If President Barack Obama nominates Janet Yellen, the second-ranking official at the Federal Reserve, to be the next chairman of the central bank, she would be the first woman to ever occupy the post. This fact—and reports that Obama is considering former Treasury Secretary Lawrence Summers for the same post—has prompted editorialsworrying that Yellen wouldn't be up to the job, as well as more subtle attacks on her lack of "gravitas."
Although Obama has spoken of the importance of diversity in his administration, his inner economic team is a boys' club, says Sheila Bair, a former head of the Federal Deposit Insurance Corporation who has pushed publicly for Obama to pick Yellen to run the Fed. The top administration jobs that most affect the financial industry, Bair explains, are the chair of the Fed, the secretary of the Treasury, the head of the New York Federal Reserve, and the comptroller of the currency. And although there have been a few women in other top economic policy positions in the Obama administration, none of these big four spots has ever been filled by a woman.
The economy added 162,000 jobs in July and the jobless rate fell to 7.4 percent, according to new numbers released Friday by the Labor Department. But the drop in unemployment is mostly due to the fact that fewer people were seeking work last month, and thus were not officially counted as unemployed by the government; the total share of Americans with jobs actually shrunk.
As in recent months, employment rose in low-wage jobs like retail and food services. Retail added 47,000 jobs in July, and jobs in food service and at bars increased by 38,000. Employment also edged upward in the financial sector and manufacturing. July was the 34th month in a row in which the economy gained jobs.
But the labor force participation rate—the total share of Americans who are working—declined from 63.5 percent to 63.4 percent. Here is a chart that the liberal nonprofit Center on Budget and Policy Priorities released recently showing how the drop in unemployment does not translate into a healthier workforce:
Ezra Klein and Evan Soltas explained why this is happening at the Washington Post Friday:
Unemployment has fallen 2.5 percent from its post-recession peak, but the share of working-age adults with jobs has barely budged….The popular (well, popular among depressed econ wonks) image of discouraged workers sighing and deleting their Monster.com account once and for all is wrong. The rate of labor force exit is actually lower than it was in the aftermath of the 2001 recession. It's labor force entry that's suffered.
In particular, it's suffered among women—and it's really suffered among young women—who are a lot less likely to enter the labor force than they were in 2002 and 2003.
That is, in certain ways, a more encouraging trend: Discouraged workers who leave the labor force typically see their skills erode. Young people who delay entry are often staying in school longer, gathering skills that will ultimately prove valuable to them (and student loan debt that will prove burdensome).
But that comforting possibility surely doesn't explain all of the drop in entry we’re seeing among younger people. And it doesn’t really explain any of the drop in entry we're seeing among older people.
If the US economy keeps adding jobs at the current rate, it will take about seven years to get back to the pre-recession jobs level, according to the Hamilton Project at the Brookings Institution.
That could be likely, given other economic indicators and expected policy. New numbers show that GDP growth was slower than expected in the second quarter of this year. Personal disposable income declined for the first quarter of the year, according to the most recent report, and average hourly earnings fell in June. Another budget impasse in Washington this fall may mean that sequestration cuts continue through this year and beyond. And the Federal Reserve could soon cut back on its economic stimulus measures given the recent superficially positive jobs numbers.
Last week, a US federal court indicted a Russian hacker named Aleksandr Kalinin for allegedly hacking into the NASDAQ stock exchange. Kalinin had access to two NASDAQ servers for a couple of years between 2007 and 2010, and during that time was able to enter commands to change and delete data. The case has heightened fears that the next time a trading system is hacked—which is becoming pretty common—rogue programmers could cause a financial collapse. The good news is that the US government has recently drafted a plan to combat stock exchange hackers. The bad news, experts say, is that the government's plan is not going to help much.
The government's anti-hacking plan comes in the form of a regulation recently proposed by the Securities and Exchange Commission (SEC), a Wall Street regulator. The rule would require exchanges, including NASDAQ, the New York Stock Exchange, and the Chicago Mercantile Exchange, to ensure that their trading technologies adhere to a set of standards that the SEC has for two decades urged exchanges to adopt voluntarily. It would force exchanges to conduct stress tests of their core technology, submit to regular system reviews to identify vulnerabilities to hackers, and draft recovery plans in case of security breaches. But financial reform advocates, software security experts, and cybersecurity gurus say the rule is far too weak to provide any meaningful protection against cyber criminals.
The way that the SEC defines whether an exchange is adhering to the regulation is too vague, says Dennis Kelleher, the president of Better Markets, a financial reform group. Instead of laying out specific requirements for system reviews, for example, the SEC "defer[s] to unspecified practices and standards set by other regulators or 'widely recognized' organizations," Kelleher wrote in a letter to the agency. Without clearer language, Kelleher worries, exchanges could comply with the letter of the regulation without making any meaningful security upgrades. (The SEC declined to comment for this story.)
