Progressives Do Not Take The Fed Seriously. Meet The People Trying To Change That
Progressive activists have no shortage of ambitious economic policy goals. They include the $15 minimum wage, Social...
Progressive activists have no shortage of ambitious economic policy goals. They include the $15 minimum wage, Social Security expansion, Medicare for all and debt-free college -- to name just a few.
One item not on the list? Federal Reserve policy to create jobs and boost wages.
But a growing number of liberal-leaning economists and a new, Fed policy-centered coalition of progressive groups are trying to change that. They are on a mission to keep the Federal Reserve from raising interest rates until the economy sees real wage growth. It is a cause that they argue is essential to raising living standards and reducing income inequality, and they are making their case in policy papers, meetings with Federal Reserve officials and yes, even demonstrations. They believe that President Barack Obama has neglected the Fed -- even failing to fill two vacant seatson the Federal Reserve Board of Governors -- to the detriment of paychecks around the country.
The progressive economists and activists merely recognize what Wall Street has long accepted as true: The Fed’s monetary policy is one of if not the most important single factors in the real economy. In that battle to guide Fed policy, Wall Street is joined bythe GOP, which routinely pressures the Fed to rein itself in.
The degree to which the Fed turns the faucet of money on or off has a direct effect on the jobs available to Americans -- and the wages they are able to demand once they are working. In fact, slowing wage growth is a feature of Fed policy, not a bug. A decision to limit the flow of money, even if based on sound concerns about inflation, is designed to lower prices by putting thousands of Americans out of work and driving down wage growth.
Janet Yellen, a liberal-leaning economist who has long focused on wage growth, runs the Fed. Progressives successfully championed her for the post, derailing the bid of Obama’s top pick of Larry Summers, yet there has barely been a peep from them as Yellen and her colleagues consider putting the brakes on the economy.
To understand the case the progressives are making, it's important to know a little bit about the Fed, how it works and why it matters so much to the American economy.
How Does The Fed Work?
In controlling the country’s money supply, the Federal Reserve System, more commonly known as the “Fed,” is charged with what is often called a “dual mandate”: maximizing employment and maintaining stable prices. It does this primarily by adjusting the Federal Funds Rate, which is the interest rate at which banks lend to one another overnight using funds kept at the Federal Reserve. (It also can adjust theDiscount Rate, which is the rate at which the Fed lends to banks directly.) The Fed body responsible for adjusting the rate is the Federal Open Market Committee, which consists of 12 members -- seven presidentially appointed Federal Reserve Board governors, including the chair of the Fed, and a rotating group of five regional Federal Reserve Bank presidents.
How the Fed chooses to adjust the money supply is what is known as monetary policy. In a weak economy, the Fed is inclined to engage in monetary stimulus, which means lowering rates to prompt a virtuous cycle of economic growth. Banks respond to the cheaper credit available to them by providing cheaper credit to consumers and businesses. Consumers benefit from lower interest rates on home mortgages, cars and student loans. Businesses get lower interest rates on the loans they need to pay employees, maintain inventory and pay other bills. The money consumers and business owners save on financing their debt then gets cycled back into the economy in demand for goods and services. This in turn stimulates hiring, lowering unemployment and ultimately raising wages as employers compete for workers.
If economic growth gets higher than the Fed believes is consistent with its inflation target, the Fed contracts the money supply, raising rates to prevent excessive inflation. That is because if debt remains cheap, wages could grow so high that businesses must constantly raise prices to remain afloat. People’s financial assets decline in value, as does the purchasing power of workers’ wages. The Fed adjusts rates with a target of 2 percent inflation, in an effort to avoid levels of inflation that would “reduce the public's ability to make accurate longer-term economic and financial decisions.”
While the 2 percent target has become sacred in Fed policy circles, it is based on no more evidence than any other figure -- and those other figures, such as target unemployment, are adjusted routinely. Taking some of the halo off the 2 percent number, some economists argue, would give the Fed much more flexibility to help workers.
What is often lost in the dry, bloodless discussion of raising rates is the consequences for regular people when the Fed moves in that direction. The goal of raising rates -- not an unfortunate, unintended consequence, but the actual policy goal -- is to throw people out of work and drive down wages. As people suffer, as their confidence is weakened, as their sense of dignity is undermined, they become meeker in the job market and as a result they stop pushing for a raise, or they accept a new position at a lower salary. With wages suppressed, companies don’t need to raise prices in order to continue growing profits, and the pressure on inflation is alleviated.
The Fed, liberal economists say, is planning to cause all of this pain with precious little evidence that it is even remotely necessary. Despite years of steady economic growth and rising employment, prices remain well below the Fed's inflation target.
There is, in fact, no evidence of much price inflation at all.
