CPD IN THE NEWS

A pair of activist groups, the Alliance for Quality Education and Center for Popular Democracy, is out with a guide — or rather suggestions — for better policing and monitoring finances of the state’s charter schools, which serve some 90,000 students, mostly in New York City.

The report states that since charters aren’t subject to all the reporting requirements required of public schools, there has been waste and abuse.

It contends the state could lose $54 million to fraud at charter schools this year, based on an accounting system used by fraud examiners that assumes 5 percent of that kind of mismanagement and tomfoolery.

To be sure, these groups are not exactly charter-friendly: AQE is funded in part by the state teachers union; the Center for Popular Democracy is also aligned with the national teachers union, AFT, among other groups.

They want a moratorium on charter expansion — which could become a high-profile issue during the next legislative session.

Here is their release and report: One note: some of these problems outlined below including the issues at Harriett Tubman Charter School occurred several years ago and under different administrations.

Today, the Center for Popular Democracy and Alliance for Quality Education released a report titled Risking Public Money: New York Charter School Fraud that reveals vulnerabilities in the state’s charter oversight system that could potentially cost New York state taxpayers as much as $54 million in charter fraud this year alone.

“Our governor and other school privatization advocates have pushed relentlessly to expand the charter industry at the expense of public school communities in New York State,” said Billy Easton, Executive Director of the Alliance for Quality Education. “But the proliferation of charters hasn’t been matched by the oversight needed to ensure that public money intended for students doesn’t instead get lost to fraud, waste and abuse.”

The report finds that state agencies have audited just a quarter of New York’s more than 250 charter schools since 2005, largely relying on them to police themselves instead. Yet in a startling 95 percent of the charters examined, auditors found mismanagement and internal control deficiencies that have occasioned $28.2 million in known fraud, waste, or mismanagement. Recognizing that the industry cannot be trusted to monitor itself for problems, the report’s authors have offered common sense interventions to remedy the problem, and have called for a moratorium on charter expansion until meaningful public oversight has been put in place.

“We can’t afford to have a system that fails to cull the fraudulent charter operators from the honest ones.” said Kyle Serrette, Education Director at the Center for Popular Democracy. “Given that New York spends over $1.5 billion on charter schools and more than 90,000 children are enrolled, a lot is at stake. We can’t afford to wait for tens or hundreds of millions more dollars to be lost before policymakers address this glaring issue.”

Here are only a few statewide examples among the dozens in the report:

IN NEW YORK CITY: Harriett Tubman Charter School issued credit cards to its executive director and its director of operation. They charge more than $75,000 in less than two years. The charges were never approved or explained.

IN LONG ISLAND: Roosevelt Children’s Academy Charter School paid four vendor a total of $521,197 for significant public work and purchase contracts without fair competition.

IN ALBANY: Albany Commuity Charter School lost between $207,000 to $2.3 million by purchasing a site for its elementary school rather than leasing it.

IN ROCHESTER: Eugenio Maria de Hostos Charter School failed to enter into a competitive bidding process for several instructional contracts. Instead the school awarded contracts to board members, relatives and other related parties.

IN BUFFALO: Oracle Charter High School entered a 15-year building lease with Oracle Building Corporation, agreeing to pay them more than $5 million at a 20 percent interest rate.

Source: Times Union

Grassroots leaders and local officials wasted little time organizing a coordinated campaign to fight SB 4, a new Texas law that targets cities, towns and sheriffs that don’t cooperate with federal immigration enforcement.

Only nine days after Texas Republican Gov. Greg Abbott signed the legislation, formally known as Senate Bill 4, into law, grassroots advocates announced a “Summer of Resistance” campaign May 16. The statute allows police officers, sheriff deputies and Texas state troopers to ask about a person’s immigration status – whether they are here legally – during a routine stop.

Read the full article here.

