…In fact, following the Constitution and “The Rule of Law” is so important that whenever they are found to have been violated by our government, it seems to me that those politicians and government bureaucrats involved should be required  to resign and those who provided the incorrect legal advice/support should be reprimanded or disbarred. In this way, there is some accountability and our politicians and government officials won’t constantly try to go right up to the edge and over.”,Mike Perry

Notable & Quotable: Immigration Ruling

‘The United States has not made a strong showing that it is likely to succeed on the merits.’

From the Fifth Circuit Court of Appeals’ decision on Tuesday maintaining an injunction that prevents President Obama from changing the immigration system while 26 states sue to overturn his executive order (footnotes omitted):

In summary, the United States has not made a strong showing that it is likely to succeed on the merits. We proceed to examine the remaining factors of the test for obtaining a stay pending appeal.

The remaining factors also favor the states. The United States has not demonstrated that it “will be irreparably injured absent a stay.” . . . It claims that the injunction offends separation of powers and federalism, but it is the resolution of the case on the merits, not whether the injunction is stayed pending appeal, that will affect those principles. The government urges that [the Department of Homeland Security] will not be able to determine quickly whether illegal aliens it encounters are enforcement priorities, but even under the injunction, DHS can choose whom to remove first; the only thing it cannot do is grant class-wide lawful presence and eligibility for accompanying benefits as incentives for low-priority aliens to self-identify in advance. . . . The states have shown that “issuance of the stay will substantially injure” them. A stay would enable [Deferred Action for Parents of Americans and Lawful Permanent Residents] beneficiaries to apply for driver’s licenses and other benefits, and it would be difficult for the states to retract those benefits or recoup their costs even if they won on the merits. That is particularly true in light of the district court’s findings regarding the large number of potential beneficiaries, including at least 500,000 in Texas alone.

…But the Illinois public pension system is at or near the bottom of national rankings. Standard & Poor’s Rating Services said in 2014 that the Illinois system was last among state systems, with just 40 cents available for every dollar of promised benefits. The system sank over decades, as officials promised pensions without setting aside enough to pay them. In its unanimous opinion on May 8, the State Supreme Court cited commissions dating to 1917 that had warned of a crisis as more retired workers started drawing benefits. Warnings were ignored, though, and shortfalls accumulated. It was easy for officials to let that happen because actuarial calculations can understate the true cost of a pension plan, and Illinois had some of the biggest actuarial distortions of any state. In 2013, Illinois became the second state in history, after New Jersey, to be accused of fraud by the Securities and Exchange Commission, which found that it had misled the public about the condition of its pension system. In recent years, with the system estimated to be more than $100 billion short and Illinois’s yearly pension payments consuming more and more of the state’s budget, Democratic leaders broke with unions that had traditionally been their allies.”, Monica Davey and Mary Williams Walsh, “Pensions and Politics Fuel Crisis in Illinois”, The New York Times

“Why don’t we see anyone of significance, in the private financial sector, chiming in about this serious financial problem for our cities, states, and nation? Might it be that so many of them depend on earning money-management fees advising these public pension plans and that “the bigger the unsustainable pension benefits, the more assets to manage and the more they need private money managers to help them take on greater risks to earn greater returns”? I think so. I also think they don’t speak up (or wade in to help solve this problem), because they don’t want to risk the ire of liberal politicians and the public pension fund bureaucrats who decide which private money managers get the business.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Politics

Pensions and Politics Fuel Crisis in Illinois

By MONICA DAVEY and MARY WILLIAMS WALSH

Gov. Bruce Rauner, a Republican who ran on cutting costs, is at odds with Democrats who control the legislature. Credit Antonio Perez/Chicago Tribune, via Associated Press

CHICAGO — Illinois is facing one of the worst fiscal crises of any state in recent decades, largely because it has mismanaged its pension system.

The shortfalls could potentially mean sharply higher taxes and cuts in spending. And even though the state’s highest court just this month threw out a landmark plan to cut worker and retiree benefits, some lawmakers say they may have to find another way to make those reductions as well.

Illinois’s problems resonate well beyond its borders. Pennsylvania, New Jersey and Kentucky are among the states confronting similar problems, and to them, Illinois is a model of what can go wrong — with political intransigence, mounting costs and a complicated legal terrain.

So elected officials, union leaders, investors, fiscal hawks and even bankruptcy lawyers across the country are watching Illinois closely to see how it addresses the crisis. In Washington, some Republicans have even raised pointed concerns that President Obama’s home state might someday seek federal help.

Mayor Rahm Emanuel of Chicago, left, taking the oath of office from Chief Judge Timothy C. Evans of the Circuit Court of Cook County on May 18. A pension overhaul proposed by Mr. Emanuel is being challenged in court. Credit Charles Rex Arbogast/Associated Press

The state faces a range of problems. Illinois has one of the worst-funded pension systems in the nation. Chicago also has a pension crisis, leading Moody’s Investors Service to downgrade its credit rating to junk status on May 12, potentially threatening the city’s ability to borrow.

And the state faces an expected budget deficit of $6 billion, which it needs to address quickly. With just days before a legislative deadline, the new Republican governor, who ran on cutting costs and holding down taxes, is at odds with Democrats who hold a veto-proof supermajority in the legislature.

“Really, it’s not a clear road map at this point,” the governor, Bruce Rauner, said of solving the pension crisis.

“We have to make big decisions,” Mr. Rauner told reporters. “The state is in dire financial straits. Chicago is in big, big challenges. And everybody’s a little bit on edge.”

Courts in other states, including Colorado and Minnesota, have sometimes approved measured pension cuts for public workers, especially for the benefits that current workers have not yet earned. And in Detroit and Stockton, Calif., federal judges have said pensions could be cut in a bankruptcy.

But Illinois has one of the most explicit constitutional pension guarantees of any state. The State Supreme Court found that the landmark plan was unconstitutional, and interpreted the clause in a way that protects even benefits that current public workers have not yet earned, as well as cost-of-living adjustments for retirees.

That has made a dire situation worse and raised the possibility that Illinois, its biggest city and Chicago’s schools must all simultaneously find a way to keep running pension systems that are already unsustainable.

“What has happened is the loudest wake-up call possible,” said Laurence J. Msall, president of the Civic Federation, a watchdog group. “This is a financial tsunami for the City of Chicago and the State of Illinois that will not be fixed without politically painful changes.”

Many states and cities have been doing to a lesser degree what Illinois did: promising pensions without calculating the costs correctly or really preparing to pay them. Other states have pulled back from the brink of fiscal disaster through extraordinary measures, including New York in 1975, to deal with the threat of bankruptcy in New York City, and California in 2012, when Gov. Jerry Brown talked his famously tax-averse voters into approving a tax increase.

But the Illinois public pension system is at or near the bottom of national rankings. Standard & Poor’s Rating Services said in 2014 that the Illinois system was last among state systems, with just 40 cents available for every dollar of promised benefits.

The system sank over decades, as officials promised pensions without setting aside enough to pay them. In its unanimous opinion on May 8, the State Supreme Court cited commissions dating to 1917 that had warned of a crisis as more retired workers started drawing benefits.

Warnings were ignored, though, and shortfalls accumulated. It was easy for officials to let that happen because actuarial calculations can understate the true cost of a pension plan, and Illinois had some of the biggest actuarial distortions of any state. In 2013, Illinois became the second state in history, after New Jersey, to be accused of fraud by the Securities and Exchange Commission, which found that it had misled the public about the condition of its pension system.

In recent years, with the system estimated to be more than $100 billion short and Illinois’s yearly pension payments consuming more and more of the state’s budget, Democratic leaders broke with unions that had traditionally been their allies.