So Why Cause Needless Suffering?
The degree to which the Fed has emphasized employment and wages, versus the threat of inflation, has varied greatly over the decades based both on its leadership and economic circumstances. Dean Baker, co-director of the Center for Economic and Policy Research, notes in his book The End of Loser Liberalism: Making Markets Progressive, that starting in 1980, the Fed shifted its monetary policy in favor of the anti-inflation prong of its dual mandate at the expense of full employment. Paul Volcker, Fed chair from 1979 to 1987, increased interest rates to wipe out high inflation, allowing the unemployment rate to reach almost 11 percent in 1982. Since then, the Fed has shifted its monetary policies modestly based on circumstances. But with rare exception, it has not allowed unemployment to get low enough to generate significant wage growth for the large majority of American workers.
The severity of the recent recession yielded an unusually broad consensus in favor of keeping rates low. Since 2008, under both the Republican-appointed Fed chair, Ben Bernanke, and the current Democrat-appointed chair, Yellen, the federal funds rate has remained at what is known as the “zero lower bound” – between 0 and 0.25 percent. In fact, the Fed went even further, purchasing trillions in securities between 2008 and 2014, in a program known as quantitative easing. The aim of the program was to keep credit flowing by maintaining high demand for public and private debt.
Now, after positive GDP growth in 19 of the last 21 quarters since 2011 and the official unemployment rate nearing 5 percent, Yellen has indicated that the Fed will soon raise the rate. How much to raise the rate -- and when the Fed will do that -- is unclear. Unemployment remained flat from March to April, which may make the Fed more cautious. The next fed committee meeting is June 16-17, and the results of the meeting will be watched closely.
What Would Progressive Fed Policy Look Like?
Baker and other economists think the Fed should allow wages to grow more substantially before raising rates.
Josh Bivens, research and policy director of the Economic Policy Institute, argues in an August 2014 fact sheet that the Fed should look for 3.5 percent growth. In the first quarter of 2015, wages were up 2.6 percent from the year before -- a growth rate that many economists say doesn't have a real impact on regular people's lives.
Jared Bernstein, senior fellow at the Center on Budget & Policy Priorities and former economic adviser to Vice President Joe Biden, shared Bivens’ preference for the Fed to wait for 3.5 percent nominal wage growth before raising the rate.
“The unemployment rate is within distance of [the Fed's full employment target], and yet inflation and wage pressures are nowhere to be seen,” Bernstein said. “My admonitions here are not to slow the economy down too soon, and that would be until GDP growth reaches workers through their paychecks.”
In short, these economists want Yellen to act more like Chair Alan Greenspan did in the late 1990s. At the time, Greenspan repeatedly declined to raise rates, claiming that the “softness in compensation growth” continued to make employment a greater concern than inflation. In doing so, Greenspan faced down criticism both from the financial industry and dissent from Fed committee members like Yellen, then the Fed governor.
The result of Greenspan’s decision, many argue, was one of the few periods of broadly distributed wage growth since before the 1973 recession. From 1995 to 2000, the bottom 20 percent of workers saw double-digit wage increases.
It is an odd turn considering that Greenspan’s handling of the dot-com and housing bubbles, and libertarian ideology, have made him a bête noire of the left.
“A lot of economists do not like to acknowledge it, but Greenspan -- and I have trashed him endlessly -- was not an orthodox economist,” Dean Baker said. “Greenspan did something nobody thought was right, and he was right. High school degree workers were getting pay raises. It was not Clinton, but Greenspan who did it.”
These economists believe that postponing a rate hike is risk-free, because price inflation has remained defiantly low for so long. From April 2014 to April 2015, personal consumption expenditures excluding food and energy -- the metric the Fed uses to measure inflation -- went up just over 1 percent, according to the Bureau of Economic Analysis. That level of price inflation occurred during a period in which the economy created nearly 2.8 million more jobs, bringing the official unemployment rate from 6.2 percent to 5.4 percent, according to the Bureau of Labor Statistics.
In the long term, Bivens and Baker would like to see the Fed be altogether more concerned about wages and employment than inflation. They believe that the Fed’s price inflation target could go higher than 2 percent without tolerating dangerous inflation rates. A higher inflation target would have allowed the Fed to pursue a more aggressive quantitative easing program and push wages upward faster.
Baker says that the Fed should be most concerned about the rate at which prices are inflating, rather than a particular percentage range. And he believes that an uptick in inflation is rarely so abrupt as to be beyond adjustment.
“If we had a jump in inflation even from 1.5 percent to 2 percent and then 2.5 the next month, then I’d say we should hit on the brakes,” Baker said.