Auditing the Federal Reserve, a financial reform long pushed by the libertarian right, just got a boost this week from an unexpected quarter: A respected Dartmouth economist who issued a new proposal to impose transparency and oversight on the nation’s powerful central bank.

Though largely dismissed by mainstream economists, “Audit the Fed” has become an applause line for central banking skeptics like Sen. Rand Paul, who believe the Federal Reserve wields too much power too secretly. In recent years the idea has spread from right-wing politicians to the conservative mainstream, and even critics on the left: A Senate vote on Paul’s “Audit the Fed” legislation in January garnered 53 votes. Sen. Bernie Sanders (I-Vt.) voted for that bill and has pushed for increased transparency at the Fed to the delight of campaign crowds suspicious that the central bank is rigged in favor of Wall Street.

This week, the Fed Up campaign, a 30-month-old group of labor and community organizations pushing for more openness at the Fed, released its own platform for reforming the Fed’s governance structure, including a new idea for an audit—or "annual review"—that could give the idea more mainstream credibility.

The author is Andrew Levin, an economist now at Dartmouth College who has decades of experience at the Fed and a reputation as a thoughtful observer of the institution. While most financial insiders have long dismissed “Audit the Fed” as an unserious political slogan from people unversed in economics, Levin’s proposal has provoked a more serious reckoning with Fed transparency. And increasingly, economists are coming to the same conclusion: More sunlight might do the central bank some good.

“The Fed is overly sensitive about reviewing its policies,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics who has worked at the Fed off-and-on for the past 30 years.

At issue is whether decisions made by the top officials of the Fed should be open to review by the Government Accountability Office (GAO). Technically speaking, the Fed is already audited – it’s subject to the same GAO scrutiny of its operations as any other federal agency. But its most influential decisions, deliberations on monetary policy that attract global attention and can move stock markets dramatically, are conducted in secret by a dozen top Fed officials. Seven of them, known as Fed governors and based in Washington, are nominated by the president and confirmed by the Senate. The remaining five spots are reserved for the presidents of the 12 regional Fed banks on a rotating basis. Collectively known as the Federal Open Market Committee (FOMC), the group generally meets eight times a year, with minutes released three weeks afterwards. Transcripts of those meetings are released on a five-year lag, effectively sealing its deliberations in the short-term.

Because banks ultimately own the regional Fed banks, and have a say in nominating many of their directors, critics say this structure leaves the door open for favoritism to Wall Street, and needs outside scrutiny to ensure it properly balances its dual mandate of stable inflation and full employment. Supporters say the Fed's relative independence is a virtue, and worry its monetary decisions would be worse in the long run if its officials constantly felt Congress breathing down their necks.

The more traditional right-wing “Audit the Fed” legislation would call for a GAO audit of the Fed within 12 months of passage, and thereafter enable any lawmaker or congressional committee to request an audit of the central bank, including the FOMC’s monetary policy decisions, whenever they wanted.

In his new plan, Levin proposes something slightly different: it would require the GAO to conduct a review of all aspects of the Fed, including monetary policy, but make the review annual and determined by GAO staff rather than Congress. “[Paul’s legislation] just seemed like a way to threaten the Fed,” said Levin.

His proposal would also call for seven-year term limits for Fed officials and reform the process that the regional Fed bank presidents are selected. Though he recoiled against terming the GAO review an “audit,” his proposal would give the GAO new powers to examine different aspects of the Fed, as it does with other agencies in the federal government. Instead of called by Congress, it would be annual and determined by agency staff. “From one year to the next, it might focus on some aspects of the Fed's operations. One year, maybe it would focus on monetary policy strategy and communications,” Levin said. “Another year, maybe it wouldn't spend much time on that.” The results would be publicly available.

Narayana Kocherlakota, the former president of the Minneapolis Federal Reserve, expressed support for the idea of regularly scheduled GAO audits of the Fed’s monetary policy. He didn't take a position on earlier audit proposals, but echoed Levin’s concern that allowing lawmakers to request a GAO audit “would be very bad and would lead us down a bad path where essentially Congress was running monetary policy.”