In late 2013, Gov. Pat Quinn signed what was considered a landmark bill that claimed to bring the pensions up to full funding, in part by curtailing cost-of-living increases for workers, capping salary levels used to calculate pension benefits and raising the retirement age for some.

The state argued that the changes did not violate the provision in the State Constitution banning the reduction of pensions because a financial emergency had taken hold. But the Illinois Supreme Court said that any emergency was of the state’s own making and that the cuts could not stand.

That has left officials scrambling at a moment when the state has a divided government for the first time in a decade and the political differences between Mr. Rauner and the Democratic-controlled legislature make compromise difficult. A splintered set of political leaders is now debating options including tax increases, large spending cuts, new pension reductions, changes to the State Constitution and even legislation to permit Illinois municipalities to file for bankruptcy.

Some in Illinois assert that changes to pension benefits remain possible under certain conditions, and various deals are being discussed in the State Capitol in Springfield, though cuts are all but certain to draw more legal challenges.

Mr. Rauner has proposed switching workers into a pension plan that would let them earn less generous benefits starting in July, but he has acknowledged that even he is uncertain whether his idea would hold up in court.

Some leaders want to amend the State Constitution so benefit changes for future years of service can be made — an idea that other states are closely watching. But that path is long and uncertain: An amendment would need support from three-fifths of the House and Senate, then approval from voters.

“I do think there should be attempts to amend constitutions for current employees, not just in Illinois but probably other states, including California,” said Joshua D. Rauh, a finance professor at Stanford University who has written about public pensions.

Others say the pension ruling takes benefit changes off the table and means that the government must pay what has been promised even if it means tax increases and spending cuts.

“This will present major challenges for any policy maker, and they really have no other alternative,” said Richard C. Dreyfuss, an actuary and senior fellow at the Commonwealth Foundation, a public policy research organization in Harrisburg, Pa.

For Chicago, the state pension ruling could not have come at a worse time. The city is facing about $20 billion in unfunded pension liabilities, an additional $550 million yearly pension payment it must start making next year, and a school system that has a $1 billion deficit of its own, underfunded pensions and a new contract for teachers under negotiation.

Only a few American cities have shakier pension systems than Chicago’s, according to a 2013 Pew Charitable Trusts report on 61 major city pension systems.

The State Supreme Court ruling raised new doubts about efforts Chicago has made to shore up two of its four main pension funds. Last year, after discussions with some unions, Mayor Rahm Emanuel pressed state lawmakers to approve an overhaul that would require some workers in the two funds to pay more for retirement benefits, and would slow cost-of-living increases for retirees.

That overhaul is also being challenged in court, but city officials have argued that, over the long term, it would protect the existence of the pensions rather than unconstitutionally diminish them. Talks are underway with those tied to the city’s remaining pension funds, and Mr. Emanuel has sought permission for a Chicago-based casino to help fund those systems.

Facing debts including unfunded pensions, Detroit in 2013 became the largest city ever to seek federal bankruptcy protection. But bankruptcy is not an option available to any state, and legislators would need to pass a law to allow an Illinois city to take such a step. Some here, including Mr. Rauner, have said they support such a notion.

Mr. Emanuel, who was sworn in on May 18 for a second term, disputed Moody’s downgrades as outliers and said Chicago, despite its pension problems, still had a vibrant economy. Asked what the developments all bode for a property tax increase in Chicago, Mr. Emanuel told WTTW television’s “Chicago Tonight” this month that revenue “has to be part of any solution.” Yet Mr. Emanuel said a tax increase would be a last option, not the first one, adding, “You cannot put all the burden on the taxpayers alone.”

Illinois is racing to settle on a budget for the fiscal year that starts July 1, and pension costs are estimated to consume as much as a quarter of general fund spending — an unusually high share and a sign of real trouble.

In a State Capitol that had grown accustomed to being run by Democrats, the election of Mr. Rauner has complicated hopes for a budget solution by Sunday, after which the number of votes required for passage will increase. He opposed an extension of a temporary income tax increase enacted four years earlier and has demanded billions in spending cuts. Democrats accuse him of trying to use the budget impasse to leverage concessions on other elements of his agenda to shrink union power and help businesses. Republicans assert that Democratic leaders are not genuinely negotiating.

By Monday afternoon, Democratic leaders announced that they would offer their own state spending plan, while a spokesman for Mr. Rauner said the Democrats were walking away from the negotiating table and refusing to compromise on critical reforms.

“So far, it looks like partisan bickering is the dominant theme,” said Bob Reed, director of programming for the Better Government Association, a watchdog group based in Chicago. “Governor Rauner and House Speaker Michael Madigan talk about compromise and negotiation, but there’s no evidence of that happening, and time is running out.”

Monica Davey reported from Chicago, and Mary Williams Walsh from Harrisburg, Pa.

A version of this article appears in print on May 26, 2015, on page A9 of the New York edition with the headline: Pensions and Politics Fuel Crisis in Illinois.

…Mr. Krugman likes to fault Mr. Greenspan first for failing to foresee the housing bubble and then for worrying about inflation. He contents himself with the quiescence of the consumer-price index while ignoring asset inflation. Mr. Krugman has emerged as an apologist for the Fed and for Mr. Greenspan’s successor, Ben Bernanke, on whose watch the value of the dollar plunged a staggering 53.1% against gold. That’s the second steepest plunge under any Fed chairman; the dollar shed 80.1% of its value under the hapless Arthur Burns from 1970-78. Burns was chairman when we plunged into the age of fiat money after President Nixon closed the gold window that had operated under the postwar Bretton Woods system. How has that worked out? Between 1948 and 1971, unemployment averaged 4.7%. Since 1971 it has averaged 6.4%. Is there a link between high unemployment and fiat money? Meanwhile, Congress is considering measures to tighten the Fed’s leash: a bill that would require the Fed to publish a monetary rule to guide its policy; another bill to audit the Fed, so Congress can look into the formation of monetary policy; another to end Humphrey-Hawkins, the 1978 law that gave the Fed a mandate to work for full employment. Lawmakers are also considering establishing a monetary commission to explore ending the age of fiat money. A year ago Paul Volcker, the Fed chairman who conquered inflation in the 1980s, addressed a conference on Bretton Woods. He didn’t write a prescription, but he didn’t deny the disease either. “By now,” he said, “I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success.””, Seth Lipsky, “A Liberal Speech Cop Targets Alan Greenspan”, The Wall Street Journal

Opinion

A Liberal Speech Cop Targets Alan Greenspan

The former Fed chairman drops out of a monetary conference after he’s assailed by Paul Krugman.

Dr. Paul Krugman Photo: Bloomberg News

By Seth Lipsky

To the list of questions the left has sought to place off limits to open debate—global warming, same-sex marriage, campaign finance, abortion—add a startling new topic: monetary reform. And what a scalp has just been claimed.

Alan Greenspan, who was chairman of the Federal Reserve for nearly two decades, has pulled out of a conference this summer on monetary reform. He did so May 8, two days after the New York Times NYT -0.85 % published a blog post by Paul Krugman labeling Mr. Greenspan the Fed’s “worst ex-chairman ever.”

Mr. Krugman was set off by word that Mr. Greenspan had been billed as one of the speakers for a counter-conference that is set to take place in Jackson Hole, Wyo., in late August, as the Federal Reserve holds its annual retreat there. Mr. Greenspan declined to comment on why he has withdrawn, but the conference’s sponsor, the American Principles Project, confirmed to me that he did so in the wake of Mr. Krugman’s attack.