Other economists from major world financial bodies, like Olivier Blanchard of the International Monetary Fund and Eric Rosengren of the Federal Reserve Bank of Boston, have also publicly endorsed higher inflation targets.
More conservative economists argue that even if prices remain stable and low, a rate hike would head off asset inflation in, for example, the housing and stock markets. Mark Calabria, director of financial regulation studies at the Cato Institute, expressed concern that the Fed’s low interest rates have allowed financial asset prices and corporate leveraging to reach “disconcerting” levels.
The liberal economists share Calabria’s concerns about asset bubbles, but believe that the Fed has tools other than raising interest rates at its disposal to address them.They note that the Fed has the power to regulate the banks and other commercial institutions with which it does business.
The Fed, they say, also has a bully pulpit that can be used to dampen the excessive expectations of growth in a particular industry that lead assets to be overvalued. A July 2014 Monetary Policy Report by the Fed Board of Governors warned against high asset prices in the social media and biotechnology industries.
“For whatever reason, [Yellen] has not done it since,” said Baker of the Fed’s July 2014 cautionary remarks. “If you show the evidence that these are overpriced, it will have an impact on prices.”
How’s The Economy Doing?
Yellen has been a consistent advocate of monetary stimulus, keeping rates low and buying financial assets. As chair, Yellen has adopted a consensus-driven approach to her leadership, including listening to some more inflation-wary members of the Fed committee.
Baker estimates that a sustained series of rate hikes would reduce the economic growth rate by half a percentage point, and the economy would create 500,000 fewer jobs per year.
The low official unemployment rate hides the fact that millions of Americans have settled for part-time work or dropped out of the labor force entirely. The Bureau of Labor Statistics estimates that when counting workers employed part-time for economic reasons, and those who have not looked for a job recently due to discouragement, the unemployment rate was 11.6 percent from the middle of 2014 through the beginning of 2015. Tellingly, despite the creation of 2.8 million jobs from April 2014 to April 2015, labor force participation remained flat at 62.8 percent.
Several small business owners who spoke to The Huffington Post also expressed concern about the fragile state of the recovery, and warned against a premature rate hike.
Mike Brey, CEO of Hobby Works, which has several retail locations in Maryland and Virginia, said that business only began to rebound in the latter half of 2014. Hobby Works employs 38 people. Brey recently rehired a worker for Hobby Works’ warehouse location, and plans to hire another employee if sales continue to pick up.
“I feel like we are in a recovery, but it has taken pretty long to get here,” Brey said. “To me, it still feels a little bit uneasy.”
Brey says the lower that Fed rates are, the better terms he gets on bulk purchases from wholesalers. A single quarter-point rate hike would probably not affect what Hobby Works does on a “day-to-day basis,” he says. Rather, he is more worried about the effects of a rate hike on the still-precarious consumer confidence of the lower-middle and middle-class consumers who frequent his stores.
Ron Nelsen, owner of Pioneer Door, a retail garage door company in Las Vegas, says that garage door sales have increased as consumers have begun buying homes in large numbers again.
“I think true consumer demand has been here for a year or two,” Nelsen said. “Maybe the end of 2013 and last year really felt like people were opening up their pockets again.”
Nelsen worried that a Fed rate hike could hurt the consumers who buy his company’s garage doors.
“If it affected my customers’ base disposable income, it would be huge,” he said.
Mobilizing Main Street -- and Martin Luther King Jr. Boulevard
Having ideas about what the Fed should do is one thing, and actually influencing the Fed’s decisions is another thing entirely. It is unclear exactly how to change a Fed decision, but it undoubtedly takes more than the public comments of a few economists.
Fed Up, a new coalition of community organizations and labor unions led by theCenter for Popular Democracy, is trying to turn the complex policy arguments of economists like Baker, Bivens and Bernstein into a grassroots political movement. The goal is to get the Fed to recommit itself to genuine, equitable full employment policies. In particular, Fed Up, whose main concern is aptly summed up by its homepage whatrecovery.org, has mobilized urban communities of color to lobby the Fed for pro-employment monetary policies that account for the disproportionately high unemployment and economic hardship levels in their communities.
Ady Barkan, a Center for Popular Democracy staff member who directs the Fed Up campaign, said that while Fed policy is more difficult to explain to community activists than issues like the minimum wage and Medicaid access, the coalition has made headway in educating people about the importance of the Fed to their daily lives.
“We have developed materials explaining why the Fed matters and why higher interest rates could hurt you,” Barkan said. “It is not just that it will mean higher mortgage rates, car rates and student loan rates, but that when the economy slows down, workers have less leverage. We are finding that people are excited by it and recognize why it matters to them.”
