Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

This version reflects edits made on February 28, 2019 to clarify the sequence of leaks, include price movement information for the GSEs’ preferred shares, and include a more comprehensive graphic. For additional context, please also read this letter that we, in conjunction with Public Citizen, submitted to the Inspectors General of the Federal Housing Finance Agency and the Treasury Department requesting that they investigate potential instances of insider trading.

Immediately following President Trump’s election, Fannie Mae and Freddie Mac’s future generated renewed and robust interest. The Government Sponsored Entities’ (GSE) shares rallied on expectations that the Trump administration would take both entities out of conservatorship in a manner that rewarded all shareholders, including hedge-fund speculators. In the intervening two years, however, those expectations faded and shares in the GSEs underwent a slow decline.

That changed December 20th, 2018 when President Trump announced that he would appoint Comptroller of the Currency, Joseph Otting, to serve as Acting Director of the Federal Housing Finance Agency (FHFA). Since that announcement, shares in Fannie Mae common stock had risen 165 percent (as of the market’s close on January 28), with a similar increase in the value of shares in Freddie Mac. Meanwhile the value of Fannie Mae’s preferred stock had increased by 29.5 percent while Freddie’s preferred shares rose by 33.5 percent. Less than two weeks after taking office on January 7, 2019, Otting had already made clear that investors’ confidence has not been misplaced; in a January 17 meeting, Otting told FHFA employees that the administration would release a plan in the coming weeks to take the GSEs out of conservatorship according to two separate leaks to MarketWatch and Politico on January 19 and January 24, respectively.   

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

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House Ways and Means Committee Chairman Richard Neal (D-MA) has been criticized by many, including us, for his failure to pursue Trump’s tax returns in a timely manner. In an article in the Berkshire Eagle with the friendly title, “Neal lays groundwork on push for Trump tax returns,” Neal gave his constituents his side of the story.

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On January 16th, Rep. Maxine Waters (D–CA), the new chair of the House Financial Services Committee, laid out an extensive agenda in a speech at the Center for American Progress. Greeted by a crowded room of supporters, press, and curious activists, Waters was received warmly as she took her place behind the podium. Before delving into her agenda, Waters offered consolation to the several hundred thousand federal workers currently working without pay or placed on unpaid leave due to the longest government shutdown in US history. Her comforting words fell short of veiling her skepticism toward Trump and his administration, which seemed to echo the emotions and fuel the eagerness for accountability of everyone under her voice.

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In an opinion piece in the Washington Post, Andrew Yarrow writes that progressives “seem to assiduously avoid” men’s problems. As examples of men’s problems that progressives avoid, Yarrow points to trends in men’s labor force participation, real median income, poverty, and health.

What Yarrow does not mention is that multi-issue think tanks on the left, such as CEPR, the Economic Policy Institute (EPI), and the Roosevelt Institute, have plenty to say about these problems and have proposed dozens of policies that would help address them. For example, EPI’s detailed policy agenda includes a long list to build worker power, create good jobs, restore full employment, expand access to health care and quality education, and manage globalization for the benefit of workers. There is little question that such an agenda would increase men’s employment, earnings and education, improve their health, and reduce their isolation. Of course, it also would do these same things for women, but that’s obviously a feature, not a bug.

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This version reflects updates and additions made on March 20, 2019.

Shortly after taking office, Richard Neal, the chair of the House Committee on Ways and Means and the one Democrat with the power to obtain Trump’s tax returns, announced his intention to slow-walk the process of requesting the President’s returns. As we wrote at the American Prospect in January, Neal should have requested Trump’s tax returns right away and after that easy part of the committee’s job was over, proceeded to more complex oversight. (alas, Neal has not yet taken our advice)

This oversight should be undertaken with the goal of not only educating the public about problems but also starting a conversation within civil society and among potential future presidents about ways new laws and better executive branch appointees can begin to fix what ails us as a society.

Given Neal’s difficulty taking the initiative, we have decided to provide his Committee with a proposed draft agenda. We hope that Neal takes note, reverses course and charges ahead on oversight.

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You have likely not heard of Joseph Otting, as he has generated comparatively little attention amidst the circus that is President Trump’s executive branch. However, he is a deeply problematic official who has quietly amassed power in critical agencies that receive far too little attention given their impact on the economy and housing.

Amazingly, Otting seems to be using these agencies to act upon resentments he developed as a “controversial,” at best, banking executive, making him a perfect representative of why we are concerned by the revolving door problem in our federal government.

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The Blue Wave brings a different perspective to this Congress. It’s an opportunity to generate compelling policy proposals while holding the Administration accountable.

While this is not a comprehensive agenda, CEPR is pleased to share its domestic policy priorities with the change makers of the 116th Congress. These policies reflect the groundbreaking, rigorous research that CEPR uses to benefit workers and their families and to improve economic equity, corporate governance, government oversight, economic performance.

