60 organisations in the Movement for Black Lives endorsed the platform calling for "black liberation" that had been forged over a year of discussions.

The agenda included six demands and 40 policy recommendations, including a reduction in military spending and a focus on protecting safe drinking water.

It also called for an end to the death penalty, decriminalisation of drug-related offences and prostitution, and the "demilitarisation" of police departments. It seeks reparations for lasting harms caused to African-Americans by slavery and investment in education, jobs and mental health programmes.

The agenda by the Movement for Black Lives came hard on the heel of the Republican and Democratic national conventions, which failed to satisfy members.

"On both sides of the aisle, the candidates have really failed to address the demands and the concerns of our people," said Marbre Stahly-Butts of the Movement for Black Lives Policy Table, which crafted the agenda.

He told the New York Times. "So this was less about this specific political moment and this election, and more about how do we actually start to plant and cultivate the seeds of transformation of this country that go beyond individual candidates."

The overarching mission of the group is to halt the "increasingly visible violence against black communities". Its agenda was issued just days before the second anniversary of the killing of unarmed black teen Michael Brown by a white police officer in Ferguson, Missouri.

Brown's death and the killing of other unarmed black men by white officers was the birth of the Black Lives Matter movement.

"We seek radical transformation, not reactionary reform," said Michaela Brown, a spokeswoman for Baltimore Bloc, one of the organisations that worked on the platform.

"As the 2016 election continues, this platform provides us with a way to intervene with an agenda that resists state and corporate power, an opportunity to implement policies that truly value the safety and humanity of black lives, and an overall means to hold elected leaders accountable."

By MARY PAPENFUSS

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