Erika Eichelberger

Erika Eichelberger

Reporter

Erika Eichelberger is a reporter in Mother Jones' Washington bureau. She has also written for The NationThe Brooklyn Rail, and TomDispatch. Email her at eeichelberger [at] motherjones [dot] com. 

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Elizabeth Warren to Obama: Fed Nominees Should Crack Down On Big Banks

| Thu May 29, 2014 10:07 AM EDT

Elizabeth Warren is at it again. On Wednesday, the senator from Massachusetts and her colleague Sen. Jeff Merkley (D-Ore.) called out the Federal Reserve—the US central bank charged with setting monetary policy and regulating big banks—for being too lax on financial reform, and urged the Obama administration to fill two open seats on the Fed's seven-member board with candidates committed to cracking down on Wall Street.

"As the events of 2008 showed, when the Federal Reserve and other financial regulators failed to engage in appropriate financial regulation, the results were the worst financial crisis in 80 years," the two senators wrote in a letter to President Barack Obama Wednesday. "Financial regulation and oversight obligations must be front and central to the Board's work."

The Fed's banking watchdog duties include imposing penalties on financial firms for violations such as inadequate money laundering protections and faulty foreclosure practices. Federal Reserve board members also vote on restrictions on CEO pay and rules governing how much emergency capital banks have to keep on their books.

This is not the first time that Warren has pushed the Fed to take its financial regulatory role more seriously. Earlier this year, she called on the heads of the central bank to stop delegating big decisions on bank oversight to staffers. Of the close to 1,000 formal enforcement actions taken by the Federal Reserve over the past decade, only 11 were voted on by the board itself. The rest were delegated to Fed staff, sometimes mid-level employees. In a letter to the Fed in February, Warren contended that the delegation of authority has resulted in bank penalties that are too lenient.

Last September, Warren and fellow Democrats on the Senate banking committee opposed Obama's plans to nominate former Treasury Secretary Larry Summers to run the Fed, citing Summers' work on behalf of the banking giant Citigroup and his past efforts to deregulate the financial industry. (Obama ended up withdrawing Summers' name from consideration.)

And at Fed chair Janet Yellen's Senate confirmation hearing in November, Warren told Yellen, "I’m concerned that [financial regulatory] responsibilities just aren’t a top priority for the board of governors."

In addition to the two Fed posts Warren and Merkley are concerned about, there are three other openings on the Fed board for which Obama has already nominated candidates. Those nominees are Lael Brainard, a former Treasury official; Jerome Powell, who has been a Fed board member since 2012 and is up for a second term; and Stanley Fischer, the former head of the Bank of Israel, whom the Senate just confirmed. There has been no real opposition by Senate Dems to any of these three nominees.

The Head of the IMF Says Inequality Threatens Democracy. Here Are 7 Charts Proving She's Right.

| Wed May 28, 2014 10:59 AM EDT

In his State of the Union address in January, President Barack Obama promised to devote 2014 to tackling inequality. When French economist Thomas Piketty's book Capital in the Twenty-First Century was released in March, it pushed the problem of growing income disparity further into the global spotlight. In April, Pope Francis tweeted, "Inequality is the root of social evil." Now Christine LaGarde, the head of the International Monetary Fund—best known for lending money to developing countries on the condition that the those states make policy changes—is taking on inequality too, warning in a speech Tuesday that rising inequality is threatening global financial stability, democracy, and human rights.

"One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy," LaGarde said.

The richest 10 percent of people in the world hold 86 percent of the world's wealth, and just 0.7 percent own 41 percent of global riches, according to the Credit Suisse 2013 Global Wealth Report. The bottom half of all adults in the world own just one percent of global wealth:

Here's what the very top of that pyramid looks like. About 10,000 people have more than $50 million:

In 24 of the 26 countries where the IMF collects income data, the wealthiest 1 percent has increased its share of income over the past three decades. Here's what that looks like in America:

 

Countries that are more unequal tend to be less stable and have lower economic growth, according to the IMF. Income disparity can bring more dire consequences too. "Disparity…brings division," LaGarde said. "History…teaches us that democracy begins to fray at the edges once political battles separate the haves against the have-nots."

What to do about growing income disparity around the world? The IMF chief suggested countries implement "redistributive" measures, including expanded access to education and health care, increased property taxes, and more progressive tax systems. Here's how the US tax system has helped the rich get richer over the years:

LaGarde said cracking down on the banking sector is part of the puzzle, too, since the 2008 financial meltdown increased the wealth gap. In her speech, LaGarde said that although governments have made progress in reining in big banks, most countries have not yet imposed strict enough reforms on the financial sector. The problem of banks being so large their collapse would endanger the entire financial system—a.k.a. too big to fail—is still with us, she noted. Here is how banks got too big to fail:

LaGarde also urged that rules governing how banks operate across international borders be tightened. And she called for a change in the banking "culture," pointing to recent scandals in which financial firms were accused of money laundering and rigging interest rates.

LaGarde slammed the banking sector's resistance to reform. "The behavior of the financial sector has not changed fundamentally…since the crisis," she said. "The industry still prizes short-term profit."

Fast-Food Strikes Go Global

| Thu May 15, 2014 10:58 AM EDT
A protester in Seoul, South Korea at a rally Thursday to demand higher wages for fast-food workers.

On Thursday, the fast-food strikes that have been spreading around the country are going global.

Workers at restaurants like Burger King, McDonald's, Wendy's, and KFC are walking off their jobs in 230 cities around the world to demand a minimum wage of $15 an hour and the right to form a union without retaliation. Strikers will protest in 150 US cities, from New York to Los Angeles, and in 80 foreign cities, from Casablanca to Seoul to Brussels to Buenos Aires.

In Zurich, some protesters are wearing "sad hamburger costumes." In the Philippines, protestors staged a flash-mob at a Manila McDonald's during morning rush hour.

The wave of strikes—which began in November 2012, when hundreds of workers walked out of restaurants in New York City—has grown quickly over the past year and a half. The idea behind this coordinated international protest was not just to further raise the profile of the fast-food workers' movement. With labor unions declining in clout at home, organizers hope that the powerful international unions can help pressure US-based companies into making changes. Last week, the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations—a labor federation composed of 396 trade unions that represent 12 million workers in 126 countries—held a summit in New York City where fast-food workers and union leaders finalized plans for the global strike.

The massive fast-food protests come a few weeks after a recent report on the industry by the left-leaning think tank Demos found that fast-food CEOs are paid a thousand times more than the average franchise worker, who makes about $8.69 an hour. Fast-food wages have dropped by 36 cents an hour since 2010. More than half of the families of fast-food workers rely on public programs like food stamps and Medicaid. (Check out our calculator to see if you could live on a fast-food wage.)

Though the industry has not yet raised wages by any significant amount, the strikes are having an effect. In a March filing with the Securities and Exchange Commission, McDonald’s said worker protests might force the company to raise wages this year. And as Salon's Josh Eidelson reported earlier this month, the National Restaurant Association, the industry trade group, is growing increasingly worried about the fast-food protests, closely monitoring social media for plans of future actions.

And while Congress is unlikely to raise the federal minimum wage any time soon to the $10.10 an hour wage President Obama proposed in his 2013 State of the Union speech, states are taking up the fight. Over the past year, seven states and the District of Columbia have raised their minimum wages, and 34 states are considering bumping up pay for their lowest-paid workers. In late April, the mayor of Seattle proposed a $15 minimum wage.

Scott DeFife, an executive vice president for the National Restaurant Association, dismisses the movement's potential. As he told the New York Times on Wednesday, "These are made-for-TV media moments—that’s pretty much it."

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