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Update, February 8, 2019:

On February 7, the bankruptcy judge overseeing the Sears Holdings case accepted Eddie Lampert’s $5.2 billion bid and allowed him and his ESL hedge fund to buy back the department store chain they had driven into bankruptcy. Nearly 200,000 jobs have been lost at Sears and Kmart since Lampert and ESL acquired the chains in a leveraged buyout in 2005.

Lampert and ESL have shown little interest and less aptitude for turning around the fortunes of what had once been the largest retail chain in the US. Their actions in selling off Sears’ prime real estate (to a real estate company that is also under their control) for the benefit of ESL’s investors suggests that their goal is making money for the fund, not turning the remaining 425 Sears stores into a profitable enterprise. Lampert and his hedge fund investors profited as Sears closed stores, laid off workers, and spiraled into bankruptcy. Can they be trusted to focus on turning Sears into a successful retailer, capable of meeting customers’ expectations and providing secure employment for the chain’s remaining employees? Or, will they continue their pattern of slowly liquidating Sears’ stores and pocketing as much as they can from stripping its remaining assets?

The Sears saga is far from over. Stay tuned for what is sure to be the next episode in the Sears version of the Perils of Pauline.

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

The Brookings Institution

How to Adjust to Automation

Automation is likely to exacerbate existing deficiencies in the government approach to worker development and training. Current policies tend to target young people at the beginning of their working lives, leaving many older workers unable to upgrade their skills in the face of shifting labor market demands. The author calls for substantial reorientation in approaches to (and subsidization of) training throughout workers’ lives and points to the disruptive potential of automation and the likelihood of future recession as reasons for urgency.

Who Makes the Rules in the New Gilded Age?

The author makes a robust comparison between the digital information age of today and the Gilded Age that took place a few decades after the Civil War. Both then and now, the rules governing new technology were made by an elite few for their own benefit, resulting in societal instability and inequality. The comparison yields several takeaways for the reassertion of the public interest and the preservation of democracy.

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On January 3, Democrats in the House of Representatives will vote to install Nancy Pelosi as Speaker of the House. The intelligence and street smarts on display as Representative Pelosi went toe-to-toe with President Trump over the border wall reinforces the importance of this choice. No less consequential will be the votes that day on the rules that govern how the House conducts business. Two rules in particular that govern taxation and spending will determine how vigorously Democrats are able to pursue the bold agenda that gave them a 40-seat majority in the House.

On taxation, the Democratic leadership has already made clear that it will scrap a Republican rule that would make it difficult to raise taxes – a rule the Republicans were quick to waive when Trump’s tax cuts for the wealthy raised taxes on some middle-class families. The Democrats had considered leaving this rule in place for the bottom 80 percent of families. To see how this rule would have needlessly tied their hands, consider the following real-life example.

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It is accepted that the Organization of the Petroleum Exporting Countries (OPEC) is a cartel that restrains oil production and keeps prices higher than they would otherwise be. Indeed, this is the premise behind the “OPEC Accountability Act of 2018” in the US Senate. This bill would address high and rising oil prices by trying to break OPEC. US pressure on OPEC — particularly on friendly governments such as Saudi Arabia that are seen as leaders in the organization — to “open the spigots” is not new. Nor is the control of oil exports by producing countries for political purposes. However, the environmental impact of high oil prices is only lightly considered.

There is little debate that motor vehicle industry changes to increase fuel efficiency were a historic and significant environmental advance. When OPEC action has led to increased prices, the quantity of oil in demand has fallen. This was starkly demonstrated when the Organization of Arab Petroleum Exporting Countries (OAPEC) — founded in 1968 — flexed its price-making muscles in the 1970s. Production cuts and an embargo against sale of oil to several countries raised the spot price of West Texas Intermediate (WTI) crude from $3.56 per barrel in mid-1973 to $4.31 later in the year to $10.11 in January. By the time President Jimmy Carter famously suggested we all turn down our thermostats, the price of WTI crude had reached $14.85 per barrel. The price finally peaked in mid-1980 at $39.50 — a 1000 percent increase in seven years. The price of gasoline more than tripled. In response, we got the Department of Energy, the Chevy Citation, and more fuel-efficient Japanese and German automobile imports.

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

The Brookings Institution

Learning from Opportunity Zones: How To Improve Place-Based Policies

Congress’ 2017 tax bill sought to funnel investment to economically distressed neighborhoods by creating Opportunity Zones. However, broad criteria for inclusion gave state decision makers considerable latitude in their selection processes. Some of the designated areas appear to be truly disadvantaged, but many are not. While the program’s design already constrains its benefits for impoverished residents, lackluster geographic targeting further limits its potential.

Work Requirements and Safety Net Programs

This analysis adds to the growing body of evidence that suggests that the subset of SNAP and Medicaid participants targeted for work requirements is vanishing. Meanwhile, the proposed work requirements would disproportionately burden those who are already working or who are legitimately unable to work.

