CPD IN THE NEWS

WASHINGTON — When a dozen protesters in green T-shirts showed up two years ago at the Federal Reserve’s annual conference in Jackson Hole, Wyo., they were regarded by many participants as an amusing addition.

Two years later, they have won a place on the schedule.

The protesters, who want the Fed to extend its economic stimulus campaign, are scheduled to meet on Thursday with eight members of the central bank’s policy-making committee. At the start of a conference devoted to esoteric debates about monetary policy, officials will hear from people struggling to make ends meet.

The Fed’s effort to show that it is listening to its critics reflects the central bank’s broader struggle to find its footing in an era whose great challenge is not the strength of inflation, but the weakness of economic growth.

Officials are wrestling with the limits of monetary policy, the focus of the conference, even as they try to address simmering discontent among liberals who want stronger action and among conservatives who say the Fed has done too much.

The meeting also represents an unlikely victory for Ady Barkan, the 32-year-old lawyer who decided in 2012 that liberals should pay more attention to monetary policy. He now heads the “Fed Up” campaign, a national coalition of community and labor groups that plans to bring more than 100 protesters to Jackson Hole.

“We want to make sure that regular voices are being heard,” Mr. Barkan said in beginning the campaign two years ago. The American economy, he said, was not working for all Americans — particularly not for blacks and other minority groups.

Fed officials so far have chosen to accommodate the group by applauding its efforts at public education, not by seriously engaging its arguments that interest rates should be raised more slowly. Esther George, the president of the Federal Reserve Bank of Kansas City, which hosts the Jackson Hole conference, arranged Thursday’s meeting with the activists. She said in an interview earlier this year that the Fed must balance job growth with other issues, like financial stability.

“I am completely sympathetic,” she said of the group’s concerns.

But she cautioned that the Fed’s powers were limited. Pushing too hard to lower unemployment could lead to higher inflation, or speculative bubbles, that would force the Fed to raise interest rates more quickly. The resulting economic volatility could end up doing more harm than good.

“The Federal Reserve has become somehow the answer to many problems far beyond what we can actually address,” she said. “I wish I could fix all of it with a tool like monetary policy. But we can’t.”

Even Mr. Barkan’s supporters acknowledge the long odds. Fed Up’s budget has grown to $2 million this year, from $145,000 in 2014, mostly from Good Ventures, a nonprofit foundation created by the Facebook co-founder Dustin Moskovitz, which describes the campaign as “relatively unlikely to have an impact.”

Fed Up’s more visible success has come in pursuit of a longer-term goal: advocating for changes in the Fed’s governance that could eventually shift its decision-making.

In a report published earlier this year, Fed Up highlighted the Fed’s lack of diversity. There are no blacks or Hispanics among the 17 officials on the Fed’s policy-making committee of 12 regional bank presidents and five governors. No black or Hispanic has ever served as president of a regional reserve bank.

Moreover, the report said that whites composed 83 percent of the directors of the Fed’s 12 regional reserve banks, who select the regional presidents.

Narayana Kocherlakota, former president of the Federal Reserve Bank of Minneapolis, said that the absence of minorities was “quite troubling.”

“Those kinds of persistent absences of key demographic groups really suggest that the appointment process, there is something that can be fixed there,” he said.

Fed Up also argued that bank executives should not sit on regional Fed boards. Under current law, bankers hold three of the nine seats on each board. The regional reserve banks are owned by the commercial banks in each district, although they operate under the authority of the Fed’s board, a government agency whose members are nominated by the president and confirmed by the Senate.

In May, 127 congressional Democrats signed a letter to Janet L. Yellen, the Fed chairwoman, calling attention to the Fed’s lack of diversity and the influence of the banking industry.

On the same day, a spokesman for Hillary Clinton’s presidential campaign said in a statement that “Secretary Clinton believes that the Fed needs to be more representative of America as a whole and that common sense reforms — like getting bankers off the boards of regional Federal Reserve Banks — are long overdue.”

Two months later, the Democratic Party adopted a campaign platform that included similar language, the first time in recent decades it mentioned the Fed.

Andrew Levin, an economist at Dartmouth College, said Fed Up’s greatest chance for significant influence was not in framing the current debate about interest rates, but in changing the Fed itself. He co-wrote a report that the campaign published Monday detailing a proposal to make the Fed a fully public institution.

“Having a diverse set of policy makers — including African-Americans and Hispanics — will influence the Fed’s decision-making,” he said. “And it should. The public should have confidence that the public is well represented at the F.O.M.C. table.”