The conferees plan to continue nonetheless, and just as Congress itself is fermenting on the need to reform the way monetary policy is made. And so the mightiest central bank in the world will be in one conference center, while its critics will gather in another venue down the street. The proceedings of the reformers will be open to the public: a classic teaching moment.

Yet it horrifies Mr. Krugman, who reacted by attacking Mr. Greenspan personally. He derided the former Fed chairman for worrying about inflation, for generally trusting markets, and for voicing opinions on the central bank he once led.

Mr. Krugman also attacked the American Principles Project, whose chairman is a conservative Catholic, Sean Fieler. “The group,” he writes, “combines social conservatism—it’s anti-gay-marriage, anti-abortion rights, and pro-‘religious liberty’—with goldbug economic doctrine.”

Adds Mr. Krugman: “The second half of this agenda may be appealing to Greenspan, a former Ayn Rand intimate—as Paul Samuelson remarked, ‘You can take the boy out of the cult but you can’t take the cult out of the boy.’ But the anti-gay stuff? And helping these people attack his former colleagues?”

“These people”? The American Principles Project was founded by Robert P. George, a distinguished professor at Princeton, at whose Woodrow Wilson School Mr. Krugman is listed as a professor. Mr. George is vice chairman of the U.S. Commission on International Religious Freedom and a former member of the Civil Rights Commission.

Also a religious Catholic, Mr. George has been praised by Supreme Court Justice Elena Kagan for his “profound and enduring integrity.” Where does the Times come off issuing a post referring to one of his institutions as “these people” and not only attacking it for being “pro-‘religious liberty,’ ” but putting that phrase in scare quotes?

The fact is that Mr. Krugman, who has devoted his column inches to plumping for inflation, is scared of critics who comprehend that there is a moral dimension to the question of money.

The Nobel laureate must have been horrified in September 2010 when, as the value of the dollar was first plunging below a 1,250th of an ounce of gold, Mr. Greenspan warned at the Council on Foreign Relations that “fiat money has no place to go but gold.” Mr. Greenspan is, after all, the author of an essay titled “Gold and Economic Freedom.”

Mr. Krugman likes to fault Mr. Greenspan first for failing to foresee the housing bubble and then for worrying about inflation. He contents himself with the quiescence of the consumer-price index while ignoring asset inflation. Mr. Krugman has emerged as an apologist for the Fed and for Mr. Greenspan’s successor, Ben Bernanke, on whose watch the value of the dollar plunged a staggering 53.1% against gold. That’s the second steepest plunge under any Fed chairman; the dollar shed 80.1% of its value under the hapless Arthur Burns from 1970-78.

Burns was chairman when we plunged into the age of fiat money after President Nixon closed the gold window that had operated under the postwar Bretton Woods system. How has that worked out? Between 1948 and 1971, unemployment averaged 4.7%. Since 1971 it has averaged 6.4%. Is there a link between high unemployment and fiat money?

Meanwhile, Congress is considering measures to tighten the Fed’s leash: a bill that would require the Fed to publish a monetary rule to guide its policy; another bill to audit the Fed, so Congress can look into the formation of monetary policy; another to end Humphrey-Hawkins, the 1978 law that gave the Fed a mandate to work for full employment. Lawmakers are also considering establishing a monetary commission to explore ending the age of fiat money.

A year ago Paul Volcker, the Fed chairman who conquered inflation in the 1980s, addressed a conference on Bretton Woods. He didn’t write a prescription, but he didn’t deny the disease either. “By now,” he said, “I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success.”

Good for him. Maybe Mr. Volcker will get invited to join the American Principles Project event in Jackson Hole. One thing we learned about him in the 1980s, when even some of the supply-siders were screaming about his attack on inflation, is that he knows how to stand his ground. He would not be scared off by the likes of Paul Krugman.

Mr. Lipsky is the author of “The Floating Kilogram and Other Editorials on Money,” just out from New York Sun Books

…The firm is particularly concerned about Japan, one of the largest car markets in the world and a TPP negotiating partner. “We can compete with any car manufacturer in the world, but we can’t compete against the Bank of Japan, ” Mr. Biegun said, referring to the central bank’s role in driving down the value of Japan’s currency under previous governments.”, Ian Talley, “How Much Should a Currency Be Worth? No One Really Knows”, The Wall Street Journal

“Not knowing is no excuse. It’s just too important. You can’t have a free and fair trade agreement with currencies being manipulated by governments or central banks like the Fed, unless you can agree on how to measure this manipulation and hold those manipulating to account. Stated another way, currency manipulation left unchecked (as it is now) can negate all the value (and then some) of free trade agreements.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Economy

The Outlook

How Much Should a Currency Be Worth? No One Really Knows

As debate over Pacific trade deal intensifies, U.S. lawmakers find themselves entangled in calculus that even IMF and WTO haven’t been able to pin down

Haruhiko Kuroda, governor of Japan’s central bank, at the International Monetary Fund and World Bank spring meetings in Washington last month. Photo: Andrew Harrer/Bloomberg News

By Ian Talley

Legislation that targets currency manipulation might make or break U.S. President Barack Obama’s signature Pacific trade deal. But calling out offenders for currency transgressions is far from a clear-cut exercise.

U.S. lawmakers, companies and unions are trying to use pending trade legislation to strike back at countries they say subsidize their industries through devalued exchange rates. They’re finding themselves entangled in a decadeslong debate about currency valuations that has bedeviled leading institutions such as the International Monetary Fund and the World Trade Organization. The complicated currency calculus is likely to persist well beyond any deal, stymieing attempts to rein in exchange-rate complaints through arbitration or diplomacy.

Some U.S. lawmakers are channeling their constituents’ long-held grievances by pressing to incorporate enforceable currency provisions into the Trans-Pacific Partnership, a proposed 12-nation free-trade deal tying together 40% of the global economy. Legislators from manufacturing-heavy states in particular—such as Michigan, Ohio and New York—worry that TPP members and potential future partners such as South Korea and China could offset any gains made through the pact by depreciating their currencies.

A weaker currency slashes production costs and fuels exports, at the expense of competitors overseas. Some economists and companies, for example, say China’s managed exchange-rate policy over the past decade cost the U.S. millions of jobs as Beijing subsidized its exporters by keeping the value of the yuan as much as 40% below the level market fundamentals would suggest.

“Currency manipulation is the mother of all trade barriers,” said Stephen Biegun, a vice president of international government affairs for Ford Motor Co. Ford, like other U.S. auto makers, is backing lawmaker proposals to punish countries that depreciate their currencies to gain a competitive advantage. The firm is particularly concerned about Japan, one of the largest car markets in the world and a TPP negotiating partner.

Yuan notes at a branch of the Industrial and Commercial Bank of China in Shanghai. Photo: Carlos Barria/Reuters

“We can compete with any car manufacturer in the world, but we can’t compete against the Bank of Japan, ” Mr. Biegun said, referring to the central bank’s role in driving down the value of Japan’s currency under previous governments.

Even if U.S. lawmakers’ currency proposals are passed into law, determining the fair value of a currency is a major complication likely to frustrate their efforts to sanction trading partners.

Christopher Padilla, a former Commerce Department undersecretary for international trade, said calculating a currency’s appropriate value would be close to impossible, and create insurmountable operational challenges.

“Ask ten different economists for the ‘objective’ market value of a foreign currency, and you will get ten different answers—all well-argued and backed by econometric analysis, but all different,” Mr. Padilla, now a vice president of government and regulatory affairs for IBM, wrote recently.