Fed Up released a study in March, "Wall Street, Main Street and Martin Luther King Jr. Boulevard: Why African Americans Must Not Be Left Out of the Federal Reserve’s Full-Employment Mandate," highlighting the still-high unemployment rate among black Americans, and lopsided impact of the Great Recession on black wealth and wages. In 2014, the study reports, black unemployment remained at 11.4 percent, while it was 5.3 percent for whites.
The study notes that even prior to the recession, African-Americans were losing ground economically. The median black worker suffered a 3.1 percent wage cut from 2000 to 2014, the study says, compared to a 2.5 percent increase for the median white worker. Between 2007 and 2013, median household wealth declined 43 percent among African-Americans, compared with 27 percent for whites.
In addition to calling on the Fed to postpone any planned rate hikes, Fed Up is asking for structural reforms that would broaden its mandate and subject it to greater influence from working people. It wants the Fed to study the effects of inequality and how non-monetary policies like the minimum wage affect the economy. It recommends making the selection of regional Fed presidents more transparent and open to public input. And it is demanding that Fed officials meet regularly with working people and community organizations.
Fed Up organized press conferences in eight cities with regional Federal Reserve banks in March to publicize the study’s findings about racial disparities in wages and employment. In November, Fed Up activists met with Yellen, Vice Chair Stanley Fischer, and Governors Lael Brainerd and Jerome Powell in Washington.
Barkan believes the Fed governors were receptive to Fed Up’s stance.
“They listened very carefully and asked good follow-up questions and seemed to be really moved and grateful for the conversation,” Barkan said.
While Fed Up has convened meetings and published reports, it has not shied away from public protests. In what the Wall Street Journal called “a first for Jackson Hole,”Fed Up sent a group to protest a possible rate hike at the Fed’s annual Jackson Hole, Wyoming, meeting in August 2014. The protests yielded a meeting between the group and Kansas City Fed President Esther George. Fed Up says it has scheduled additional meetings with regional Fed presidents.
Lobbying the Fed is a delicate task because it is seen as novel -- even subversive. The Fed has traditionally been viewed as a nonpartisan, technocratic institution that should be left to its own devices by politicians and political movements.
But progressive advocates argue that the Fed has not always been impartial. Regional Fed presidents and Fed governors routinely survey business and financial leaders to help make interest rate decisions. And the mere fact that regional Fed presidents are largely elected by private bankers, these progressives say, means that the financial community has an outsize say in Fed policy.
“What central bank independence has really meant is independence from all sectors except the financial sector,” Bivens said. “Organized labor? Of course they should not be allowed to have a voice at the central bank, but the financial sector does.”
What's more, progressives note, the political right has wasted no time heaping criticism on the Fed for what it perceives as excessive stimulus. And attacking the Fed has not just been a campaign trope for tea party-friendly presidential candidates like Rick Perry. Congressional Republicans regularly pressure Yellen, too. In an April hearing, Rep. Scott Garrett (R-N.J.), a member of the House Financial Services Committee, complained to Yellen that the Fed was supposed to check Congress’ desire for looser monetary policy, but now Congress found itself trying to check the Fed.
A couple months before that, Garrett questioned Yellen about a speech she gave on economic inequality. He argued that the timing of the speech -- it was a few weeks before the 2014 midterm elections -- "clearly indicate[s] that the Fed is already acting and making decisions clearly on a partisan political basis."
“In recent years, [the Fed is] just getting criticized up and down from the right that they are priming the pump for hyperinflation,” Bivens said. “If the right is going to pressure them, pressure from the left is more important than ever.”
Source: Huffington Post
US lawmaker welcomes plan to aid Caribbean immigrants
Guardian - July 22, 2013 - Caribbean American Congresswoman Yvette D Clarke has welcomed a plan by New York City (NYC)...
Guardian - July 22, 2013 - Caribbean American Congresswoman Yvette D Clarke has welcomed a plan by New York City (NYC) to aid undocumented Caribbean immigrants. NYC officials say the city will spend US$18 million to help undocumented Caribbean and other immigrants find jobs. City council speaker Christine Quinn, a mayoral candidate, said the money will fund adult education classes and legal services that the US federal government requires immigrants to take to qualify for the Deferred Action for Childhood Arrivals programme.
The New York Immigrant Family Unity Project will provide free legal services to immigrants threatened with deportation who are unable to represent themselves in proceedings. “New York has always been a city of immigrants within a nation of immigrants,” said Clarke, the daughter of Jamaican immigrants, who represents the 9th Congressional District in Brooklyn.
“Under this programme, thousands of immigrants in Brooklyn and other parts of the city will finally have an opportunity to challenge the deportation proceedings that separate families and weaken communities,” she said.