The Federal Reserve declined to comment on Levin’s plan. But Fed Chair Janet Yellen and other Fed officials have aggressively attacked prior proposals to increase oversight over the FOMC’s deliberations. In January, before the Senate voted on Paul’s legislation, Yellen sent a letter to Majority Leader Mitch McConnell and Minority Leader Harry Reid opposing the bill. “These reviews could only serve to create public doubt about the conduct and independence of monetary policy,” she wrote.

“All of that criticism does apply to my proposal,” Levin said after reading those lines from Yellen’s letter. But he argued that such oversight is necessary in a democracy. He added, “After all, the Congress is the Fed’s boss.”

Levin enters this debate with considerable experience. He spent two decades as an economist for the Fed and then was a special adviser to then-Chairman Ben Bernanke and then-Vice Chair Yellen from 2010 to 2012. He also advised many other central banks, including the European Central Bank, the Bank of Canada and the Bank of Japan. Those policy bona fides mean he’s being taken seriously even by people who have dismissed previous “Audit the Fed” proposals.

“Levin knows a lot about the internal workings [of the Fed] that I don’t,” said Jared Bernstein, the former top economist to Vice President Joe Biden and a frequent critic of “Audit the Fed” proposals. “He’s not coming at this from the perspective of some radical protester.”

The underlying question is whether an annual review by GAO—not one triggered by individual lawmakers or committees—will cause the Fed to be influenced by politics in its monetary policy decisions. To some extent, that already happens. The Fed, like every institution, faces criticism from an array of politicians, outside economists, and pundits. “Independence is not as black and white as many people make it seem,” said Kocherlakota.

Finding the right balance between giving the Fed room to make independent policy and holding it accountable is a constant challenge—one that extends beyond “Audit the Fed" proposals. Sanders, for instance, has proposed that FOMC transcripts be released within six months, instead of the current five years.

Few serious Fed watchers, however, have spent much time developing detailed ideas for increased Fed transparency. “I felt like there was a vacuum in the discourse,” Levin explained.

Levin’s reforms are unlikely to become law anytime soon: Lobbying efforts around such a change would be fierce, and groups like the Fed Up campaign are likely to be heavily out-spent by Wall Street banks skeptical of changes intended to reduce their influence over Fed decisions. The Federal Reserve would likely oppose the reforms as well.

By DANNY VINIK

Source

In just a little over three weeks’ time, on 17 September, the US central bankers are going to have to sit down around a table and decide whether to raise interest ratesfor the first time since before the financial crisis of 2008 unfolded. And just as the markets were preparing for the news, China has thrown a wrench in the works.

Just to put this in its proper context, the last time the Fed raised interest rates, it was June 2006. Microsoft was releasing a version of Windows Vista; Google officially became a word in the Oxford English Dictionary. The Da Vinci Code ruled at the movie box office. The iPhone hadn’t even been introduced yet; we didn’t yet live in a world of apps and selfies. Hey, you could even collect interest on your bank savings account!

If it all feels blurred and slightly unreal (especially the idea of earning interest from a bank account) in your mind, that’s OK. Time has a habit of doing that to us. Then, too, what has happened since then has rendered the events of 2006 pretty forgettable: the financial crisis, the recession, and the struggle to get back to where we were, all neatly summarized in the glib phrase that some use when describing the first part of the 21st century: the “lost decade”.

But the Fed really, really, really wants to get back to normal. And that would be the old normal – when its team of policymakers meets once every six or seven weeks to monitor the economy and determine whether it’s overheating or cooling down too rapidly. Then they whip out the key tool in their monetary policy arsenal – interest rates – and adjust it accordingly. If the economic environment is too robust and the threat of inflation looms large on the horizon, well then, higher interest rates should make money more costly, dampen demand for it and calm everyone down a bit. On the other extreme, if animal spirits are low and unemployment is high, low interest rates should generate some economic activity and get everything moving again.

