California is, as the time-worn adage has it, our nation's bellwether, and nowhere is that truer than in the Golden State's prison crisis. California's inmate population is among the highest in the nation. Its complex of prisons spills over with tens of thousands of inmates housed in every available inch of space and sleep-stacked three-high. So overcrowded are California's prisons that the state penal system has been successfully sued for violating the constitutional rights of inmates—essentially by subjecting them to a public-health crisis. That its inmates consistentlyresort to violence in prison should come as no surprise.
The dire state of California's prisons can, in part, be traced to its draconian "three-strikes law," which throws three-time felons behind bars for a mandatory 25 years. Overflowing prison populations have, in turn, contributed to that state's bleak economic future, helping consign California to a perpetual budget deficit, annual financial crises, and repeated deep cuts in education and social funding. The state currently spends a staggering 10% of its annual operating budget, or $10.8 billion, on its prison system and its nearly 170,000 prisoners—more than it spends on the University of California system, once the jewel in the crown of American public higher education.
Despite rampant criticism and open attacks on its leader, the Federal Reserve could emerge a winner in the Senate's long slog toward financial-reform legislation. The latest news from the Senate banking committee's ongoing negotiations, led by chairman Sen. Chris Dodd (D-Conn.), is that the Fed will retain oversight power for the nation's biggest banks—the 23 institutions with more than $100 billion in assets—according to a Sunday night report from the Financial Times(sub req'd). Banks with less than $100 billion in assets will potentially fall under the oversight of a new, centralized super-regulator, which would mean a victory for Dodd who included a super-regulator in his November reform draft. Among the losers would be the Fed's branch banks spread throughout the nation, whose authority right now includes mid-sized banks.
For Dodd, the move to keep big-bank authority with the Fed and its embattled chairman, Ben Bernanke, marks a startling reversal. Last year, Dodd was the scourge of the Fed, calling its consumer-protection and bank-oversight performance in the run-up to the crisis "an abysmal failure." His apparent U-turn on the Fed's role is undoubtedly a conciliatory move to win bipartisan support with his main negotiating partner, Sen. Bob Corker (R-Tenn.), who has backed giving more power to the Fed. Doing so, however, will rankle consumer advocates who have lambasted the Fed for its utter failure to prevent the subprime mortgage collapse and the global financial meltdown.
The Financial Times story included additional updates on the state of the Senate's talks:
A new "resolution" regime to deal with failing, but systemically important, institutions would allow the government to wind up a company quickly to avoid contagion spreading through the financial system.
But in a concession to Republican fears about giving government too much power over business, a bankruptcy judge would provide checks and balances.
The regime is designed to prevent a repeat of the costly bail-out of AIG or the damaging bankruptcy of Lehman Brothers.
But Democrats have had to come up with a complex system that incorporates a role for the judiciary to meet Republican concerns, while also limiting the time and scope of a judge’s intervention to prevent an unruly process that infects the entire financial system.
If these latest leaked reports are true, then that means the Senate talks are nearing their conclusion, with the fate of a consumer-protection agency one of the few remaining hurdles. Expect to see a bill emerge out of the banking committee sometime this week.
Despite the glacial pace of financial-reform negotiations in the Senate—the banking committee, led by Sen. Chris Dodd (D-Conn.), was expected to release its bill this week to no avail—the Senate Majority Leader Harry Reid (D-Nev.) remains confident Dodd and his GOP counterparts will still pass comprehensive financial reform. In response to a question on whether Reid feared the window of opportunity was closing to pass financial regulation, a Reid spokeswoman told Mother Jones Reid "is not" worried the chance to reform Wall Street is passing. "Years of reckless actions by Wall Street put our economy on the brink of collapse, and the American people are paying the price," the Reid spokeswoman added. "It is essential that we bring reform to our financial system to ensure that this does not happen again. We look forward to the Banking Committee completing its work to move this legislation forward."
