Making daylight saving time permanent — by never “falling back” again — could save the country billions a year in social costs by reducing rapes and robberies that take place in the evening hours, according to a forthcoming paper by researchers at the Brookings Institution and Cornell University.
In 2007, Congress increased the period of daylight saving time (DST henceforth) by four weeks, adding three weeks in the spring and one in the fall. “This produced a useful natural experiment for our paper,” authors Jennifer Doleac and Nicholas Sanders write at Brookings, “which helped us isolate the effect of daylight from other seasonal factors that might affect crime.” They found that “when DST begins in the spring, robbery rates for the entire day fall an average of 7 percent, with a much larger 27 percent drop during the evening hour that gained some extra sunlight.”
The mechanism that might cause this drop is fairly simple: “Most street crime occurs in the evening around common commuting hours of 5 to 8 PM,” the authors write, “and more ambient light during typical high-crime hours makes it easier for victims and passers-by to see potential threats and later identify wrongdoers.”
Moreover, according to the paper, the drop in crime during evening hours wasn’t accompanied by a rise in crime during the morning hours. Criminals aren’t morning people, as it turns out. In addition to the decrease in robbery rates, the researchers found “suggestive evidence” of a decrease in the incidence of rape during the evening hours, as well.
Every crime carries a social cost — direct economic losses suffered by the victim, including medical costs and lost earnings; government funds spent on police protection, legal services and incarceration; opportunity costs from criminals choosing not to participate in the legal economy; and indirect losses like pain and suffering. Previous estimates have put the total social cost of a single robbery at roughly $42,000, and the cost of a rape at $240,000. Tally it all up, and the three-week DST extension in the Spring of 2007 saved the country $246 million, according to Doleac and Sanders.
“Assuming a linear effect in other months, the implied social savings from a permanent, year-long change in ambient light would be almost 20 times higher,” they conclude, or several billion dollars annually. They do caution, however, that this is just an assumption and that more research would be needed to determine whether the drop in crime from enacting permanent DST would hold true year-round.
This economic argument joins a long litany of other arguments in favor of a permanent DST extension. Changing the clocks in any direction is a major disruption to our daily rhythms, resulting in increased rates of heart attacks, car accidents and work injuries. Year-round DST could potentially save hundreds of lives from a reduction in traffic accidents. DST also causes people to spend more time outside, resulting in a 10 percent increase in daily calories burned, according to one study.
Stack all of these findings, plus the big savings in crime and social cost outlined in the new Brookings paper, and you have a really powerful empirical case for permanent DST. On the other side of the ledger, it might make life a little bit more difficult for some farmers. People also often cite schoolkids waiting for buses in the dark as an argument against yearlong DST. But the dangers of standing around in the early morning hours are probably overstated — especially considering, as the Brookings paper shows, that many types of criminals don’t seem to be active during these hours.
“Only the government would believe you could cut a foot off the top of a blanket, sew it to the bottom, and have a longer blanket,” goes a saying of unknown provenance. It’s time to stop cutting that blanket.
Written by Christopher Ingraham of The Washington Post
One of the best political outcomes for the stock market would be for a Democrat to win the presidential election next year while Congress remains in Republican control.
That’s not a statement of my political desires. It’s a reflection of the stock market’s performance over the past century.
Consider a study conducted by Ned Davis Research, the quantitative-research firm: It measured the Dow Jones Industrial Average’s performance under various political scenarios, ranging from Democrats controlling the White House and both houses of Congress to Republicans dominating — and all combinations in between.
One of the best constellations of political power, according to the study, is for there to be a Democratic president and a Republican Congress. Since 1901, the Dow under those conditions has produced an annualized gain (before dividends) of 9.0%. (See chart above.)
That compares with a 7.3% annualized return when the Democrats control both the White House and Congress, and a 7.0% return when the Republicans dominate both.
It might be tempting to conclude from those results that the stock market prefers political deadlock. That certainly accords with the Libertarian notion that the government creates more problems than it solves.
