Sunday, June 22, 2014

NYC | de Blasio's Cities of Opportunity Task Force

I wrote this in 1988.
June 22, 2008–At the 82nd annual U.S. Conference of Mayors meeting yesterday, Sacramento Mayor Kevin Johnson–who heads up the USCM–announced a new Task Force.

It will be called the "Cities of Opportunity" Task Force and it will be chaired by New York City Mayor Bill de Blasio.

The Task Force will address issues of inequality, through a higher minimum wage, expansion of affordable housing and ensuring every child has access to pre-K.

Mayor de Blasio said: 
Mayors are starting to respond to this crisis, and this task force is going to organize and focus the progressive ideas coming out of cities across the U.S., and put city issues back on the national agenda. Cities are the problem solvers and the centers of innovation. As Mayors, we are on the front lines. It is our responsibility to create more opportunities for our citizens and more equitable cities.
John Tepper Marlin (L) with new
Chair of "Cities of Opportunity"
Task Force.
The task force's Vice Chair will be Boston Mayor Martin J. Walsh. New York City and Boston are two cities with very high (among top 13 cities) Gini Coefficients, i.e., very high inequality of income.

Mayor Walsh:
This is a national problem, but we feel the impact of income inequality particularly in Boston's neighborhoods. Some areas have seen a development boom, significant drops in crime statistics, strong advances in our education system; and yet, we struggle with concentrations of real poverty and unemployment in other neighborhoods. This inequality makes it difficult to sustain the strong workforce, active consumer base, and vibrant civic life that every city needs for lasting growth. We need solutions to bridge this growing divide, and I applaud Mayors Johnson and de Blasio for their work. I'm proud to participate in this Task Force.
The task force will spend a year developing and sharing governing methodologies to empower cities to make equity a central governing principle.

The task force will develop an action plan for cities to take action in developing aggressive equity agendas and implement real change. This plan will include practical tools and best practices – both previously executed and newly developed by the task force – which cities can use to make the most equitable decisions that they can, with the powers that they have, to create more equitable cities.

The Cities of Opportunities Task Force will conduct its kickoff meeting in New York City on August 10-11, 2014 where mayors will develop the groundwork for the scope and direction of the task force's work.

Philadelphia Mayor Michael Nutter
I am pleased to join Mayors de Blasio and Johnson and a host of other mayors from across the country to tackle inequality in America's cities. Cities are incubators of change and innovation, and mayors are at the forefront of it all – we get things done. Providing equitable opportunity directly correlates to the success of our cities, our regions and our country...
Los Angeles Mayor Eric Garcetti
I look forward to partnering with Mayors Emmanuel and de Blasio on this transformative task force that will look to develop policies aimed at addressing the needs of our historically underserved and disenfranchised communities.
Dallas Mayor Mike Rawlings
We as a nation will only succeed when our cities succeed together. The gap between those of means and those that are not as fortunate will only be closed with new, long-term, non-partisan and pragmatic solutions.
Houston Mayor Annise Parker
Even in cities with robust economies like Houston, too many are locked outside looking in on opportunity. We are pleased that the Conference of Mayors is focused on this issue to ensure that all residents of every city can have equal opportunities to thrive. This is our call to action.

Thursday, June 19, 2014

Long Island Economy in an Election Year

Queens, Nassau and Suffolk Counties are comparable
economies, with 544,000 (Queens) to 640,500 (Suffolk) jobs.
With all of its U.S. reps in DC up for re-election in 2014, the latest quarter of data on jobs and wages is worth looking at with an eye to what it means for the political environment.

For example, in  New York's First Congressional District, which accounts for most of Suffolk County, both of the main candidates for the Republican nomination on June 24 (Lee Zeldin and George Demos) have announced that they plan to make their main issue the economy.

They plan to paint the incumbent, Rep. Tim Bishop, as a pro-regulation, pro-spending Democrat who has contributed to higher taxes in Suffolk County.

So it will pay to stay a step ahead of the electoral clamor and look at three counties that may help establish the context of the debate - Queens, Nassau and Suffolk. Their fourth-quarter 2013 jobs and wages data were just published by the Bureau of Labor Statistics this morning.
  • The three counties are remarkably similar in economic size, with between 49,000 (Queens) and 53,300 (Nassau) establishments.
  • Of the three, Suffolk County has the most jobs, 640,500. Nassau is in second place with 616,700 jobs and Queens with 544,500.
  • It is true that the growth in jobs in Suffolk County compared with the fourth quarter of 2012 is the slowest of the three counties, 1.2 percent, behind Queens with 1.5 percent and Nassau with 2.3 percent. But Suffolk's growth is near the U.S. median for the 335 largest counties - it's not terrible.
  • Meanwhile, on the wage front, Suffolk has done very well. The average wage per week in the fourth quarter was $1,079, an increase of 1.9 percent over a year earlier. This is in the top one-sixth of all large counties in the nation. Suffolk's weekly wage is nearly as high as that of Nassau, at $1,120.
  • However, during the same year that Suffolk's wages were rising, Nassau's were falling by 1.5 percent. Both Nassau and Suffolk wages are higher than in Queens, which has a weekly wage of $955, a 2.1 percent increase over 2012.
The job and salary data do not provide a prima facie case that either Suffolk or Nassau County suffers from over-regulation or over-taxation, at least compared with the rest of the United States.