GOP lawmakers who support trade legislation have latched onto that argument to fend off congressional Democrats. “To think that Congress can legislate what currency valuations are between countries is almost laughable,” House Speaker John Boehner (R., Ohio) said last week. He noted that lawmakers have been debating the issue for decades.

The IMF is designed to get around political debates, serving as the world’s independent assessor of exchange-rate policies. Founded in the wake of World War II, the organization’s goal was to prevent another global conflict in part by promoting stable currency regimes.

IMF rules prohibit the fund’s 188 member countries from manipulating their exchange rates to gain a competitive advantage. But the fund has never officially declared a country in violation of that prohibition. The fund’s legal department said the prohibition “is a relatively complex provision and not all of its terms are easily understood, or easily applied.”

The latest currency debate presents a circular problem: The leading proposals from U.S. lawmakers rely on the IMF’s determinations. Legislation sponsored by Sen. Charles Schumer (D., N.Y.) would allow the U.S. to treat undervalued currencies as a subsidy, and subsequently apply duties on imports from that country in retaliation.

If trading partners challenged the U.S., as they likely would, the dispute would be arbitrated by the World Trade Organization. The WTO, in turn, looks to the IMF’s expertise on exchange rates.

The IMF, however, is far from precise in those calculations.

Over the past several years, it has been trying to develop new ways to measure currency values that member countries and economists could broadly agree indicate how much exchange rates were undervalued or overvalued. Their answer was to publish a range of possible valuations for major currencies based on several methodologies. The result: a wide range of valuations that, in some cases, contradict themselves.

In a report last year on major economies, for instance, the fund estimated the Japanese yen was between 15% overvalued and 15% undervalued in 2013. As U.S. auto companies and lawmakers seek to counter alleged damage from Japan’s policies, the IMF’s data showing overvaluation would give Tokyo a strong counterargument. It shows the IMF can be of two minds on the value of the yen, and other currencies.

The data also could raise questions about why U.S. car makers have struggled to compete with Toyota and other Japanese manufacturers, even after those companies have opened plants in the U.S. in part to nullify exchange-rate and trade-sanction issues.

The IMF’s double-minded assessment of currency values goes beyond Japan.

South Korea’s won was between 5% and 20% undervalued, it estimated. The Hong Kong dollar was somewhere between 10% undervalued and 10% overvalued. The U.S. dollar was estimated to be 5% undervalued to 10% overvalued. The IMF’s next report, due in coming weeks, will likely show significant changes in the 2014 data.

The IMF is also at odds with the U.S. on China’s currency. While the fund says the yuan is approaching equilibrium after nearly a decade of appreciation, U.S. Treasury officials say it’s still substantially undervalued.

And last week IMF economists signaled again South Korea’s won may be undervalued. But in the same breath, the IMF’s executive board undercut the critique: “Methodological shortcomings amplify the uncertainty surrounding such an assessment.”

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics and a former U.S. trade official, said passage of congressional currency provisions could set the stage for China and other countries to bring a case challenging the U.S. at the WTO. It’s uncertain how the WTO would rule, and “China could mount a strong case,” he said.

The White House—wanting the Pacific trading partners to sign a deal, but needing the votes of a pack of lawmakers pushing for currency legislation—is backing a separate proposal by Sen. Michael Bennet (D., Colo.) that seeks to bolster U.S. oversight of trading-partner exchange rates.

It would apply far tamer sanctions. And in line with the long history of broad interpretations of currency levels, it would give the White House wide latitude to assess countries’ exchange-rate policies and the appropriate punishments.

…The Economic Policy Institute, a liberal research group influential with Democrats in Congress, said the United States-Japan trade deficit reached $78.3 billion in 2013, with currency manipulation being “the most important cause.” That gap, it estimates, displaced 896,600 jobs in the United States. But Obama administration officials and many economists see a more insidious threat to an open global economy. If the Trans-Pacific Partnership were to forbid government interventions that influence currency prices, they argue, other countries could challenge government actions in Washington, like stimulus laws that use deficit spending to bolster demand, or monetary policies like the Federal Reserve’s printing of money to support faster economic growth. These actions, while not specifically intended to influence currency levels, nonetheless affect the value of the dollar in exchange markets. “In 2008, Congress, the president and the Federal Reserve took decisive steps to avert a second Great Depression. Many countries, inaccurately, claimed that these polices amounted to so-called currency manipulation,” Mr. Lew wrote on Tuesday. Adopting the proposed currency rule “could put at risk our ability to take steps needed to protect the U.S. economy in the future, and would be counterproductive to our broader efforts to address unfair currency practices,” he said. “These are risks we cannot afford to take.” Perhaps more seriously, attaching a currency provision to the trade-promotion bill could cause other countries to leave the negotiating table, sacrificing what officials see as far more important moves to open Pacific markets to American goods and services for the singular demand to end currency intervention.”, Jonathan Weisman, “Debate Over Currency Cheating Intensifies in Trade Talks”, New York Times

“A foreign trade deal that doesn’t address sovereign currency manipulation is not worth the paper it is written on. And yes, that means that the Fed and the U.S. government must also be held accountable, to key trading partners, for their currency manipulations.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Debate Over Currency Cheating Intensifies in Trade Talks

By JONATHAN WEISMAN

A highway in Tokyo. American automakers argue that intentional weakening of the yen has raised the cost of imported vehicles. Credit Franck Robichon/European Pressphoto Agency

WASHINGTON — Thirty-six years ago, Japan lowered import tariffs on foreign automobiles to zero, ostensibly opening the world’s fourth-largest auto market to full international competition. Yet United States automakers say 93 percent of the cars on Japan’s well-tended roads are still made in Japan by Japanese companies.

Consumers there simply prefer their country’s cars, Japan has said.

Automakers in the United States, however, say something else has long been amiss: the systematic, intentional weakening of the yen by Japanese policy makers, which effectively raised the cost of all kinds of imports, autos included.

With bipartisan momentum building for a currency amendment to the trade bill, President Obama on Tuesday publicly backed a pledge by the leaders of the Senate Finance Committee and Representative Paul D. Ryan of Wisconsin, chairman of the House Ways and Means Committee, to complete a trade policy enforcement bill by next month.

That bill, which passed the Senate last week, contains its own tough currency measure, but Republicans are quietly working to water it down if not remove it altogether. Mr. Obama backed what he called “constructive tools to address unfair currency practices.”

Opponents say the moment for such harsh measures has passed. The last time Japan overtly interfered with its exchange rate was 2011. China’s currency, the renminbi, which was long held down to help the country’s export industries penetrate markets in the United States and elsewhere, has been gaining value against the dollar. And the Obama administration insists its own diplomacy has effectively dealt with the problem.

On Tuesday, citing those gains, Treasury Secretary Jacob J. Lew sent a letter to the bipartisan leadership of the Senate Finance Committee, saying he would recommend that the president veto a trade-promotion authority bill that included a mandated response to currency manipulation.

Yet American politicians, pressed hard by Detroit, say they are not going to give up this chance to finally legislate a solution.

“This is the first time in recent American history that cheating on currency is getting the kind of attention it’s getting now,” said Senator Bob Casey, Democrat of Pennsylvania. “And that’s a good thing.”

The auto market is the No. 1 example of the impact of currency manipulation on American industries. Outside niche auto brands like Lamborghini, no foreign automaker — not Ford, not Mercedes, not BMW, not Hyundai — has a market share in Japan that reflects what it has in the rest of the world, said Stephen E. Biegun, Ford Motor’s vice president for international government affairs.

The Ford Focus has in recent years been the world’s best-selling compact car, with nearly 1.1 million sold in 2013. That year, 800 were sold in Japan.