But not all the historical data are consistent with that hypothesis, since not all deadlocked situations in Washington have coincided with an equally strong stock market. Consider those years in which there has been a Republican president and a Democratic Congress: On average, according to the Ned Davis study, the Dow in such years has gained an annual average of only 2.2%.
That’s less than a fourth as much as it performed in the reverse situation that is presumably equally deadlocked, when a Democrat was president and the Republicans controlled Congress. The fact is, as you can see from the chart, the stock market over the past century has performed better when a Democrat has been in the White House.
This difference can’t be explained in terms of inflation, either. Though inflation on average has been higher during Democratic presidencies than Republican ones, even in inflation-adjusted terms the stock market has performed better when a Democrat has been in the White House.
Why Wall Street loves Hillary Clinton, businesses brace for an onslaught of regulations, Harry Reid as power player, and more.
Some readers howled in protest on past occasions when I reported these results. But note carefully that Democrats don’t necessarily deserve the credit for the superior performance of the stock market during their presidencies. It might be, for example, that the stock market during Democratic presidencies is reaping the rewards of the economic discipline imposed during prior Republican presidencies or by the Republican congresses that often accompany Democratic presidencies.
You are entirely free to make such arguments, of course, or interpret the facts in any of a myriad possible alternate ways.
But facts remain facts even when you don’t like them.
A recent article in The Economist examined the “gig” economy. You know, people selling crafts online, offering their services as taxi drivers, renting their cars and spare bedrooms for short periods. Some folks even rent space on their driveways to commuters. It’s that old American ingenuity and, as it turns out, it’s difficult to quantify.
Analysts expected this employment revolution to be reflected in self-employment statistics. However, the self-employment rate in the United States has declined during the past two decades, according to Pew Research.
Why would self-employment be falling when more people appear to be offering services independently? The Wall Street Journal suggested several possibilities: 1) The gig model might not be prevalent even though some headline-grabbing companies rely on it; 2) It’s possible gig companies operate in industries that have always depended on independent contractors; or 3) people who do this work may report they are employees of the firms they work for rather than independent contractors.
The Economist concurred with the last, suggesting that people do not consider their gigs to be work. If that’s the case, then governments may not be asking the right questions when they try to assess the situation. A British survey that focused its queries on alternative employment found that about 6 percent of respondents participated in the gig economy.
Does it matter? Should anyone be concerned the dimensions of this segment of the economy are relatively unknown? The Economist suggests it is important:
“Measuring the gig economy matters. To get a clear picture on living standards, you need to understand how people combine jobs, work, and other activities to create income. And, this gets to the crucial question of whether the gig economy represents a positive or negative development for workers. All this makes it important for official agencies to have a go at measuring it.”
What’s the solution? The Wall Street Journal suggested the U.S. Congress might want to reconsider funding the U.S. survey of Contingent and Alternative Employment Arrangements. The last time it was conducted was 2005.
This time around, the approaching debt ceiling deadline is frightening.
It’s old news that crisis government is the order of the day in Washington, and that’s especially the case in a Congress deeply divided across party lines on virtually major issue. But now that another crisis looms at the beginning of next month, when America will default on its bills unless Congress raises the debt ceiling by November 5, it’s time for panic mode.
It’s not the first time that the far-right caucus has dredged up this particular brand of madness, threatening arbitrary economic calamity unless an unwilling country meets its demands. It’s not even the first time this year. We’ve seen three debt ceiling crises since the Tea Party arrived in 2010, but this time might frighteningly be different.
This time, the insurgents actually have a pretty good argument for going over the cliff.
For those who’ve ignored it or blissfully managed to forget, the debt ceiling is a cap on government borrowing that was created back in 1917. Prior to that, Congress had to authorize every new bond issuance, so the system was changed to allow the Treasurer to issue public debt as necessary within a fixed limit.
Why the limit? Mostly as a matter of political posturing. The debt ceiling has nothing to do with government spending, which is set during the budget process; it’s just a chance to showboat about paying for things Congress has already bought. The Treasury only borrows money when it doesn’t have the cash on hand to pay for pre-existing obligations.