Mr. Barkan started the “Fed Up” campaign after joining the Center for Popular Democracy in 2012, a few years after graduating from Yale Law School. He had read a 2011 article by the journalist Matthew Yglesias, titled “Fed Up.” Unions and other advocacy groups were focused on minimum-wage laws. Mr. Barkan was compelled by the argument that they also should be focused on interest rates.

“Even if they move once less over the course of several years, that’s still massive,” he said earlier this year. “The number of people who have jobs because of that, or higher wages, that dwarves a $15-an-hour wage increase in a smaller city.”

The campaign has gained traction in part because the Fed is eager to show that it is listening. During the first protest two years ago, Mr. Barkan approached Ms. Yellen, who listened politely and invited him to bring a group of workers to Washington, where she met with them in November 2014.

Lael Brainard, a Fed governor who plans to attend the Thursday meeting, made a point last year of visiting the parallel conference Mr. Barkan staged on the sidelines of the Fed event. And Mr. Barkan’s group has now succeeded in persuading each of the regional reserve presidents to meet with groups of local workers.

Neel Kashkari, the new president of the Federal Reserve Bank of Minneapolis, met with Fed Up’s local affiliate, Neighborhoods Organizing for Change, this month, telling the group that he shared their concern about the persistence of higher rates of unemployment among blacks and other minority groups.

Mr. Kashkari also accepted an invitation to spend a day with one of the group’s members, Rosheeda Credit, a Minneapolis resident who described the struggles she and her boyfriend faced to cover the cost of rent and child care for their five children.

“Walking a day in somebody else’s shoes is actually — it makes the anecdotes that much more real,” Mr. Kashkari, who arrived at the bank in January, told reporters after the meeting. “It influences how I think about the problems we face.”

By BINYAMIN APPELBAUM

Source

NEW YORK — Over a dozen activists descended on a building where Federal Reserve chair Janet Yellen and her three living predecessors were speaking on Thursday to demand that the Fed bail out Puerto Rico’s cash-strapped government.

The demonstrators, who are affiliated with the progressive Fed Up coalition, distributed Puerto Rican flags and empanadas as Puerto Rican music played outside Manhattan’s International House, a student residence. Yellen was there for an unprecedented panel discussion alongside past Fed chairs Ben Bernanke, Paul Volcker and Alan Greenspan, who participated via videostream.

The activists were joined by Puerto Rican lawmaker Manuel Natal, who was in town to participate in a panel discussion hosted by City Council Speaker Melissa Mark-Viverito on Friday.

“They have two mechanisms under their authority to help Puerto Rico: one is to provide a bailout to Puerto Rico similar to the one they did to banks, the same banks that are now in Puerto Rico making a fortune out of our fiscal situation,” Natal said. “And the second would be to buy our debt” and charge Puerto Rico interest rates that are lower than the market would offer.

The activists claim that since the Fed had the authority to buy trillions of dollars of bad debt from Wall Street banks after the 2008 financial crisis, it can do the same for the debt of Puerto Rico.

Economic observers with knowledge of the Fed’s functions consider that argument dubious. Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics who was an economist at the Fed Board of Governors for many years, said that the Fed is not allowed to buy municipal debt — of the kind Puerto Rico owes — that comes due over a period longer than six months. He also said such a purchase would be inconsistent with the Fed’s dual mandate of maintaining price stability and full employment.

The Fed has “never bailed out any insolvent entity as far as I know. They always demand collateral sufficient to cover any loan,” Gagnon said, as the Fed did when it provided aid to major U.S. banks.

Natal, the lawmaker, also believes some of Puerto Rico’s debt has been issued unconstitutionally and can therefore be nullified.

Greg Williams, a spokesman for Jubilee USA, a coalition of faith-based groups that advocates for global debt relief policies, declined to endorse a Fed bailout, but suggested the Fed could broker a deal instead.

“We support a proposal where the Fed facilitates a restructuring process,” Williams said.

More important than the details of the demonstrators’ demands, however, is the protest’s political symbolism in the midst of a heated battle over Puerto Rico’s future. The demonstration was perhaps the most colorful in a series of political moves and counter-moves by the Puerto Rican government and its sympathizers on one hand and the commonwealth’s bondholders and their allies on the other. Both seek to influence a congressional rescue plan that could enable Puerto Rico to restructure its debts.