College attendance rates for African-American and Latino students have been increasing steadily in recent years. But here's the bad news that comes along with that: those students are mostly attending non-selective four-year colleges and community colleges, while whites are increasingly attending prestigious colleges and universities, the Washington Post reports.
A study released Wednesday by the Georgetown University Center on Education and the Workforce found that between 1995 and 2009, college enrollment more than doubled for Latinos and jumped 73 percent for African Americans, while only increasing 15 percent for whites. During that period, 80 percent of white college freshman enrolled in the nation's top 468 colleges, while only 13 percent of Latinos and nine percent of African-Americans went to those selective four-year schools. More than two-thirds of African Americans and almost three-quarters of Hispanics went to non-selective schools. Look:
It's not because minority students are less qualified. Thirty percent of African-American and Hispanic students who had an A average in high school attend community colleges, compared with 22 percent of whites, according to the report, which says that unequal educational outcomes for minorities can be attributed to things like family income, and peer expectations, but also to simply not being white.
"The higher-education system is colorblind in theory but in fact operates, at least in part, as a systematic barrier to opportunity for many blacks and Hispanics, many of whom are college-qualified but tracked into overcrowded and under-funded colleges, where they are less likely to develop fully or to graduate," Anthony Carnevale, one of the report's authors, told the Post.
Here's how unequal college paths for whites and non-whites contributes to growing inequality in America, via the Post:
Students at the nation's top 468 colleges are the beneficiaries of much more spending—anywhere from two to five times as much as what is spent on instruction at community colleges or other schools without admissions requirements. And students at top schools are far more likely to graduate than students at other institutions, even when they are equally prepared, according to the report. In addition, graduates of top schools are far more likely than others to go on to graduate school.
The financial implications of those differences are huge: A worker with an advanced degree is expected to earn as much as $2.1 million more in his or her lifetime than a college dropout, the report said. Also, the report said graduates of selective colleges earn an average of $67,000 a year 10 years after graduation, about $18,000 a year more than their counterparts who graduate from non-selective schools.
The report's authors say that in order to combat growing racial polarization in higher education, more resources need to be directed to improve students' academic experiences at non-selective schools, which often struggle with over-crowded classrooms and outdated materials. The authors say that colleges and lawmakers should also do more to bring black and Hispanic students into top schools.
The report comes just as the Supreme Court recently dealt a blow to affirmative action. In June, the high court allowed affirmative action to survive, but made it harder to institute as part of the admissions process, ruling that schools must first prove there are "no workable race-neutral alternatives" to achieve diversity on campus.
Specifically, the Federal Energy Regulatory Commission (FERC) accused Chase traders in Houston of devising elaborate schemes that essentially forced electricity grid operators—organizations that manage the flow of electricity—in California and the Midwest to pay for plants to sit idle, causing them to pay more than 80 times the cost of prevailing electricity prices for ten months between 2010 and 2011. Chase's alleged price-gouging echoes the infamous 2001 Enron scheme, in which the company constricted electricity supply in California in order to jack up prices.
The FERC action comes at a time of increasing scrutiny of banks' ownership of commodities. Last week, for example, the New York Times questioned whether Goldman Sachs was manipulating the aluminum market through the metal warehouses it controls.
Even though the penalty for Chase's bad behavior is the largest the FERC has ever slapped on a company, the fine still falls in line with trifling punishments leveled against the bank—and other financial behemoths—for similar egregious behavior. Chase’s $410 million settlement, which was reached on Tuesday and will be divided between ratepayers and the Treasury Department, represents less than two percent of Chase’s record $21.3 billion 2012 profits—or about what it earns in a single week. (FERC has also barred the bank from trading in US energy securities for the next six months.)
Investigators for the agency initially considered holding one Chase executive and a few specific traders individually liable for the allegedly abusive pricing schemes, but ultimately dropped that idea, according to the Times. The bank has denied wrongdoing, and, as Reuters has pointed out, the settlement will put an end to a troublesome "distraction" for Chase CEO Jamie Dimon.
The bank has had other distractions in recent years. In May 2012, Chase lost $6 billion on risky trades out of its London office. So far, the banks has escaped penalty for those actions—US banking regulators merely ordered it to fix the risk-management failures that led to the massive loss.
Sen. Elizabeth Warren (D-Mass.) has repeatedly highlighted the discrepancy between the punishments meted out to ordinary Americans for criminal behavior and those big banks receive for wrongdoing—whether it be tricking consumers into paying higher power prices, causing massive trading losses, or laundering drug money: "If you're caught with an ounce of cocaine, you're going to go to jail," she said at a Senate Banking Committee hearing earlier this year, referring to the giant international bank HSBC. "But if you launder nearly a billion dollars for international cartels and violate sanctions you pay a fine and you go home and sleep in your own bed a night."