It’s getting the check at the end of dinner. The lobster was great but someone has to pay for it, even if that means calling the bank and raising your credit limit.
Noting the contradiction in the late ’70s Congressman Dick Gephardt passed what was known as the Gephardt Rule, which automatically raised the debt ceiling to meet the budget. (The rule said that a debt ceiling hike was “deemed approved” as necessary to pay for any budget that passed Congress, unless specifically voted otherwise.) Although it didn’t end the grandstanding, this rule did effectively eliminate the debt ceiling as a substantive issue until 1995, when House Republicans suspended it pending an ultimate repeal in 2001.
Compare this with the right’s signature Hastert Rule, designed to make bipartisan legislating impossible and which gives about 40 members of the House’s far right enough power to keep manufacturing this crisis.
Although several major politicians, including some presidential candidates, are posing this as a spending issue, it’s really about restructuring debt. This government has already spent this money on thousands of greater and lesser obligations, such as to contractors, retirees, existing bond holders, soldiers and more. Now it needs to borrow in order to cut the checks.
Two countries in the world use this parliamentary device (the U.S. and Denmark), and it’s because, not to mince words, the idea is catastrophically nonsensical. With the money already spent, Treasury must borrow in order to avoid default, so why allow even the smallest chance that it can’t?
Mostly because for almost 100 years, the debt ceiling was a very quiet bit of legislative arcana. Politicians used it as an opportunity to rail against spending by the other party while understanding its role in keeping the lights on. Some would cast symbolic “no” votes on a sure-to-pass bill, and the system chugged quietly along. Nobody fixed what wasn’t broken.
That was then. Today that understanding is broken with a breathtakingly radical group of House Republican legislators who see their prime duty not as functional governance but as “standing up” to President Obama and the Democrats. (See: more than 50 votes to repeal the Affordable Care Act.)
To them the debt ceiling is a made-to-order hostage situation. It’s not that they disagree with the widespread misery a default would cause. It’s that they see in those unemployment lines an opportunity.
So what exactly would happen if America breaches the debt ceiling? According to UCLA economist David Shulman, at first it would look very much like a government shutdown.
“My guess is what will happen is the government will make payments on the debt and not default on that, but might default on Social Security checks, Medicare checks, accounts to defense contractors and salaries to federal employees,” he said. “That’s where the balance will come from. I don’t think you’ll have a default in a financial sense, but you will have a default in the sense that people who expect to get paid are not going to get paid.”
Even that might not be so bad. It might just more closely resemble previous debt ceiling crises as far as financial markets are concerned: a scare, maybe a credit downgrade that doesn’t affect interest rates, but everyone gets paid in the end.
A default that winds on this form of “financial triage” would hit its limits and the Treasury would begin to default on interest and loans. That, Shulman, said “is the squeeze.”
“That’s what makes the economy worse, [when] you have pressure on the banking system,” he said. Interest rates would feed on the uncertainty, bringing borrowing down to a crawl and taking with it business spending on new equipment and buildings. Those industries would start laying people off, which would suck purchasing power out of the economy and what economists call a negative feedback cycle would begin. Getting interest rates back down to stimulate more spending would be incredibly hard, because once a deadbeat, always a deadbeat.
Of course any prediction, Shulman emphasized, comes with the caveat that no one necessarily knows how Treasury would prioritize its payments or how the market would react. It’s anyone’s guess.
In 2011 and 2013, Tea Partiers bet big that Democrats, unwilling visit that kind of harm on the American people, would cave in to extraordinary demands as a condition for new debt. In 2015, with a Presidential election in the offing, the stakes are higher. Frighteningly so, because this time around it would actually be politically rational for Republicans to pull the rip cord on calamity.
We’ve been to this dance so many times since 1994, it’s begun to feel routine. Each time the GOP shuts down the government or takes America to the brink of default, it takes a beating in the polls, losing the public relations battle despite its very best spin doctoring. By the time of the next election, though, voters have moved on to other things.
It happened in 2013, when the Republicans did both in one month and still won big in the 2014 elections. We voters are fickle creatures. It takes something on the order of the Iraq War to make an issue stick long-term, and even then only when it manages to stay in the headlines.
