CPD IN THE NEWS

There is an easy step officials at the Federal Reserve could take to improve their ability to fight the next recession, but policymakers are deeply reluctant to go there: raising the central bank’s 2% inflation target.

Several prominent economists, including former President Barack Obama’s top economic advisor Jason Furman and Nobel laureate and Columbia University professor Joseph Stiglitz, have signed a letter proposing Fed officials do just that.

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Liberal activists are putting a target on the Federal Reserve for the 2016 elections, much to the delight of the Bernie Sanders campaign.

Denouncing an agenda that they say tilts toward Wall Street, members of the “Fed Up” coalition on Monday unveiled a set of reforms that would alter how the central bank does business.

“No longer are we focused only on fixing the Fed’s monetary policy and internal governance positions,” said Ady Barkan, the group’s campaign director. “We are now beginning an effort to reform the Federal Reserve itself.

“Ask all of the presidential candidates what their plans are for the Federal Reserve,” he added in a call with reporters.

While touting its reform proposals, the group was joined Monday by a top policy official with Sanders, who has made criticism of Wall Street a cornerstone of his presidential bid.

Warren Gunnels, Sanders’s policy director, said the Democratic candidate was not yet ready to endorse the coalition’s proposal, needing more time to review it.

But Sanders has pitched his own Fed reforms, and Gunnels said the Vermont senator is “very passionate” about overhauling how the Fed does business. Gunnels said the central bank should delay raising rates any time soon.

“The Fed should not raise interest rates until unemployment is lower than 4 percent,” he said. “Raising rates must be done as a last resort, not to fight phantom inflation.”

The “Fed Up” coalition said it had reached out to every remaining presidential campaign with its reform proposal. None of the Republican campaigns responded, but the group has had “very substantive conversations” with staffers to Hillary Clinton, according to Barkan.

“We urge Secretary Clinton to show leadership on this issue and hope that she will soon be coming out with her plan to reform the Federal Reserve,” he told The Hill.

Clinton’s campaign did not respond to a request for comment.

The leftward pressure on the Fed is coming at a critical time.

The bank is trying to step back from intense stimulus it injected into the economy after the financial crisis. It raised rates for the first time in nearly a decade in December, but so far has opted not to raise them any further at subsequent meetings.

Looming over its deliberations is the presidential election. The central bank prides itself on its political independence, and any major decisions in the months to come could expose it to charges it is working to benefit one party or the other.

While many economic indicators are improving, many community groups like Fed Up argue that many middle-class and working-class Americans are feeling none of those gains. They point to stagnant wage growth and a low labor participation rate as evidence that the Fed has ample reason to continue boosting the economy.

The coalition’s reform proposal was written by Andrew Levin, a Dartmouth economist who spent two decades at the Fed, including time as a special adviser to Fed chiefs Ben Bernanke and Janet Yellen.

While most conservative critiques of the Fed center on how it conducts monetary policy, Levin focuses most of his fire on the dozen regional Fed banks scattered across the country.

Levin argues that the regional institutions are undemocratic entities that hand bank executives huge influence at the Fed. The regional banks are directly backed by commercial banks, which occupy most of the seats on each regional bank’s board. In turn, those boards pick each regional Fed president, who at some point will hold a rotating spot on the Fed’s board, which handles the nation’s interest rates.

Under Levin’s plan, regional Fed banks would have to solicit public input when selecting their presidents. Regional banks would be required to put together a list of candidates through input from both the public and public officials from their specific region. The plan calls for Fed banks to emphasize diversity, considering candidates across a range of racial, gender and educational backgrounds.

Levin highlighted that in the 100-year history of the Federal Reserve system, there has never been a black head of a Fed regional bank.

The unveiling of the reform plan came on the same day that Fed Chairwoman Janet Yellen met privately with President Obama to discuss the central bank’s work and the state of the economy.

High-ranking Republicans have been critical of the Fed, particularly for the unprecedented stimulus program it carried out under Bernanke. Top GOP candidates like Donald Trump and Ted Cruz have accused the Fed of harming the economy with its efforts, and Speaker Paul Ryan (R-Wis.) has also been a frequent critic of the bank.

Sanders occupies a fairly unique political position when it comes to the Fed. He was one of just two Democrats to back a vote earlier this year on a Republican bill that would subject the central bank to a full outside review.

Did you know 67% of all job growth comes from small businesses? Read More

Separately, Sanders has also pushed to “Audit the Fed,” and the Levin plan also includes a comprehensive annual review of the Fed’s operations.

The Vermont senator has floated his own Fed reform proposal, arguing in a December piece in The New York Times that the institution has been “hijacked” by bankers. His plan would limit the influence of the financial sector on selecting Fed officials and require the Fed to prioritize unemployment when considering interest rates.

Fed officials have repeatedly resisted any efforts to change how it does business, frequently arguing that changes could render the central bank ineffective or subject it to improper political pressure.

By Peter Schroeder

Source

More than a dozen community activists picketed the Federal Reserve Bank of Philadelphia this week, protesting what they say is the bank president’s refusal to meet with them to discuss how Fed monetary policy affects real people.