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The very vocal protesters who took on the Fed are now fighting to protect it
The very vocal protesters who took on the Fed are now fighting to protect it
Liberal advocacy group Fed Up launched a campaign nearly three years ago in hopes of persuading the nation's central...
Liberal advocacy group Fed Up launched a campaign nearly three years ago in hopes of persuading the nation's central bank to hold off raising its benchmark interest rate.
The group organized protests at the Fed's annual retreat in Jackson Hole, Wyoming. It demonstrated outside the Federal Reserve Bank of New York. And it recruited prestigious economists and former top central bank officials to the cause.
But now, Fed Up has a new target: Republicans who want to curtail the central bank's power.
House Financial Services Chairman Jeb Hensarling, R-Texas, is expected to introduce legislation soon that would require the Fed to set rules for conducting monetary policy and explain any deviation from those rules. The Fed has bristled at the proposal, arguing that the proposal limits its power to revive the economy in moments of crisis.
Fed Up agrees, finding common ground between itself and the central bank it was created to criticize. The group mobilized its members at Fed Chair Janet Yellen's appearance Tuesday before the Senate Banking Committee. The group held protests ahead of her semi-annual testimony and intends to pack the hearing room with members wearing bright green shirts bearing slogans such as, "Whose Recovery?" Executive Director Shawn Sebastian said Fed Up met with several senators before the hearing to voice its concerns.
"We see the [bill] as speeding us toward another financial crash and preventing the Fed's ability to respond to another financial crash," Sebastian said.
The so-called Financial Choice Act would also roll back some of the regulatory authority handed to the Fed following the 2008 financial crisis. Sebastian said his group would be closely watching President Donald Trump's nominees to fill the three vacant seats at the central bank's board of governors in Washington. Fed Up has pushed for greater diversity among Fed appointees, both on the board and among the 12 regional central bank presidents.
The alliance could provide the Fed with its own grassroots support as it attempts to steer clear of the populist anger against economic elites that helped propel Trump into the White House. The president has promised to "do a number" on the post-financial crisis reforms known as the Dodd-Frank Act that were designed to, among other things, curtail risky behavior among banks and protect consumers from unscrupulous practices by lenders.
A draft version of Hensarling's bill includes shifting the Fed's annual bank stress tests into two-year cycles and changing the way banks calculate risk, among other things, according to a memo obtained by CNBC.
"Donald Trump and [Treasury Secretary] Steven Mnuchin, the foreclosure king, don't care about stories like mine. They only care about their billionaire friends," Philadelphia resident Tyrone Ferguson said in a prepared speech. "Now Trump and his billionaire friends want to take over the Fed, too."
Fed Up has proven adept at navigating the often esoteric world of central banking. The group has met with Yellen and Vice Chairman Stanley Fischer. It also raised pointed questions about racial diversity and ties to Wall Street during a discussion with top central bank officials at the Jackson Hole conference last year.
Sebastian compared the Fed's 14-year appointments to those of the Supreme Court. He said he will continue to press the central bank on those issues — as well as the lawmakers responsible for confirming the Fed's new governors.
"The entire world has shifted around us," Sebastian said. "But our principles have remained the same on this."
By Ylan Mui
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Promueven petición contra Wells Fargo y JPMorgan por “financiar el dolor” de inmigrantes
Promueven petición contra Wells Fargo y JPMorgan por “financiar el dolor” de inmigrantes
La petición cuenta con el respaldo de más de 70 organizaciones bajo el paraguas de la coalición #FamiliesBelongTogether...
La petición cuenta con el respaldo de más de 70 organizaciones bajo el paraguas de la coalición #FamiliesBelongTogether, que incluye a Presente.org, la Unión de Libertades Civiles de EEUU (ACLU), MoveOn.org, Amnistía Internacional, la Alianza Nacional de Trabajadoras Domésticas, MomsRising, Center for Popular Democracy, y Make the Road New York, entre otras.
Lea el artículo completo aquí.
JPMorgan CEO Jamie Dimon is sticking with Team Trump
PMorgan Chase CEO Jamie Dimon is sticking with President Trump. Presiding at the U.S. banking giant's annual...
PMorgan Chase CEO Jamie Dimon is sticking with President Trump.
Presiding at the U.S. banking giant's annual shareholder meeting Tuesday, Dimon got an earful from investors who criticized JPMorgan's support of the new White House administration and asked whether he would step down from Trump's business advisory council.
Read the full article here.
Kansas And Missouri Activists Gather On Troost To Stand For 'Moral Economy'
NPR - March 6, 2015, by Cody Newill - Community activists and faith leaders from Kansas and Missouri rallied at the...
NPR - March 6, 2015, by Cody Newill - Community activists and faith leaders from Kansas and Missouri rallied at the intersection of 63rd Street and Troost Avenue Thursday, calling for a "moral economy."