A sabotaged economy certainly would stay relevant, but not the mess that caused it. That would fade into the background against the drumbeat of bad news: return to recession, high unemployment numbers, hemorrhaging retirement accounts and all on Obama’s watch.
Presidents get the blame when the economy turns south, fair or not. Happy voters tend to stick with the status quo; unhappy ones throw the bums out. For Republicans hoping to take back the White House after eight years of Democratic rule, a rocky economy would be just the thing to shore up their electoral bid, especially after a difficult primary).
For a party that has made clear that “the single most important thing we want to achieve” (Mitch McConnell, 2010) is defeating Obama, the political calculus of a bad economy in 2016 is a frighteningly rational option.
Or maybe not. As Shulman reiterated, voters do properly appoint blame when conservatives shut down the government.
“They can’t win the PR battle,” he said. “If anything happens, the government shuts down or we run out the debt limit, the Republicans get blamed.”
Maybe. But a plan doesn’t need to be foolproof to sound appealing, especially to legislators borderline desperate for the Oval Office. It might reasonably work, and that’s enough to make it a politically rational choice for the opposition.
Like we said, the debt ceiling is back. This time it’s scary.
New Yorkers embraced Pope Francis on his first ever visit to the Big Apple. Across the city thousands of supporters gathered along barricaded streets to get a glimpse of “The People’s Pope”.
“It’s a daunting schedule and he seems to be handling it quite well. The crowds here are quite adoring,” says Father Michael Russo of St. Mary’s College, who is travelling with the pope during his visit to America.
Friday morning began with a speech at the United Nations where Francis became the fifth pope to address the UN General Assembly. He once again championed the environment and the downtrodden, saying the poor suffer most from the misuse of natural resources.
He also did not shy away from criticizing capitalism, saying that it contributes to society’s ills and that the consequences of “irresponsible mismanagement of the global economy must be cause for reflection.”
Father Russo tells Yahoo Finance that the pope’s message on the economy has been received well. “
He says the takeaway for lawmakers and the business world is to “get more engaged with the larger community.”
For those who say he’s out of touch with the economy, Father Russo says that the Pope isn’t telling individuals who wish to succeed not to. “Obviously he’s a pope who wants to make sure that those people who have the opportunities are also giving back.”
On his first full day in New York, the pope also led a prayer service at the September 11th memorial, met with schoolchildren in Harlem, greeted 80,000 people in Central Park and will celebrate Mass at Madison Square Garden in front of thousands.
Speaker John Boehner’s announcement that he will be resigning next month is, in the words of Democratic Leader Nancy Pelosi, “seismic to the House.” But it could also shake up the stock market if it injects additional uncertainty into congressional efforts to reach a deal on the budget and debt ceiling.
That uncertainty might come into play as soon as next week, as Congress needs to pass a continuing resolution to authorize federal spending at 2015 levels by the end of the month to avert a partial government shutdown. Boehner’s resignation reportedly makes such legislation more likely to pass, giving a victory to conservatives who had been pushing for a fight over funding for Planned Parenthood.
But that stopgap measure might not do much to prevent another budget and debt ceiling showdown, or Republican infighting over strategy, beyond the end of the month. “The shock announcement that Republican House Speaker John Boehner will retire in October has increased the odds of a shutdown, if not this week then in early December,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote to clients on Friday.
A continuing resolution would simply delay the fight until late November or December, by which time the debt ceiling would also need to be addressed. The government recently hit that $18.1 trillion limit, and the Treasury Department is again performing a financial juggling act to prevent a default, but those accounting maneuvers can’t go on indefinitely.
Election-year pressures — the notion that Republicans don’t want to be blamed by voters for another shutdown — might also cut the other way. “Not only is there a multitude of Republican presidential nominees looking for a boost among the party’s base, but all of the House representatives and a third of the Senate will be up for election next year,” Ashworth notes. “Republicans will be under pressure to play hard ball to avoid nomination fights against more conservative candidates. Boehner’s retirement will only embolden the conservatives in Congress to push harder.”