“Either the Japanese want to pay more and have less choice in the car market, or global manufacturers, when they get to Japan, forget how to make cars,” Mr. Biegun said in a telephone interview on Tuesday. “That strains credulity.”

Currency manipulation extends throughout the Pacific Rim: in Japan, where Tokyo’s central bank has printed more yen to help its slumbering economy grow; in China, where the renminbi has long been fixed to the dollar rather than allowed to fluctuate in response to market forces; and in Malaysia, where the government has intervened to protect the ringgit against currency traders.

The issue has rarely been more relevant to Congress. The Senate is considering extending trade-promotion authority to the president for as long as six years, allowing this administration and the next to negotiate trade deals that could be approved or disapproved by Congress but could not be amended or filibustered.

The most immediate target of that authority is the Trans-Pacific Partnership, a 12-nation accord encompassing 40 percent of the world’s economy, and stretching from Canada and Chile to Japan and Australia.

Critics of currency manipulation see a rare opportunity to elevate currency policy to the level of standard trade issues, like tariff barriers, intellectual property protection and market access.

The Economic Policy Institute, a liberal research group influential with Democrats in Congress, said the United States-Japan trade deficit reached $78.3 billion in 2013, with currency manipulation being “the most important cause.” That gap, it estimates, displaced 896,600 jobs in the United States.

But Obama administration officials and many economists see a more insidious threat to an open global economy.

If the Trans-Pacific Partnership were to forbid government interventions that influence currency prices, they argue, other countries could challenge government actions in Washington, like stimulus laws that use deficit spending to bolster demand, or monetary policies like the Federal Reserve’s printing of money to support faster economic growth. These actions, while not specifically intended to influence currency levels, nonetheless affect the value of the dollar in exchange markets.

“In 2008, Congress, the president and the Federal Reserve took decisive steps to avert a second Great Depression. Many countries, inaccurately, claimed that these polices amounted to so-called currency manipulation,” Mr. Lew wrote on Tuesday. Adopting the proposed currency rule “could put at risk our ability to take steps needed to protect the U.S. economy in the future, and would be counterproductive to our broader efforts to address unfair currency practices,” he said. “These are risks we cannot afford to take.”

Perhaps more seriously, attaching a currency provision to the trade-promotion bill could cause other countries to leave the negotiating table, sacrificing what officials see as far more important moves to open Pacific markets to American goods and services for the singular demand to end currency intervention.

Phillip L. Swagel, a former economist in the George W. Bush White House who now teaches at the University of Maryland, says that countries like China and Malaysia do intervene to distort the value of their currencies. That, in turn, has hurt American workers. But a deal to promote trade, he argues, is simply not the place to push such a delicate economic issue.

“Each country needs to have the ability to run its monetary policy in the way it sees fit,” he said. “It just seems like a strange thing to use a trade agreement to tell other countries how to run their monetary policies.”

To blunt the political push, Mr. Lew is insisting that diplomacy is rendering legislation unnecessary. He told Congress the Chinese renminbi has appreciated nearly 30 percent against the dollar since Beijing began loosening controls in 2010. China’s trade surplus has declined from 10 percent of its economy before Mr. Obama took office to 2 percent last year.

Japan, which has intervened in currency markets 376 times since 1991, has refrained from obvious manipulation since 2011, Treasury officials say.

“In my conversations with our 11 negotiating partners, I point to the strong feeling in our country, the strong feeling in our Congress” over currency issues, Mr. Lew told an economic conference on Tuesday morning, referring to the Pacific trade negotiations. “And it’s the reason we can have a conversation with them about what can we do in the context of T.P.P. on currency,” he said. “So we will continue the conversation on a very hard issue like currency, and I think we will achieve something.”

But such claims have not assuaged concerns in Congress, within export industries, nor among a group of economists particularly worried about the effects of a chronic trade deficit on the American economy.

Automakers point to the Japanese central bank’s efforts to stoke the economy through the printing of yen, which has helped lower the value of the currency against the dollar. And while China is not a party to the trade negotiations, supporters of the measure say it will send a message to Beijing not to use the excuse of a slowing Chinese economy to resume heavy-handed currency intervention in the future.

“I agree with those assessments,” Jared Bernstein, who served from 2009 to 2011 as chief economic adviser to Vice President Joseph R. Biden Jr., said of the Obama administration’s assurances that Asian nations have scaled back their currency interventions in recent years. “But I take no comfort from them for the same reason that I don’t destroy my umbrella on a sunny day.”

A version of this article appears in print on May 20, 2015, on page B1 of the New York edition with the headline: Debate Over Currency Cheating Intensifies in Trade Talks

The Opinion Pages

Free Trade Is Not the Enemy

By WILLIAM M. DALEY

CHICAGO — IN 1993, President Bill Clinton tapped me as special counsel to lead the fight to pass the North American Free Trade Agreement. As a new trade debate rages in Washington, I’ve thought a lot about that effort. The mistake we made in the 1990s was overestimating the potential of Nafta’s positive impact. Today, we are making the mistake of underestimating what defeat of the Asia-Pacific deal would mean economically, globally and politically.

During the Nafta debate, America was on the precipice of great change. In plain view was the collapse of the Soviet empire, the further liberalization of China’s economy and the intensification of international efforts to integrate economies worldwide. On the horizon was a technological revolution to rival any we had known. In 1993, the Internet was made up of just 130 websites. President Clinton, who felt that a party that embraced the future would always win out over one that shrank from it, firmly believed that adopting Nafta was in the best interest of the nation, the middle class and the Democratic Party. So we muscled the agreement through Congress over fierce Democratic opposition.

The economic impact of the deal was immediately undercut by the collapse of the Mexican peso in 1994. But opponents’ predictions of “a giant sucking sound” accompanying the departure of millions of jobs from American workers never materialized, either. From Nafta’s ratification through the end of President Clinton’s final year in 2000, America added over 20 million jobs, including more than 300,000 in manufacturing. When the manufacturing decline began in earnest in 2001, the main culprits were the offshoring of jobs to China, with which we have no trade deal, and automation.

Now Congress is set to weigh in on the Trans-Pacific Partnership, which encompasses 12 nations on four continents and dwarfs Nafta in economic size and geopolitical importance. Once again, the debate takes place while we are in the midst of great change — a prolonged period of slow economic growth in the United States, China’s re-emergence as a regional power, and a new economic order in which the developing countries of the world produce more goods and services than North America, Europe and Japan combined. Many on the political left and right oppose the liberalization of trade policy, just as they did during the Nafta debate, arguing instead for protectionist measures. But they’re off-base.

There is no path to middle-class prosperity without tearing down barriers to American exports. By 2030, the world economy is expected to grow by $60 trillion, with almost 90 percent of the growth occurring outside the United States. Our success depends on how much of that new wealth is spent on American products. But today, of the 40 largest economies, the United States ranks 39th in the share of our gross domestic product that comes from exports. This is because our products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination.

When barriers disappear, we prosper. In the 17 trade deals the United States has concluded since 2000, our balance of trade in the blue-collar-goods sector went from minus $3 billion to plus $31 billion, according to an analysis of government data by the centrist policy institute Third Way, on whose board I sit. According to the International Trade Administration, export-related jobs pay 18 percent more than similar jobs in the same sector.

Geopolitically, President Obama is also right. If we don’t set the rules for commerce in the Asia-Pacific region, China will. Since 2000, China has concluded trade agreements with 23 countries, Hong Kong and Macau and is now drafting its own Asia trade deal that cuts us out. This deal apparently omits any mention of labor rights and environmental standards common in modern American-led deals. It would keep many of the region’s economies relying on the same substandard factory floor conditions that China and other Asian nations used to become manufacturing giants.