While the Majority Leader has largely been trying to round up enough Senate support to pass comprehensive health-care reform, he has voiced support for Dodd's effort to overhaul Wall Street. Last month, Reid told reporters that he was "comfortable we are going to be able to do a really good financial regulation bill." Reid's support comes as outsiders fear the chance to rein in Wall Street and its risky behaviors is slipping away, that the memory of 2008 and 2009's financial crisis is already fading in public's memory and the urgency that accompanies every crisis is dwindling with it. "Meaningful regulatory change is urgent now because this is the window of opportunity," says Simon Johnson, former chief economist at the International Monetary Fund economist. "If that window closes, we're asking for trouble."
The Senate banking committee's talks on crafting a comprehensive financial-reform bill are still slogging along this week, with no bill in sight despite expectations we'd see a draft this week. So what's holding up the negotiations? Top of the list of stumbling blocks involves the creation of a new consumer-protection agency—and, more specifically, the independence of that new agency.
Back in November, Sen. Chris Dodd (D-Conn.), chair of the banking committee, unveiled an early draft of financial reform that notably contained an independent Consumer Financial Protection Agency (CFPA). The CFPA would be a watchdog with its own budget and rule-writing and enforcement power to protect consumers against predatory lending, abusive credit-card practices, hidden overdraft fees, and the like. There were two watchwords for the CFPA back then: One was "standalone," meaning the new agency would look like the EPA and wouldn't be housed within an existing organization. The other was "independen." Unlike regulators like the Office of Thrift Supervision or financial gatekeepers like the credit ratings agencies, all of which became captive to the people they were supposed to regulate before the crisis, independence meant the agency wouldn't rely on fees from the people they were supposed to be regulating, letting them rein in banks and non-banks freely and effectively.
Today, creating a consumer agency that's standalone isn't nearly as important—or controversial—as one that's independent. Indeed, independence has turned out to be the lightning-rod issue. As Dodd recently explained, he doesn't care all that much where a consumer agency is housed—the Treasury, the Fed—so long as it has the independence to do its job. "We're talking about an agency...that has the autonomous ability to craft rules and to be directly involved in the enforcement of those rules," he said. "Now where that's located is less relevant."
Consumer advocates, who've been openly critical of several of Dodd's proposals, agree that independence is paramount. "There is a difference between a standalone agency and an agency that is independent but might be within another agency," says Heather Booth with Americans for Financial Reform. "We don't necessarily need it to stand alone, but we're still fighting for an independent consumer protection agency that has real teeth."
Senate Republicans, however, aren't so keen on that independence. Sen. Bob Corker (R-Tenn.), Dodd's main negotiating partner, and Sen. Richard Shelby (R-Ala.), the banking committee's ranking member, recently pitched a watered-down version of a consumer agency within the Fed that would report to the Fed chairman—a death blow to the agency's independent power. They also don't want a consumer agency to have the kind of enforcement and rule-writing power that Dodd and other Democrats do. All of which is to say, in the coming days keep your eye on the issue of independence for a new consumer-protection agency. With it, consumers stand to gain from Dodd's new reforms; without it, any attempt at protecting consumers is merely window dressing.
There aren't any major shockers in the latest monthly employment report for February out today from the Bureau of Labor Statistics. The most commonly used unemployment rate held steady at 9.7 percent, and the economy shed 36,000 jobs—up from 22,000 in January. What you should care about in the latest jobs report is the army of unemployed Americans who remain chronically unemployed, meaning they've been without work for 27 weeks or more. As you can see in the graph below from the invaluable economics site Calculated Risk, in the past two years the number of chronically unemployed Americans has skyrocketed, shattering the previous record in the early 1980s.
Today, 4 percent of the population has been without work for 27 weeks or more. No story of the ongoing job crisis is complete without the graph below, especially given that the longer people are out of work, the harder it is for them to get back into the workforce. Likewise, no solution to our job nightmare will be sufficient without addressing this army of the long-term unemployed.