That potential scenario hasn’t rattled the market, at least not yet. Stocks rallied Friday after the Commerce Department revised its read on second-quarter GDP growth to a 3.9 percent annual pace, up from 3.7 percent — reinforcing Federal Reserve Chair Janet Yellen’s case in a speech she delivered Thursday that economic progress makes it appropriate for policymakers to raise interest rates this year and to continue boosting them gradually.
The Fed’s rate-setting committee is scheduled to meet again late next month and then on Dec. 15 and 16. If the committee holds off on a rate hike next month, Washington could be in the midst of another fiscal fight by the time it convenes in December, potentially clouding any rate hike decision.
Back in Feb. 2014, when Congress was also confronted with a deadline decision on the debt ceiling and Boehner’s efforts to pass a compromise plan had failed, the Speaker admitted his defeat by saying, “When you don’t have 218 votes, you have nothing.” Boehner’s successor as House speaker, whether it’s Kevin McCarthy or someone else, will be facing many of the same pressures from the right wing of his caucus — and he or she will be dealing with the same math.
So while Boehner’s resignation may reduce risks of a disruptive government shutdown and a market-rattling fiscal fight this month, it might not do much to forestall further Washington turmoil and uncertainty. And Wall Street abhors uncertainty.
Too many Americans, particularly in the younger generation, believe Social Security benefits will be nonexistent by the time they reach retirement age. While it’s true that the money in the Social Security trust funds is being depleted, the chances that benefits will be eliminated altogether are slim to none. Here’s what Americans need to know about the current state of Social Security, what would need to happen to keep benefits as they currently stand, and what the worst-case scenario looks like.
The reserves are running out
Social Security taxes are deposited into trust funds, which theoretically earn enough interest to pay out benefits — and right now, they do.
However, the Social Security and Medicare Trustees’ 2014 report projects that reserves will build until 2019, after which the benefits being paid out will exceed the amount of money flowing in. This deficit will drain the trust funds, and all reserves are forecast to run out by 2033 unless Congress makes changes to the program.
What can be done to fix this?
Several actions could be taken to maintain Social Security benefits past 2033. And Congress has some time to decide, as reserves will build up for another four years.
1. Increase Social Security taxes: Currently, employees pay Social Security taxes at a 6.2% rate, and employers contribute a matching amount. One potential fix would be to gradually increase the rate to 7.2% over 20 years. It is estimated that this would make up for 52% of the projected shortfall. This solution is supported by 83% of Americans, according to a survey by the National Academy of Social Insurance and Greenwald and Associates.
2. Eliminate (or increase) the wage cap: As of the 2015 tax year, only the first $118,500 of Americans’ wages are subject to Social Security taxes. Increasing the wage cap to about $230,000 — which would represent 90% of all earned wages — would reduce the shortfall by 29%. Eliminating the cap altogether would take care of 74% of the shortfall, although this idea is less popular than simply increasing the cap.
3. Raise the normal retirement age: Gradually raising Social Security’s full retirement age to 68, or even 70, would go a long way toward fixing the problem. However, this is a rather unpopular option: 65% of the population opposes an increase to 68, and even more Americans oppose an even higher retirement age.
4. Lower benefits: Across-the-board cuts are extremely unpopular, but cutting benefits for higher earners is a possibility. Because the system is weighted toward lower-income earners already, it could be possible to reduce benefits on a sliding scale to middle- and high-income workers. There are an infinite number of ways to do this, so it’s tough to say how much of the deficit this could offset.
5. Adjust how cost-of-living increases are calculated: Currently, the Consumer Price Index, or CPI, is used to determine annual cost-of-living increases in Social Security benefits. However, switching to an index called “chained CPI,” which economists say provides a more accurate picture of inflation, would reduce annual increases by about 0.3%. This politically popular idea would eliminate 25% of the shortfall.