But if the TPP passes, the poorer countries in the pact will have to conform more to the standards of the United States, Japan, Australia, New Zealand and Canada — all signatories to the proposed deal. The need for the China-led agreement disappears, and China’s economic fortunes will be tied to joining our alliance, which would necessitate raising its standards on labor conditions, the environment and the rule of law.

Finally, there is the question of politics. Denying the president the authority to negotiate an agreement to bring before Congress would be a serious rebuke. With much of the opposition coming from his own party, it would tell the nation that Democrats had lost confidence in the economic leadership of the man who steered us out of a near-depression. In effect, Mr. Obama’s own party would be stripping him of the same ability to negotiate trade agreements that every president since F.D.R., except for Richard M. Nixon, has enjoyed.

Nafta’s shadow hangs over this deal, but the truth is that both its upside and its downside are smaller than anyone likes to admit. Now we have a chance to guide a huge section of the world’s economy to reflect our own high standards for commerce. Why would we deny the president the opportunity to seize this moment?

Correction: May 21, 2015

An Op-Ed article on Tuesday incorrectly described South Korea’s involvement with the Trans-Pacific Partnership; it is not a signatory to the proposed trade agreement.

William M. Daley, a managing partner at Argentière Capital AG, was secretary of commerce from 1997 to 2001 and President Obama’s chief of staff from 2011 to 2012.

A version of this op-ed appears in print on May 19, 2015, on page A25 of the New York edition with the headline: Free Trade Is Not the Enemy.

U.S.

Roaming Elk at Point Reyes Bedevil Ranchers in California

By RONNIE COHEN

Tule elk at Point Reyes National Seashore in California. While some elk are fenced in, others roam freely, and they have been encroaching on ranch land. Credit Jason Henry for The New York Times 

POINT REYES, Calif. — Tule elk, an indigenous California breed rescued from the brink of extinction 140 years ago, graze on one side of a wire fence, while dairy cows feed on the other side here at Point Reyes National Seashore, about 30 miles north of San Francisco.

The wild elk and the domesticated cattle appear to share the breathtaking oceanfront bluff harmoniously. But a survey by the National Park Service revealed that 250 of the elk living in a penned-off reserve — nearly half the herd that was re-established in Point Reyes in 1978 — had died between December 2012 and December 2014, most likely from drought-related starvation and thirst. The elk live in a 2,600-acre enclosure at the northern tip of the peninsula.

During the same period, two free-roaming elk herds on the south end of the peninsula, outside the reserve, grew in number from 160 to 212. Ranchers complain that these elk trample their fences, feed on drought-limited forage and drink precious water meant for milk cows.

Ranchers complain that the free-range elk trample their fences and drink precious water meant for milk cows. Credit Jason Henry for The New York Times

“There are ranchers who are literally on the brink of losing their operations because of the lack of forage and the damage from the elk,” said Jeffrey Creque, who farmed at Point Reyes for 25 years and now works on agricultural ecology projects.

The die-off in the elk refuge and the flourishing of the free-roaming flocks have rekindled a dispute over management of these majestic creatures found only in California, where they were half a million strong before the Gold Rush.

“How can the National Park Service trap and contain animals and not have them get water?” asked Gary Giacomini, a former Marin County supervisor who worked to protect Point Reyes from development. “It strikes me as absolutely preposterous, if not criminal, that the park service would let half the elk herd die by depriving them of water. Imagine if the ranchers did that to their cows — they’d all be indicted.”

In defense of the park service, David Press, a wildlife ecologist with the agency, said the plan for managing the elk preserve “wasn’t written in light of the worst drought in records.”

The problem of the tule elk — named after the sedgelike vegetation they favor and pronounced “too-ly” — pits conservationists, who want wild animals to roam the national seashore freely, against ranchers, who want to confine the elk behind fences.

The ranchers’ interests have been integral to the preservation of the 70,000 acres of national seashore here, which President John F. Kennedy established in 1962. In the years that followed, the ranchers agreed to sell their properties to the park service in exchange for the right to lease them back at below-market rates and continue to graze cattle.

Today, about two dozen families farm here in what is seen as a model for sustainable agriculture. At the same time, the national seashore attracts two and a half million visitors a year. Many are drawn to the tule elk, particularly in summer, when males bugle and duel with four-foot antlers in a rivalry for females.

“Point Reyes can be, and is, a shining example of how small-scale family farming and the protection of national park resources can coexist,” said Amy Trainer, executive director of the Environmental Action Committee of West Marin.

“It’s tricky, because you’re managing this magnificent success story of recovery of the native tule elk population,” Ms. Trainer said. “But you have to manage it so you’re not impacting the viability of the agricultural operations.”

As many as 1,000 elk once roamed the area, but by the 1800s, after ranchers converted the habitat to grazing land and hunters killed the elk, the native species all but vanished.

In 1874, four years after the last tule elk had been seen, ranch hands discovered a few survivors in a San Joaquin Valley marsh, and bred and cultivated them to try to restore the species. More than 100 years later, in 1978, the park service brought two bulls and eight females to Point Reyes, erected a three-mile fence and confined them to a cliff overlooking the Pacific Ocean and Drakes Bay at Tomales Point.

The elk reproduced quickly. After rangers counted 465 in 1997, they began firing contraceptive darts at females from helicopters. Biologists then moved 45 elk from the fenced refuge to an open area.

The free-range elk now live in the wilderness as well as on ranch land. One rancher awoke recently to more than two dozen elk in a field next to her cow pasture.

“The elk were supposed to remain in the wilderness and were not supposed to be in the pastoral zone,” the rancher, Nichola Spaletta, said as she prepared to corral her milk cows. “We’ve been forced to live with elk for years, and we would like them placed where they belong.”

Dr. Creque, the former farmer, faulted the park service for failing to manage the elk properly. “The fact that you had 250 elk die of starvation out there tells me that ecologically, we have a problem,” he said. “Clearly the carrying capacity of the land has been exceeded.”

Mr. Press of the park service is optimistic that there has been enough precipitation this winter and spring to carry the preserve’s elk herd through the summer. But if rain-fed ponds dry up, the park service will consider hauling water into the preserve, he said.

The park service is also devising a management plan for the free-roaming elk. Possibilities for culling the herd include dart-administered contraception, scaring the elk away from ranches (a procedure known in wildlife terms as “hazing”) and even having park personnel hunt the elk and deliver their meat to homeless shelters. Not surprisingly, the latter option is seen as a last resort.

The park service is scheduled to release a draft management plan for the elk next year. But to ranchers here like Bob McClure, that could be too late.

Two elk that he calls “jailbreakers” from the preserve live on his 1,500 acres, far from his Holstein herd. But he fears the two elk could multiply to dozens and become pests.

“There’s no hunting to control the population,” he said. “We’re all on borrowed time.”