If prior elections are a guide, however, don't under-estimate the ability of campaigners to find data to support the economic case they want to make against an incumbent.

If you torture data enough, they will confess.

NYC - Manhattan Tops 2.5 Million Jobs in 4Q13

Manhattan Jobs Passed 2.5 Million in 4Q13
Manhattan jobs grew 2.4 percent between the fourth quarter of 2012 and the fourth quarter of 2013, the Bureau of Labor Statistics announced this morning.

The base of 2.5 million jobs will be a marker for Mayor Bill de Blasio.

The Manhattan (aka New York County) growth rate was among the 100 best of the 335 largest counties in the United States.

The best-performing borough in New York City was Brooklyn, with 4.5 percent growth, followed by Staten Island with 4.4 percent and the Bronx with 2.9 percent. Queens trailed with 1.5 percent growth.

The average weekly wage in Manhattan fell 3.3 percent over the year, to $2,041, trailing San Mateo, Calif., which was $2,724 in 4Q13.  San Mateo's income fell even more than Manhattan's, as did that of Washington, DC and Tulsa, Okla.

Wednesday, June 11, 2014

Sunday, June 1, 2014

Bank Regulation: Admati and Hellwig's Home-Run Rethink

The Bankers' New Clothes
While Thomas Piketty's book has been getting great public attention, being compared with Keynes's General Theory, the March 2014 Journal of Economic Literature includes a a review by Roger B. Myerson of the University of Chicago that points to another as of equivalent importance.

It should not be surprising that the Great Recession would call forth two such heralded books appearing within months of each other. Like the Great Depression, the crisis of 2007-2008 and its aftermath was a big, complex event requiring corresponding intellectual effort to understand and interpret.

Myerson argues that Anat Admati and Martin Hellwig have successfully made such an effort, considering why bank regulation failed. They have come up with a book that will be important and lasting. The book, The Bankers' New Clothes (Princeton and Oxford: Princeton University Press, 2013), makes some surprising arguments.

One surprise is that they recommend that no provision be made for the riskiness of assets in the Adequacy of Bank Capital (ABC) requirements. This has been a cornerstone of U.S. bank examinations and the Basel equity capital standards. American bank examiners for decades have categorized each bank's loan portfolio based on risk, and risky loans are charged against equity capital. When I worked for the FDIC as a financial economist, 20% of "substandard" loans were charged against capital, 50% of "doubtful" loans and 100% of loans were categorized as "loss".

The authors argue for two main changes in bank regulation:
  • Equity-capital adequacy should be set at 20-30 percent of total assets. This gives a substantial cushion against losses and means equity holders have a higher stake in the bank.
  • Banks should not be allowed to pay any dividends to stockholders if their equity is below 20 percent.
This proposal has the powerful merit of simplicity. The Dodd-Frank legislation attempted to patch back up the easily understood system created in 1933 with the Glass-Steagall legislation. Dodd-Frank has become mired in procedure as many of the provisions in the lengthy patch-up required further action by the various regulatory agencies. Bank lobbyists have been ready at every step to minimize the impact of regulatory action.

Myerson explains well why Admati and Hellwig are on the right track. I agree with him and them. The Glass-Steagall Act's simplicity contributed to its swift passage and long life. In fact the Steagall part, relating to the FDIC, is still in place. The banks in 1933 wanted deposit insurance. Carter Glass's wall between banks and investment banks was the price that the banks paid for putting the Treasury at risk for deposit insurance. But the banking industry ended up at the turn of the century taking the deposit-insurance cheese while dismantling, over nearly seven decades, the Glass half of Glass-Steagall.

It may be difficult now - to change the metaphor - getting the stray chickens back in the banking coop and the speculative foxes out. But the Admati-Hellwig solution of 20-30 percent equity capital requirements for banks offers this possibility. Myerson's review ends:
Economics professors can't do it alone. Political leadership is also needed to get the public's attention and communicate the new principles by which the public should judge its financial institutions, regulators, and politicians.