6. Base the formula on more working years: Finally, because Social Security is calculated based on the 35 highest-earning years of a worker’s career, that number could be increased to, say, 38 years in order to reduce the calculated average. This could take care of 13% of the shortfall, but it would effectively represent an across-the-board benefit cut and would therefore be unlikely to gain traction in Congress.
The most likely outcome
I’m almost certain Congress will do something to make Social Security solvent, at least on a temporary basis. In the past, lawmakers have acted when necessary in order to keep the program above water, and there’s no reason to believe things will be any different this time. After all, the last significant Social Security changes (made in 1983) are the reason the trust funds are expected to last until 2033 in the first place.
However, some options are highly unlikely. For example, cutting benefits across the board and raising the full retirement age are both particularly unpopular choices among Americans, so they’re unlikely to get serious political support.
On the other hand, Americans of all income levels and political affiliations support gradually increasing taxes, raising or eliminating the wage cap, and changing the cost-of-living calculation method. So my best guess is that we’ll see one of those, or some combination of them.
What if Congress does nothing?
Of course, there’s always a chance that Congress will do nothing (hey, it’s happened before), but that doesn’t mean benefits would disappear completely, despite the fact that 41% of Americans mistakenly believe they would. It simply means that because the trust funds will be depleted by 2033, the only funding source for benefits after that point would be money flowing in from taxes.
If this unlikely scenario were to play out, the Social Security and Medicare Trustees 2014 report found that benefits could be sustained at 77% of the current level until 2088, at which point they would only drop to 72%.
Again, I find this scenario unlikely, but it’s good to know Social Security benefits will be largely sustained no matter what.
Hope for the best, but plan for the worst
The point here is to recognize the current state of Social Security and what the future could look like.
And . . . they’re back. The temporary tax breaks known as “tax extenders” that caused so much tension on Capitol Hill in late 2014 are returning to the legislative fore as the Senate Finance Committee prepares to mark up a bipartisan effort to reinstate them for two years.
A quick refresher: The tax extenders are an alphabet soup of special tax provisions, mostly targeted at business, that most members of Congress seem to believe ought to be made permanent, but which never are. These include things like mortgage insurance premium deductions on individual tax returns, businesses tax breaks for research and experimentation costs, and tax credits for energy efficient construction.
They also contain a number of highly targeted tax breaks that some find objectionable. There’s a special allowance for Puerto Rican rum, a cut tailored specifically to the owners of NASCAR tracks, and possibly the most controversial, a cut for the mostly wealthy owners of racehorses.
The extenders also cost a lot of money. They represent foregone tax revenue of more than $150 billion in Fiscal 2016 alone.
A large number of the provisions are meant to create incentives for certain desirable behavior – getting businesses to invest in research, or homeowners to pay for energy efficient upgrades. But the creation of effective incentives requires lawmakers to provide taxpayers with certainty that the tax benefits will be there when it comes time to file for them. And lawmakers haven’t been very good at that.
For example, the tax extenders that were supposed to incentivize certain behaviors in tax year 2014 were actually not in effect for the first 50 weeks of the year. When Congress finally voted to renew them on their way out the door in December of last year, Sen. Ron Wyden, the Oregon Democrat who was then the chair of the Senate Finance Committee fumed, “This tax bill doesn’t have the shelf life of a carton of eggs.”
Wyden wasn’t wrong. The tax breaks the bill authorized promptly expired two weeks later, at the beginning of tax year 2015, meaning that whatever incentive effect they are supposed to have is being watered down by the uncertainty of their passage this year.
The bill to be considered by the Senate Finance Committee tomorrow contains 52 different provisions, 31 of which apply to business taxes, while 13 are energy-related and another eight affect individual income tax returns.
“This markup will give the Committee a timely opportunity to act on extending a number of expired provisions in the tax code that help families, individuals and small businesses,” said Sen. Orrin Hatch, the Utah Republican who took over the chairmanship of the committee when the GOP took control of the Senate in January.
“This is the first time in 20 years where a new Congress has started with extenders legislation having already expired, and given that these provisions are meant to be incentives, we need to advance a package as soon as possible,” Hatch said. “This package is a result of strong bipartisan work, and I look forward to working with the full Committee to ensure members are able to work their will and examine these provisions carefully.”