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With the departures of Gary Cohn, Steve Bannon, and Dina Powell from the White House, has Goldman Sachs’ initial influence on the Trump Administration dwindled?

CNN asked that question this spring, noting that “one by one, almost all the high-profile Goldman Sachs alums have left the White House.” But as CNN, to its credit, also noted that while who is up and who is down in the Trump White House changes, leadership at the Securities and Exchange Commission (SEC) has been more stable — and Goldman Sachs’ former lawyer, Chairman Jay Clayton, runs that key agency.

But Jay Clayton, Goldman Sachs’ past and likely future lawyer, is not alone in the Trump-Goldman axis at the SEC. To better understand how corporations consistently manage to maneuver ostensibly independent agencies in their interest, it is instructive to consider one of Clayon’s “Senior Policy Advisors,” Alan Cohen.

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The Independent Federal Agencies Leadership Tracker monitors appointments to agency leadership positions through the confirmation process and beyond. The initiative is part of the Revolving Door Project’s effort to even the playing field by empowering ordinary people with information previously hoarded by special interest groups.

The ability to nominate principal government officials is one of the executive branch’s most important powers. Though their degree of independence varies by agency, appointees that survive the Senate confirmation process have the power to bolster a president’s vision through hiring decisions, budgeting and spending, and formal rulemaking processes. There are over 150 such appointments[1]  to just under forty independent federal agencies tasked with everything from overseeing the country’s nuclear arsenal to ensuring adequate protection for government whistleblowers. The purpose of this tracker is to make it easier for the public to hold their elected officials accountable for federal agency leadership appointments.

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At first glance, the contentious Brett Kavanaugh confirmation process and the Trump Administration’s response to the apparent brutal assassination of Jamal Khashoggi have very little in common.

But there is one disturbing commonality — a shocking lack of transparency into the motivations of key players.

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It was a few days after Christmas when Sears announced plans to close up to 120 Sears and Kmart locations. The year was 2011. With a market cap of only $3.45 billion, Sears looked like a good candidate for a takeover, but there were no takers. As Dan Primack observed at the time, Sears debt was higher than its market cap.

The company was a good candidate for a turnaround. True, many of Sears’ stores were in downwardly mobile neighborhoods. But that didn’t stop Dollar General and Dollar Tree from succeeding. Sears owned high-quality brands — Kenmore appliances, Craftsman tools, and apparel maker Lands’ End. It had mastered “online” retailing before the web and email, back when that meant ordering from a catalog. As for logistics, Sears had figured out how to deliver everything a family needed to build its own house!

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

The Brookings Institution

Seasonally and Weather-Adjusting the Monthly Jobs Numbers
An economist reexamines this month’s Bureau of Labor Statistics (BLS) employment report using three alternative projection methods to account for seasonal weather patterns.

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CEPR’s senior economist Dean Baker argues in The Housing Bubble and the Great Recession: Ten Years Later that the Lehman event marks the peak of a recession caused by the collapse of the housing bubble. The media’s attention on the failure of Lehman Brothers as the driver of the recession to the exclusion of the bursting housing bubble reveals the class conflict apparent in how the Great Recession was, and still is, reported.

While the fear generated by politicians and media was able to get enough support for saving the financial industry, the country was left to deal with the painful fallout from a collapsed housing bubble. Millions lost their homes and jobs. Even a decade later, by some measures, most notably prime-age employment rates, the labor market has still not recovered.

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On the third day of Brett Kavanaugh’s Supreme Court confirmation hearing, Senator John Cornyn trotted out what has become a staple GOP criticism of the nation’s consumer watchdog agency, the Consumer Financial Protection Bureau. The agency, Cornyn lamented, has “vast powers to get into the personal financial information of every American… really more authority than we would ever give any of our intelligence agencies.” It’s a charge that has been echoed by several of his compatriots on the right, including Chairman of the Senate Committee on Banking, Housing and Urban Affairs, Mike Crapo.

The Consumer Financial Protection Bureau has drawn the ire of Wall Street executives and their allies on Capitol Hill since its inception. Formed in the wake of the 2007-08 financial crisis as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act, the Bureau is tasked with regulating financial products and services and protecting consumers from abusive practices by financial institutions. This has resulted in the return of nearly $2 billion to customers who were duped by credit card companies and refunds of over $60 million to Americans extorted by debt collectors.

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Bloomberg published a recent article on how the Trump administration’s proposal to radically reinterpret the obscure “public charge” provision is contrary to the administration’s pledge to reduce paperwork and other regulatory burdens. As I previously wrote here, the Trump proposal would require immigration officials to predict whether an immigrant who is otherwise eligible for a green card might receive even small amounts of supplementary assistance (like SNAP and Medicaid) at any time in the future.

The Bloomberg article does a good job of highlighting some of the new burdens the proposal would place on visa applicants. Unfortunately, the article underestimates the impact of the proposal by saying that “it is expected to affect some 383,000 people annually.”

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