One issue that several speakers focused on was a recent comment by Federal Reserve Bank of Kansas City president Esther George suggesting that interest rates may be increased to combat inflation.
Rev. Stan Runnels of St. Paul's Episcopal Church believes that raising interest rates now would hurt low-wage earners and undo economic progress that has been slowly mounting in the last several years.
"Right now, there is some opportunity for us to move in the direction of an improved economy," Runnels said. "We're concerned that if we begin dabbling with these other metrics, like worrying about inflation, we could scramble that up."
The rally was held outside a fast-food restaurant and payday loan lender, which organizer Andrew Kling with the group Communities Creating Opportunity says is symbolic of the economic troubles that face minorities.
"These are two of the greatest challenges that working people face in this economy: low wages and predatory industries that thrive on taking away the wealth and earnings of working people struggling to get through," Kling said. "We should not accept double-digit unemployment in the black community as normal."
The activists also called for an end to the U.S. Bureau of Labor Statistics' use of averaged unemployment rates, which they say ignores racial disparities. For example, Kansas City's unemployment rate as a whole sits around 5 percent, but the rate of black citizens without jobs is 12.6 percent.
The Bureau of Labor Statistics released its February employment statistics Friday, which showed the U.S. economy as a whole at 5.5 percent unemployment.
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Activists invite St. Louis Fed president on north St. Louis bus tour
Activists invite St. Louis Fed president on north St. Louis bus tour
Activists with a group pushing for changes at the Federal Reserve asked St. Louis Fed President James Bullard to...
Activists with a group pushing for changes at the Federal Reserve asked St. Louis Fed President James Bullard to accompany them on a bus tour of some of the poorest communities in St. Louis.
About a dozen activists delivered an invitation for the tour to a St. Louis Fed official at the regional Fed headquarters downtown. An equivalent number of police watched.
“You’re very removed when you’re in that rarified air of the Federal Reserve,” said organizer Derek Laney.
The group is affiliated with the national Fed Up campaign, which is pushing for more diversity on regional Fed boards and wants the Fed to put more emphasis on keeping unemployment low rather than controlling inflation. Laney is affiliated with Missourians Organizing for Reform and Empowerment, a local activist group that speaks out on issues such as policing and coal companies.
The activists’ demonstration coincided with the Fed’s Open Market Committee meeting Wednesday, where Fed officials decided, as expected, to again hold off raising its benchmark interest rate.
Still, some expect the Fed could signal another small rate hike at the end of the year, similar to a small increase in December 2015 that was the first hike in almost 10 years.
Even discussing an increase will still affect market interest rates and economic growth — an unnecessary move while many people are still trying to benefit from the tepid economic recovery, said Nick Apperson, an executive from downtown tech firm LockerDome who participated in the demonstration.
“While it’s likely they’re not raising interest rates in this meeting, … they’re hinting that they’re going to, which will have a similar effect,” he said.
Laney said the group also wanted to call attention to comments Bullard made last month at the annual conference attended by Fed officials and other top central bankers in Jackson Hole, Wyo. Fed Up activists attended the event to speak with officials, and during an interview with CNBC, Bullard said that one of the group’s funders, Facebook co-founder, Dustin Moskovitz, should have come in person rather than sending “all these people.”
“If Bullard wants to walk back those comments he made at Jackson Hole, he needs to walk our streets and talk to our folks,” Laney said.
By Jacob Barker
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Democrats are back in the fight for the Arizona Eighth Congressional District: All Bets are Off.
Democrats are back in the fight for the Arizona Eighth Congressional District: All Bets are Off.
Trump won by over 20 points, the Democrat leads in fundraising as well, aided in part by Ady Barkan, a wealthy...
Trump won by over 20 points, the Democrat leads in fundraising as well, aided in part by Ady Barkan, a wealthy Democratic activist with the Center for Popular Democracy who was recently diagnosed with A.L.S. (Lou Gehrig’s Disease). In speaking with Bill Roe, the First Vice Chair of the Arizona Democratic Party, he indicated that this race is unpredictable for several reasons.
Read the full article here.
Taking Selfies and Talking Inequality, has Janet Yellen Gone Too Far?
PBS - November 21, 2014, by Simone Pathe - One recent brisk morning in the nation’s capital, about 30 community leaders...
PBS - November 21, 2014, by Simone Pathe - One recent brisk morning in the nation’s capital, about 30 community leaders and workers from around the country, all clad in matching green T-shirts, posed for a group photo on Constitution Ave. Ten guards huddled at the top of the walkway separating them from the Federal Reserve.
The workers weren’t protesting. They weren’t sightseeing. They were there to meet Janet Yellen.