Members of Congress from both parties are negotiating changes to the draft of a relief bill released last week by the House Committee on Natural Resources, which has jurisdiction over U.S. territories.

But many in Puerto Rico, and some progressives in the mainland United States, object to the Washington-based federal oversight board the bill would introduce to audit Puerto Rico’s finances and recommend reforms. Under the terms of the bill, Puerto Rico would pursue voluntary compromises with its creditors; failing that, the board could greenlight court-supervised debt restructuring that would force bondholders to accept the losses.

Those critics of the draft bill — including lawmaker Natal — view the board as having the trappings of American colonial rule over Puerto Rico.

Critics of the draft House bill say it has the trappings of American colonial rule over Puerto Rico.

They also argue that Puerto Rico should not have to meet any conditions to gain access to court-supervised debt restructuring. Puerto Rico, unlike the fifty mainland states, lacks the power to grant its municipalities and public corporations federal bankruptcy protections.

Puerto Rico is taking a multi-pronged approach to secure debt relief that appears designed to increase its leverage with creditors and win terms that are as favorable as possible.

The island’s governor, Alejandro Garcia Padilla, signed a bill on Wednesday that would empower him to declare a state of emergency and enact a moratorium on the island’s $70 billion debt. Puerto Rico’s next major debt payment — a $422 million tranche — comes due on May 1.

Daniel Hanson, a Puerto Rico specialist for the financial analysis firm The Height, wrote in an email newsletter that Puerto Rico’s creditors will likely challenge the moratorium in court, where Puerto Rico’s “playbook is not likely to be persuasive to American courts adjudicating the contracted rights of creditors.”

Garcia Padilla has said the island is incapable of paying its debts in full. Puerto Rico has enacted spending cuts and tax hikes in recent years that have stifled its economy and depleted its social services, creating a situation that many people already characterize as a humanitarian crisis.

Puerto Rico also argued for the right to enforce a local bankruptcy law that went before the Supreme Court last month after lower courts had blocked the island from putting it into effect. The high court is expected to rule in the case by late June.

In Congress, Democrats sensitive to Puerto Rico’s plight — and solicitous of the votes of former island residents living on the mainland — hope to dilute some of the proposed oversight board’s sweeping powers.

The Height’s Hanson, however, expects subsequent iterations of the House bill to be “more creditor-friendly,” he wrote.

Meanwhile, organizations representing Puerto Rico’s powerful creditors have stepped up their efforts to amend the legislation to limit the restructuring authority that the island would get. The commonwealth’s bondholders include a significant number of so-called vulture funds, which are hedge funds that have bought its debt from other creditors at discounted rates on the promise of recovering the obligations’ original full-dollar value.

A group called Main Street Bondholders, which claims to represent ordinary retirees, has created a web site attacking the draft House bill for granting Puerto Rico “super Chapter 9” bankruptcy protections.

Main Street Bondholders is associated with the conservative seniors group 60 Plus, which played an active role in the fight against the Affordable Care Act. The New York Times reported in December that 60 Plus is funded by a handful of large, anonymous donors and was recruited into the effort by a Republican public relations firm that also represents BlueMountain Capital, a creditor that has been outspoken against federal government help for the island.

The fight over whether to help Puerto Rico has reached the bottom rung of American discourse — cable news ads paid for by undisclosed donors. The ad, which ran on CNN and was paid for by the Center for Individual Freedom, urges Congress to “stop the Washington bailout of Puerto Rico.” The Virginia-based conservative group does not disclose its donors. It was founded in 1998 to combat government restrictions on smoking.

The CFIF did not respond to a Huffington Post question about whether any of its funders have a financial stake in the outcome of the Puerto Rico bailout.

By Daniel Marans & Ben Walsh

Source

One of America's largest banks, JPMorgan Chase, is quietly financing the immigration detention centers that have detained an average of 26,240 people per day through July 2017, according to a new report by the Center for Popular Democracy and Make the Road New York. Through over $100 million loans, lines of credit and bonds, Wall Street has been financially propping up CoreCivic and GeoCorp, America's two largest private immigration detention centers.

Read the full article here.

Puerto Rico was badly damaged by Hurricane Maria. The storm caused billions of dollars worth of property damage. Efforts to repair and rebuild houses, roads, and telecom infrastructure are going to take months. Around half of the U.S. territory's residents lack cell phone service. More than eight out of every ten people in Puerto Rico still don't have electricity.

Read the full article here.