For now, the Fed’s leaders have said repeatedly, they are waiting until they are reasonably sure that inflation is heading toward their annual target of 2%. For the last three years, it hasn’t approached that level, and there’s tremendous uncertainty about acting too soon – and causing the economy to stall altogether – or delaying and perhaps allowing bubbles to take shape and jeopardize the credibility of the Fed itself as a policy-making institution.

It doesn’t help that the post-crisis recession seemed to throw the ability of monetary policy as a tool to guide the economy smoothly through storms into question. It certainly wasn’t enough to get the economy going once the financial system had been rescued from bankers intent on dashing off a precipice like lemmings, carrying the whole structure with them.

And now policymakers must continue to grapple with economic news that can be used in whatever way a pundit wants, to advocate for pretty much whatever point of view one wishes. The housing market is recovering at its strongest pace in nearly a decade! But it’s still functioning well below long-term historical averages, when compared to total national GDP levels. It all depends on which data set you prefer to look at. Employment? Well, the good news is that unemployment levels have fallen. On the other hand, there’s absolutely no wage inflation to be found, much less to be contained: most Americans would find the idea to be laughable. Indeed, middle income earners have seen a significant erosion in their buying power. There is inflation, but it’s in the prices of goods and services, not in wages.

Yellen and her fellow policymakers need to wake up and smell the espresso, according to a consortium of progressive policy organizations led by the “Fed Up” campaign, a nonprofit created by the Center for Popular Democracy. They’re putting together an online petition to be delivered to Yellen and other Fed members at their annual Jackson Hole, Wyoming retreat at the end of August. “Working families haven’t made a full economic recovery, and now is not the time to declare victory,” the petition states, noting that higher interest rates would make it more costly for Americans to buy homes or cars, as well as boosting the costs of student loans and credit card or any other form of debt.

All of that is true, but the Fed policymakers aren’t just thinking about working families when they consider boosting interest rates. They’re considering the bigger picture, and specifically what might happen if they don’t act: inflation (in the form of a flood of new, cheap loans from banks) and, far more dangerously, asset bubbles.

The latter is a real risk: the Fed already is stepping up its scrutiny of one particularly risky and active party of the market fueled by ultra-cheap financing, the leveraged loan market. According to at least one source, since the Fed tried to crack down when banks were shrugging off the regulator’s guidelines, the market has only grown still larger, to nearly $875bn. And it is full of the kind of excessive risk taking that led to the 2008 crisis.

In a perfect world, Yellen and the Fed would rather not preside over a repeat of that event, and if the price to pay is higher interest rates, well, that’s a perfectly acceptable tradeoff, thank you very much. Indeed, some economists believe that they already are delinquent; that they should have begun “normalizing” interest rate policy a long time ago. Already, a Bank of America securities report has scoffed that keeping rates unchanged for so long has left the Fed suffering from “central bank policy impotence” – and no little blue pill in sight.

So, will the Fed act?

The minutes of the Fed’s last meeting, held in late July, which were released to the public last week, display a lot more dithering and a considerable amount of wariness. Inflation data just isn’t there; Federal Open Market Committee members say they want more evidence that economic growth is “sufficiently strong”. How Yellen will forge a consensus out of this group is baffling.

And then there is the wild card: China. Is it even possible for the US to consider raising interest rates with the yuan depreciating, stock markets plunging and the contagion spreading to other markets in Southeast Asia? The precise extent to which these events might affect the United States is hard to gauge, but in a globalized economy, of which China and its 1.4 billion citizens play a growing and significant role, the Fed can’t pretend that they are blips on the horizon.

For my part, I’m left with only one certainty. Charged with sorting through all these issues, weighing them, and making the right policy choices for the country, Yellen is earning every penny of her annual salary of $201,700.

Source: The Guardian