“That’s a big deal,” said former Fed vice chair Alan Blinder.
Friday marked the third time in the past month that Yellen has been in the public eye for engaging with the public, or at least with economic issues much more on their minds than, say, quantitative easing.
First, it was her speech at a conference on inequality organized by the Boston Federal Reserve. On that same trip, she met with the jobless at a nearby community center. And then, she posed for selfies.
The string of incidents has raised questions about the public face of the Fed, and when it’s appropriate for Yellen, an unelected government official with enormous power, to inject herself into public debates that may have political overtones.
“I see no harm in her talking and listening to people,” said Michael Strain, an economist at the conservative American Enterprise Institute. “But those situations can magnify and invite off-the-cuff remarks.”
Yellen certainly doesn’t want to be a politician, said Alan Blinder, vice chair of the Fed under Bill Clinton. But making those off-the-cuff remarks is an “occupational hazard” of the position, he added, especially when testifying in front of lawmakers. Some chairs have handled it better than others, and both Blinder and Strain agree that Yellen’s comments about inequality were slight as indiscretions come. Alan Greenspan was famous for weighing into policy debates too freely, as when he endorsed George W. Bush’s plan to privatize Social Security in 2005. That behavior inspired Ben Bernanke to shy away from any incursions into the public dialogue unrelated to monetary policy.
A Rare Meeting
Bridging the gap between the public dialogue and what’s arguably the most powerful economic institution in the world is exactly what Yellen has been doing.
While her remarks about inequality have sparked the most controversy, her invitation to a coalition of community organizers, labor leaders, low-wage workers, faith leaders and liberal economists is the farthest step she’s taken toward involving the public in the Fed and its policies. She didn’t just meet the “Fed Up” campaign, as they call themselves, in a spare conference room. They sat in the inner sanctum of one of the most cloistered agency’s of the U.S. government — the board of governors meeting room, where the Federal Open Market Committee meets in private to decide monetary policy.
Fed Up’s tagline — “What recovery?” — illustrates the disconnect between the two-thirds of voters who told exit pollsters earlier this month that the economy is getting worse and headline economic figures that are growing stronger. Unemployment is now as low as it was before the recession. But wages are barely keeping pace with inflation, while unemployment for some demographics and geographic regions remains much higher than the average. Nationally, African Americans were unemployed at a rate of 10.9 percent in October. In Atlanta, the unemployment rate for blacks is nearly 14 percent, according to an analysis by the Economic Policy Institute, one of the parties to the Fed Up campaign.
Workers didn’t travel to Washington to protest Yellen, said Amador Rivas, of Harlem; they just wanted her to hear what’s happening on the ground. Jean Andre echoed those remarks. Andre, a member of New York Communities for Change, used to do locations support in the film industry. “You know, one of those names at the end of the movie that no one reads,” he said. He lived a middle-class lifestyle. But after the financial crash, he lost his home and struggled to find a full-time job to pay for a mortgage modification.
Jean Andre, a member of New York Communities for Change, speaks at an Oct. 14 press conference before Fed Up’s meeting with Yellen. Photo by Simone Pathe.
To some on the right, though, Yellen’s meeting looked like it was going beyond a simple meet-and-greet with the public. American Principles in Action blasted her for discussing monetary policy “with representatives of an extreme political view,” and requested a similar meeting for a chance to express their concerns with low interest rates.
Fed Up does have an agenda when it comes to monetary policy: they want the Fed to keep interest rates low to stimulate jobs and, they argue, higher wages. They’d also like the Fed to buy municipal bonds as a form of lending to cities and states.
Their campaign took off earlier this month with a call to democratize the very table at which they met Friday. In early 2015, the presidents of the regional Federal Reserve banks in Philadelphia and Dallas are stepping down, and Fed Up called on the board of governors and regional banks to release the names of possible successors and to give the public input, if not the opportunity to serve on the regional boards. (The Philadelphia Fed on Friday morning released the name of the search firm vetting candidates, which has established an email to receive public inquiries.)
“We had Wall Streeters in the building all the time,” Blinder said, reflecting on his time as vice chair. This “signals the Fed is as interested in these groups as the financial markets.”
“The Fed is too important of an institution to be insulated from the voices and perspectives of working families,” said Ady Barkan, an attorney at the Coalition for Popular Democracy, the group that organized the meeting.
That’s why Friday’s meeting with Yellen was so significant for them. “The people who are the true consumers who finance the economy finally have a chance to have input,” Andre said. The meeting was a significant event for the Fed, too. “We had Wall Streeters in the building all the time,” Blinder said, reflecting on his time as vice chair. This “signals the Fed is as interested in these groups as the financial markets.”