A version of this article appears in print on May 20, 2015, on page A12 of the New York edition with the headline: While Protected Elk Dwindle, Wild Herds Bedevil Ranchers

…Such alternative lending does have its skeptics. “It’s high-risk lending, an accident waiting to happen,” said Gerard Cassidy, a bank analyst at RBC Capital. One sign of risk came in a March report by Goldman Sachs, which pointed out that the loan approval rate of new small-business lenders is 62 percent, much higher than the 21 percent at traditional big banks., Randall Smith, “For Lending Start-Up, a Man Who’s Been Through a Few Cycles”, New York Times

“I think nearly all of these small business and consumer lending startups are going to fail. In this type of finance, the durable competitive advantage is a low cost and stable source of funds and leverage. In this regard, while regulated banks processes may be slow and screwed up, they beat the pants off of these poorly funded (not in capital….in debt, leverage, and cost of funds). And if they get any scale….welcome to the arbitrary regulation of the wholly unaccountable and highly political Consumer Financial Protection Bureau!!!! Finally, there is a reason that the leaders of these firms are 20-somethings and a few middle managers are 50-somethings with banking/credit experience. The 20-somethings think they can build a better process and credit mousetrap. They can build a better process, until they get regulated by the CFPB. They may be able to build a better credit mousetrap, but I doubt it…and with their high cost of funds, I think they are going to get adversely selected with much riskier credits than their models tell them. And the 50-something credit types they have brought in to provide “window dressing”….they really have no skin in the game…they are just relatively low-level (former bankers) hired guns. Count me as a big skeptic.”, Mike Perry, former Chairman and CEO, IndyMac Bank

For Lending Start-Up, a Man Who’s Been Through a Few Cycles

By RANDALL SMITH

Jerry Weiss, 57, second from left, at work in the offices of Bond Street, a start-up small-business lender in Manhattan. Credit Ruth Fremson/The New York Times

Through three decades, Jerry Weiss wore coats and ties to the offices where he managed credit risks at the nation’s biggest banks — a 50-story Citigroup tower in Queens and the 60-story Chase Manhattan Plaza in Lower Manhattan.

Now Mr. Weiss, who is 57, works out of a tiny two-room office in the Flatiron district, home of the start-up small-business lender he joined last year, where his younger colleagues make fun of his New Balance sneakers and “dad jeans.” His bosses at the start-up, Bond Street, are a pair of apple-cheeked Harvard graduates; and the average age of his seven colleagues is 28.

The culture collision reflects the latest challenge to big banks, in which risk-taking and jobs are flowing to dozens of new alternative lenders. The start-ups aim to reinvent small-business and consumer lending by offering quicker approvals, relying on automated credit checks that include data feeds from bank accounts and tax returns, salted with inputs from social media.

But the new businesses still need a few grizzled veterans who have lived through downturns and have learned what can go wrong. Louis Beryl, the chief executive of Earnest, a consumer lending start-up, said, “When you’re raising a lot of money from debt investors, they want to see someone who’s been through multiple credit cycles.” Earnest has a 45-year-old chief risk officer who previously worked at Barclays.

Mr. Weiss, in an interview at Bond Street’s office, said, “I have seen many online lenders who are bringing in some bright young people into the role I am doing, but they are folks who have never made a loan in their lives.” He added, “They think it’s all science and math, but they’ve never been through a recession.”

Bond Street is one of 25 digital small-business lenders that rely heavily on data analysis in making decisions, aiming at a market with $300 billion in outstanding loans, according to a report in April by Autonomous Research. Lending Club and several dozen other new lenders compete for an additional $450 billion in consumer and student loans. Such marketplace loans have risen from $1.2 billion in 2012 to $9 billion last year, according to Foundation Capital.

Bond Street was founded in October 2013 by David Haber, 27, its chief executive, who had investing experience at two firms, and Peyton Sherwood, 33, its chief technology officer, who had been a computer science major.

Mr. Haber, a San Diego native whose father managed a small department store in Tijuana, Mexico, previously worked at Spark Capital, where he helped partners invest in alternative lending start-ups like Orchard and Behalf, and the bank-data start-up Plaid.

It doesn’t hurt that Mr. Haber’s father-in-law, George Hornig, a Wall Street veteran of Wasserstein Perella vintage, made an angel investment in Bond Street and an introduction to the securities firm Jefferies, which will supply funds for the firm’s lending.

“We wanted to reinvent the small-business lending process, but we realized we didn’t have a credit background,” said Mr. Haber, who wants Bond Street to be faster, simpler and more open than banks. His firm offers loans of $50,000 to $500,000 at annual rates of 8 to 25 percent.

As he canvassed bank lending executives before starting Bond Street, Mr. Haber spoke with two Orchard founders, who had both worked for Mr. Weiss on Citigroup’s small-business risk team from 2009 to 2013.

“A lot of people his age and his level of experience would work at a very high-altitude level and not get into the details,” said David Snitkoff, one of the Orchard founders. “But Jerry also gets his hands dirty and gets things done on the ground.”

Mr. Weiss had previously worked in credit cards at Citigroup and JPMorgan Chase, and in small-business and branch-bank credit risk at Bank of America. In 2000, he helped with the creation of a small-business credit database shared by a half-dozen big banks.

Born in Far Rockaway, Queens, Mr. Weiss grew up in suburban Chappaqua, N.Y., attended Reed College in Portland, Ore., acquired a taste for the Allman Brothers Band and the Grateful Dead, and later earned a business degree at New York University. Though he wears T-shirts and sweaters to the office, as his colleagues do, he does have a thick gray beard.

“That was definitely a thought we had at the beginning — he’s a little bit older than most start-up people,” Mr. Sherwood said. But Eddie Serrill, Bond Street’s head of business development, said Mr. Weiss had “jumped in with both feet.”

Mr. Weiss has thrown himself into team building, manning the grill at a cookout to celebrate Bond Street’s first loan, arranging for water-skiing at the firm’s first off-site meeting at a borrowed Hamptons rental house last summer and helping with a recent paintball event.

At the big banks, Mr. Weiss sometimes seemed like “a cog in the wheel of upper management,” said his longtime friend, the food photographer Allen Owens. What’s more, Mr. Weiss chafed at being considered one of “the new villains,” with bankers being blamed for the 2008 financial crisis, his son Aaron said.

Mr. Weiss himself recalled being stuck in “endless meetings and endless levels of approvals for everything.” At Citigroup, he said, it took three years to develop a small-business underwriting platform and 18 more months to put it into operation. He added, “I wanted to break free and have fun again.”

But the going hasn’t always been smooth. Bond Street had to freeze new loans between last December and April while it sought new investors and loan sources. It recently obtained an infusion of new venture capital and a Wall Street lending facility that will allow the hiring of 25 employees over the next 18 months.

Such alternative lending does have its skeptics. “It’s high-risk lending, an accident waiting to happen,” said Gerard Cassidy, a bank analyst at RBC Capital. One sign of risk came in a March report by Goldman Sachs, which pointed out that the loan approval rate of new small-business lenders is 62 percent, much higher than the 21 percent at traditional big banks. Others worry that borrowers might skip the payments on such loans more readily than they would with other forms of debt.

Recognizing the risk, Mr. Weiss is bringing a distinctive quantitative approach to alternative lending. He has helped design Bond Street’s loan approval process to reflect automated inputs from credit bureaus, bank accounts, tax filings and QuickBooks online financial statements. The process also includes targets like expected profits of 1.2 times debt service. After seeing five past delinquencies in one applicant’s report, he observed, “This is a decline.”

But he also values personal contact with applicants to gauge their path to profitability. A coffee shop owner who was hoping to consolidate $55,000 in credit card debt into a new loan of $100,000 said on a call that he was seeking the money for “capital expenses, new hires and to load up the shelves.”

Mr. Weiss asked about the shop owner’s latest tax filings and QuickBooks updates, and about a new baby, who was audible in the background. “Customers like talking to the chief credit officer,” he said after the call. “And I love hearing their stories.”

A version of this article appears in print on May 14, 2015, on page B7 of the New York edition with the headline: Standout at Business Lending Start-Up, Dad Jeans and All.