The roughly 15 activists are members of ACTION United, an organization representing low-income people of color in Philadelphia. ACTION United is affiliated with the national Fed Up campaign, a coalition of progressive groups advocating Fed monetary policies that prioritize full employment and shared economic prosperity.

Fed Up and ACTION United planned Tuesday's protest because they say that Philadelphia Fed President Patrick Harker reneged on a promise to meet, and allow group members to give him a tour of low-income neighborhoods where they are active. The activists point to a video in which Harker appears to commit to the meeting in a conversation with ACTION United organizer Kendra Brooks at the annual Jackson Hole symposium in August.

When Brooks followed up, Theresa Singleton, the Philadelphia Fed’s vice president and community affairs officer, said in an email obtained by HuffPost that a meeting was not in the cards, because the bank is reluctant to work with “just one organization."

Instead, Singleton invited Brooks to Tuesday’s community development briefing for low- and moderate-income community stakeholders. Singleton also said Fed staff would “design and organize” their own community tour.

That response rankled Fed Up and ACTION United members. The Federal Reserve has a dozen regional banks, and the activists have met or have planned meetings with all of the regional Fed leaders except Philadelphia's since the campaign began in August 2014. They want a meeting -- and they want it to take place in an economically distressed community of color -- not in the Fed’s offices.

So they decided to pressure the Philadelphia Fed with a protest, featuring Fed Up’s trademark “What recovery?” signs and green "Whose Recovery?" T-shirts.

ACTION United also sent Brooks to the community development briefing, where she and several nonprofit executives and bankers who work with low- and moderate-income earners spoke with Harker and Singleton.

Brooks said she was mostly pleased with what she heard from Harker and other Fed officials, who she said sounded genuinely committed to researching the conditions in communities the Fed serves and finding ways to improve “economic autonomy” in the Philadelphia region. 

“The outcome of the meeting was much better than we anticipated, but going in, we did not know the information that we knew coming out.” Brooks said. “We hope he will continue to keep the doors open for organizations like ours and our coalition. And that we will continue to be a part of that conversation and not excluded.”

But Brooks noted that the Fed officials did not discuss how monetary policy and the Fed’s adjustment of interest rates disproportionately affects low-income workers and communities of color.

For the Fed Up campaign, the exclusion of monetary policy reaffirms that nothing short of a meeting between Harker and activists will suffice.

“We appreciate and accept the invitation to discuss community development and research, but this is not a substitute for the promise President Harker made to Fed Up,” said Shawn Sebastian, a policy advocate and staff attorney for the Fed Up campaign. “President Harker promised to speak with working families in the black neighborhoods of Philadelphia about their experiences -- where unemployment is double white unemployment. Harker promised to discuss how his monetary policy decisions can build a true full employment economy that works for everyone.”

Philadelphia Fed spokeswoman Marilyn Wimp, in an email to HuffPost, didn't address a question about whether Harker reneged on his promise to meet with protesters. She instead pointed to Tuesday's briefing as evidence of Harker's interest in reaching out to diverse parts of the community.  

But the list of the Tuesday briefing’s attendees reveals that Brooks was the only stakeholder from a group with a position on Fed interest rates.

Crafting monetary policy is a main responsibility of the Federal Reserve regional banks. Regional Fed presidents occupy five of the 12 seats on the Federal Open Market Committee, responsible for adjusting the Fed’s benchmark interest rates. Lately, they have accounted for half of the committee’s votes, because the Senate has failed to approve presidential nominees for two of the seven seats reserved for members of the Federal Reserve Board of Governors in Washington.

The FOMC keeps its benchmark interest rates low when it is more concerned about full employment, and raises them to curb excessive inflation when the economy has grown enough to drive up prices.

Fed Up wants the central bank to maintain current low interest rates for the near term, which will allow economic demand to continue to grow, benefitting workers with more jobs and higher wages. The campaign applauded the Fed’s decision to leave rates unchanged in September.

But Fed Up leaders said they're worried about the Philadelphia Fed and the role its president may play in future monetary policy decisions. The Philadelphia region's previous Fed president, Charles Plosser, who left the post in March, was an outspoken inflation hawk.

Harker, who will serve a one-year term on the FOMC in 2017, was a member of the Philadelphia Fed board’s search committee for a new president, recusing himself once he became a candidate.

Harker’s views on monetary policy are not yet known. He is a former trustee of the Goldman Sachs Trust, which Sebastian and other Fed Up critics said they worry will make him more sympathetic to financial institutions' concerns about inflation.

Source: Huffington Post

Late last month, thousands of Americans with HIV/AIDS -- many of them among the millions of Americans who rely on Medicaid or Affordable Care Act (ACA) plans for their health coverage -- saw the news and breathed yet one more major sigh of relief: GOP Senate leader Mitch McConnell announced that, lacking the votes needed to win, the Senate would not go forward on its final effort this year to kill the ACA (aka Obamacare) and take a devastating bite out of Medicaid.

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