A Central Bank Can Only Do So Much
Even if their message resonates, though, the Fed, and Yellen as its public face, does not necessarily have authority to address every plight of working Americans. Yellen has herself said many times that wages are still too low in this recovery. “If they’re trying to elicit sympathy that wage earners aren’t making enough,” Blinder said about Fed Up, “they’re preaching to the converted.”
The “Fed Up” campaign gathers for an Oct. 14 press conference outside the Federal Reserve before meeting with Chair Janet Yellen. Photo by Simone Pathe.
The central bank has no control over wages, except in the sense that wages typically rise in a tighter labor market, said Blinder. Holding short-term interest rates low is supposed to boost employment, and it has — unemployment has dropped from above 10 percent to below 6 percent — but so far, that’s done little for wages.
As for buying municipal bonds to lend to cities and states in need, Blinder doesn’t think that’s the Fed’s business, even if it does have the legal authority to do so. Its dual mandate to maintain full employment and stable prices is about national economic policy, he said, and there’s no way it would be able to choose which states’ bonds to buy.
The Fed and Inequality
Likewise, the Fed has no policy tools to directly address economic inequality. That’s why Yellen’s Oct. 17 speech, more than anything else, has left Blinder, a close friend, and Strain, who still thinks she’ll “make a great chair,” feeling uneasy.
Of course, the Fed isn’t totally removed from the debate over inequality. The central bank conducts research on the subject as an economic phenomenon, and the Boston Fed organized the entire October conference at which Yellen spoke around the topic.
In fact, plenty of the Fed’s critics accuse the central bank and its bond buying program of contributing to the divide between Wall Street and Main Street. “The fact that quantitative easing has driven up the stock market to what some would call dizzying heights does in fact exacerbate wealth inequality,” Blinder said. But to him, that’s just collateral damage. “If the instruments you have are limited and work through financial markets,” he added, “that’s going to be a side effect.”
But reduced income inequality can also be a side effect of the Fed fulfilling its mandate. Blinder pointed to the second Clinton Administration as a period when plentiful jobs — “if your breath showed in the mirror you could get a job” — slowed the growth in the gap between top and bottom earners. (Clinton’s economic legacy — including his administration’s impact on inequality — is a subject of continuous debate.)
The “Fed Up” campaign isn’t interested in side effects, though. Their mission statement singles out the Fed for its ability to make a difference in the lives of working Americans: “President Obama, Congress, and most state legislatures have failed to strengthen the economy — and have often made things worse. But the Federal Reserve has tremendous power over the economy.”
That power is precisely why Blinder and Strain agree that the Federal Reserve must be insulated from politics. Talking to labor, community leaders and Wall Street is important, said Blinder, but the transparency for which Bernanke, and now Yellen, has been lauded is about monetary policy, not taxes or inequality.
A Step Too Far?
For many conservatives, Yellen crossed the line with her Boston remarks, especially when she said, “The extent of and continuing increase in inequality in the United States greatly concern me.”
To Strain and others on the right, Yellen sounded far too Democratic in her concerns about inequality, as she did when she alluded to universal pre-k, another policy priority often associated with the Democratic Party.
Did Yellen betray herself as too blue? Richard Reeves, a fellow at the Brookings Institution, doesn’t think so. The substance of Yellen’s speech offered more to conservatives, he wrote, particularly her acknowledgement of business ownership and inherited wealth as “building blocks” of opportunity in the United States.
Republicans in Congress may not see it that way, though, which is another reason Yellen’s remarks worried Strain. He’s afraid they’ll only fuel GOP efforts to rein in the central bank. There’s a reason Congress doesn’t have oversight over monetary policy: it doesn’t mix well with politics, said Blinder. “You’d get too high inflation because there’s the temptation, among all these politicians, to juice up the economy just before elections.”
For Fed Up organizers, though, Yellen’s meeting with them last Friday is not a sign she’s identifying with either party, but that the Fed can be, in the words of the Kansas City Rev. Stanley Runnels, of Communities Creating Opportunity, “an unconventional source of hope” for millions of Americans.
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Aboard flight, dad battling ALS pleads with Sen. Jeff Flake to vote no on tax bill
Aboard flight, dad battling ALS pleads with Sen. Jeff Flake to vote no on tax bill
A 33-year-old father battling ALS, also known as Lou Gehrig’s disease, was flying home last week after traveling to...
A 33-year-old father battling ALS, also known as Lou Gehrig’s disease, was flying home last week after traveling to Washington, D.C., to protest the tax bill when he came face-to-face with one of the lawmakers he most hoped to influence.
Ady Barkan and others had spent a week trying to get lawmakers' attention and giving speeches outside their offices.
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