Wyden, who remains the top Democrat on the Committee added, “The tax code should work for, not against, Americans. We need to extend these tax provisions now in order to provide greater certainty and predictability for middle class families and businesses alike. However as we look beyond next week, it’s critical we all recognize and take action to end this stop and go approach to tax policy through extenders.”
However, if history is any guide, this is little more than wishful thinking. Last year, the Finance Committee’s mark-up took place in April, and the extenders still languished until December.
Part of the reason is that the tax-extenders are seen as must-pass legislation, which means that they often get held up to be used as possible leverage for difficult negotiations on related legislation.
Another reason is that Republicans in the House of Representatives remain interested in breaking up the extenders package, and making some of their favored tax breaks permanent. Democrats have fought this approach in the past, and it’s unclear the there is much reason to expect it to be successful this time around, either. However, it’s another argument that could leave the package in limbo until the last minute.
Rep. Sean Duffy, R-Wis., lashed out at Federal Reserve Chair Janet Yellen on Wednesday, accusing her and the Fed of willfully hiding documents that have been subpoenaed for an ongoing congressional leak probe.
“You did absolutely nothing—zero. … You did nothing to perpetuate an investigation that would lead us to the truth,” Duffy charged. “Madam Chair, it appears that you are the one who is jeopardizing—or the Fed is the one who is jeopardizing—this investigation. Am I wrong?”
Yellen, who maintains that the Fed cannot release requested documents without jeopardizing the Justice Department’s criminal investigation, replied by saying, “We want to see this investigation succeed.” She said she plans to turn over all the requested documents once the investigations by the DOJ and the Fed’s inspector general are completed.
Yellen, speaking slowly, told Duffy that the Fed had a clear procedure to follow.
He responded: “If anyone is trying to sweep this under the rug, it’s the Fed. It is Congress who is trying to bring light to this.” The congressman emphasized that the Fed has no legal authority to withhold the relevant documents.
At issue is the disclosure of confidential information about a 2012 meeting of Fed policymakers allegedly to a firm that sells analysis and reporting to investors.
The fiery exchange occurred while Yellen presented a monetary policy report to the House Financial Services Committee.
Puerto Rico lost its bid to revive a restructuring law that investors argued conflicts with U.S. bankruptcy code, a blow to the commonwealth as it falls deeper into a fiscal crisis.
Lawyers for Puerto Rico officials had asked the U.S. Court of Appeals in Boston to reinstate the local law to help it deal with $72 billion in debt. The court resisted, agreeing instead with a San Juan judge who threw out the statute in February.
The dispute centers on whether the island, which is excluded from federal bankruptcy code regarding municipal entities, can make its own rules for allowing public agencies to seek protection from creditors.
The commonwealth may seek a rehearing before the three- judge panel or a larger group of judges at the Boston-based court. It can also seek to be heard by the U.S. Supreme Court. Puerto Rico can also turn to Congress and request permission to put its agencies in bankruptcy, the appeals court said.
“In denying Puerto Rico the power to choose federal Chapter 9 relief, Congress has retained for itself the authority to decide which solution best navigates the gauntlet in Puerto Rico’s case,” the appeals court said in a majority decision on Monday. “We must respect Congress’s decision to retain this authority.”
Barring help from federal lawmakers, the decision means the debt-burdened Puerto Rico agencies will have no other choice except to continue piecemeal negotiations with creditors, a process which could lead to chaos if discussions break down and investors end up suing the agencies and each other to reclaim some of what they’re owed.
Puerto Rico securities have dropped in prices after Governor Alejandro Garcia Padilla last month said he would move toward restructuring the island’s debt. Commonwealth general obligations maturing July 2035 traded Monday at an average price of 70.6 cents on the dollar, after falling to 66.6 cents on the dollar June 30, a record low, according to data compiled by Bloomberg.
The case is Franklin California Tax-Free Trust v. Commonwealth of Puerto Rico, 15-1218, U.S. Court of Appeals for the First Circuit (Boston).