…and the district will have to make a roughly $700 million pension payment for teachers in fiscal 2016. Maybe Ms. Lewis can get one of Chicago’s teachers to do the math for her…..Teachers (already) are also comparatively well compensated. The Illinois State Board of Education says the average Chicago teacher salary is about $71,000 a year. That compares to Chicago’s median salary of $47,270 in 2009-2013, according to the Census Bureau. The average starting pension for a Chicago teacher retiring in 2011 after a public-school career was $77,496, according to the Illinois Policy Institute. The city will pay a teacher who retired in 2011 some $2.4 million during retirement, up from $1.35 million a decade earlier.”, The Wall Street Journal Editorial Board,  May 14, 2015

Opinion

Why Chicago’s Bonds Are Junk

The average teacher’s annual pension in 2011 was $77,496.

Photo: Getty Images

Illinois’s domination by public unions has the state dancing on the edge of fiscal freefall. The state Supreme Court ruled last week that Springfield can’t alter pension benefits, prompting Moody’s this week to downgrade the debt of the city, its public schools and park district all to junk status. Now the Chicago Teachers Union wants to make another contribution to the collapse.

In May the union filed an unfair labor practice complaint with the Illinois Educational Labor Relations Board, accusing the school district of failing to bargain in good faith and rejecting mediation to reach a new contract. The union’s complaint? The school district wants teachers to chip in more for their pensions. The horror.

The dispute goes back to 1981, when in lieu of larger pay raises the district agreed to pick up seven percentage points of the teachers’ contribution of 9% of their salaries to their pensions. This is on top of the district’s own contribution. Teachers have since become accustomed to paying only 2% of their salaries for pensions, about $1,496 a year on average.

Many current teachers weren’t in the school system in 1981, but they like the perk of paying a fraction of their pension cost. Who wouldn’t? The 2% contribution is far less than the 9% contributions made by many other public employees in Illinois, let alone the 6.2% payroll tax for Social Security or what private workers pay into 401(k)s.

Teachers are also comparatively well compensated. The Illinois State Board of Education says the average Chicago teacher salary is about $71,000 a year. That compares to Chicago’s median salary of $47,270 in 2009-2013, according to the Census Bureau. The average starting pension for a Chicago teacher retiring in 2011 after a public-school career was $77,496, according to the Illinois Policy Institute. The city will pay a teacher who retired in 2011 some $2.4 million during retirement, up from $1.35 million a decade earlier.

Union President Karen Lewis called the city’s proposal “reactionary and retaliatory” because the union backed incumbent Rahm Emanuel’s challenger in the recent mayoral race. The better description is inevitable. The district faces a $1.1 billion deficit in the next fiscal year, the city’s teachers pension has an unfunded liability of $9.6 billion, and the district will have to make a roughly $700 million pension payment for teachers in fiscal 2016. Maybe Ms. Lewis can get one of Chicago’s teachers to do the math for her.

…In 1984, when the Census Bureau started compiling these statistics, the ratio was 10 to 1. Yet programs to benefit older Americans, like Social Security and Medicare, increasingly are eating up the budget of a federal government that is $18 trillion in debt. Those two programs account for more than four dollars out of every 10 in the federal budget…….Protecting the entrenched interests of the old at the expense of the young is getting to be a U.S. tradition. AARP, originally the American Association of Retired Persons, spent $25 million on lobbying in the 2012 presidential-election cycle and more than $16 million for the 2014 midterms. AARP consistently ranks in the top 1% of lobbyist spending tracked by the Center for Responsive Politics.”, Dina Furchtgott-Roth and Jared Meyer, “Dear Class of 2015, You’re in Big Trouble”, The Wall Street Journal

Opinion

Dear Class of 2015, You’re in Big Trouble

Facing unemployment, loan debt, expensive retiree payouts and more problems, young people need a lobby.

Photo: Getty Images

By Diana Furchtgott-Roth And Jared Meyer

Over the next few weeks 3.5 million of you will graduate and try to find jobs. We’re sorry to tell you that achieving success will be more difficult than it was for your parents or grandparents. Not because you’re less intelligent, or lazier or less deserving of realizing the American dream. The primary reason why today’s graduates face a daunting future: Government is making life more difficult for you.

The youth unemployment rate for those between ages 20 and 24 is 9.6%, compared with 4.5% for those 25 and over. But America’s double-cross doesn’t start when you receive your diploma. It has been going on since elementary school, with too many American children badly educated at schools where ill-qualified teachers are protected by unions.

As a result, the U.S. has steadily dropped in international education rankings—to an estimated 27th in mathematics in 2012 among Organization for Economic Cooperation and Development countries, down from 23rd in 2003. For those of you who majored in education, guess what? When bad teachers can’t be fired, there are fewer job openings for you.

Harvard economist Raj Chetty has estimated that replacing a teacher in the bottom 5% of skills with a teacher of average quality results in an extra $9,000 in lifetime income per student. Replacing the bottom 5% of the nation’s 3.3 million public-school teachers would have collectively increased the lifetime income of 2015 graduates by $31 billion.

Seventy percent of you are graduating with student-loan debt, and your average debt is $27,000, according to the New York Federal Reserve. It is the current system of federal student aid that is raising your college tuition, and your debt will burden you for years after you graduate.

It gets worse. After an inferior education and taking on thousands of dollars in debt, you will find that state occupational-licensing requirements will stop many of you from starting a business. These rules are said to protect public safety, but instead they protect established businesses and hurt you.

Forget about starting a tree-trimming business in Alabama, California, Connecticut, Louisiana, Maine, Maryland or Rhode Island, because doing so requires a license. How the greenery in the 43 other states survives unlicensed trimming is a mystery.

If you live in Florida, Nevada, Louisiana or the District of Columbia and want to be an interior designer, good luck: It will take six years of experience (and paying average of $364 in fees) before you can get a license. Even becoming an emergency medical technician is easier: You need to take an average of 33 days’ training and pass two exams.

About those unpaid internships: Don’t count on one from a for-profit company in banking or publishing. These might provide a path to a permanent job, but they have been practically banned by the Labor Department. The government and community organizers, on the other hand, are still allowed to sign up unpaid interns.

Let’s say you do eventually find work. Then you will start paying taxes, mostly to subsidize government programs that increasingly benefit middle-aged and older Americans, many of whom have jobs and assets. The average household headed by an adult 65 or older has nearly 50 times the wealth of the average household headed by an adult younger than 35. In 1984, when the Census Bureau started compiling these statistics, the ratio was 10 to 1.

Yet programs to benefit older Americans, like Social Security and Medicare, increasingly are eating up the budget of a federal government that is $18 trillion in debt. Those two programs account for more than four dollars out of every 10 in the federal budget.

Oh, and many of you will pay taxes to help out state governments that are among those facing a collective $5 trillion in unfunded liabilities, mostly from unfunded promises made to government retirees.

You’ll even be expected to pay for the health care of older Americans with your higher health-care premiums under the Affordable Care Act, just so older people get to pay less. So considerate of you.

President Obama isn’t to blame for all of this (except for the higher health-care premiums and the vanishing of unpaid internships). Most of these destructive policies began long before the current administration. Protecting the entrenched interests of the old at the expense of the young is getting to be a U.S. tradition.

AARP, originally the American Association of Retired Persons, spent $25 million on lobbying in the 2012 presidential-election cycle and more than $16 million for the 2014 midterms. AARP consistently ranks in the top 1% of lobbyist spending tracked by the Center for Responsive Politics.

With the extra time many of you will have on your hands after graduation, you might want to consider starting your own group to put pressure on Washington to change its ways: the American Association of Young Persons.

Ms. Furchtgott-Roth is a senior fellow at the Manhattan Institute, where Mr. Meyer is a fellow. Their book, “Disinherited: How Washington Is Betraying America’s Young,” is out this week from Encounter Books.