President Trump has named Jerome Powell as the next chairman of the nation’s central bank.

Pending Senate confirmation, he will replace Janet Yellen, the first woman to head the Federal Reserve, who was appointed by President Obama in 2014. Yellen’s term expires in early 2018.

By tapping Powell, Trump is breaking with tradition. Presidents usually allow their predecessor’s Fed chair picks to remain on the job for a second term. But Powell is reportedly considered a safe choice who is likely to continue on with his forerunner’s policies.

Jerome Powell will replace Janet Yellen, the first woman to head the Federal Reserve, who was appointed by President Obama in 2014

Who is Jerome Powell?

Powell, a Republican, has been a member of the Federal Reserve’s seven-member Board of Governors since 2012. He also served as an Undersecretary of the Treasury for George H.W. Bush, and was an attorney and investment banker in New York, according to his Federal Reserve profile.

He was a partner at the private equity firm Carlyle Group, where he reportedly amassed a personal fortune of up to $55 million. He has a reputation as a consensus builder who studies issues carefully before making decisions, according to the Washington Post.

Yellen has overseen interest rate increases as the economy has improved, and ended a bond repurchase program associated with the financial crisis.

Powell is considered a reasonable pick who won’t dramatically alter the course of the central bank. He is, however, considered by some to be more pro-business with regard to regulations than his predecessor.

What does the Federal Reserve do?

The Federal Reserve is the central bank of the U.S. It oversees 12 district banks, which together are responsible for the monetary policy of the U.S.

The Federal Reserve’s mission is to oversee the health of the nation’s financial system. It attempts to keep the economy strong and growing by enacting policies to maintain low inflation and healthy employment levels. It does this primarily by adjusting inflations rates, and lending money to the nation’s banks.

The central bank was responsible for making sure the financial system didn’t freeze up during the financial crisis that began in 2008. It flooded the banking system with cash, and decreased interest rates to below 0%. It also was responsible for a program called quantitative easing, where it bought up trillions of dollars worth of government bonds, which helped shored up the financial system.

The post Who is Jerome Powell? Meet Trump’s New Fed Chair Pick appeared first on Stash Learn.

The move could have a big impact on industries that create greenhouse gases, such as the energy sector, as well as on investors who are concerned about the environment.

But what does that all mean? We break it down.

What’s the EPA?

The EPA is the federal agency charged with protecting the environment and ensuring that federal regulations around human health and the environment are effectively enforced. It was launched in 1970 by President Richard Nixon.

What are greenhouse gases?

These are gases, created primarily by industry and human activity, that trap heat in the atmosphere and are thought to contribute to global warming. They include carbon dioxide from burning of fossil fuels like coal and oil, methane from decomposing animal waste, nitrous oxide from agricultural activities, and fluorinated gas from industrial processes.

What regulations will be rolled back?

The Clean Power Plan (CPP). The CPP, created by the Obama administration and put into play in 2015, would have moved the energy industry primarily away from coal, which together with natural gas reportedly produce one third of all carbon emissions in the U.S.

The repeal of CPP also would effectively end U.S. participation in the Paris Agreement, an accord signed by 168 countries in 2015.

The CPP, which was decades in the making but has been held up in court, set goals of reducing greenhouse gas emissions by industry to 30% below 2005 levels by 2030. It empowered states to make necessary changes, which included upgrading existing energy infrastructure to pollute less, switching to renewable energy sources like solar and wind, and investing in or creating new energy efficiency programs, among other things.

Why is the EPA pulling out?

The Trump administration, which guides the EPA’s decisions, campaigned on the promise of rolling back numerous business regulations put into place during the Obama era, which it believes hinder economic growth. It also vowed to put coal miners back to work. Although use of coal for power has been on a steep decline for years as the U.S. relies increasingly on other sources of power, exiting the CPP could provide a boost to the coal mining industry.

Pruitt also said on Tuesday that by giving states specific greenhouse emission reduction goals, the CPP represented an overreach of federal authority into state activities.

What would the impact be?

Rolling back the plan could save power producers an estimated $33 billion in additional compliance costs, the EPA said in a press release on Tuesday. But environmentalists say there will be steep costs beyond dollars and cents. Those would include a negative impact on  air quality, which it says will worsen if coal use increases, and will disproportionately affect the health of children, according environmental group the Sierra Club.

The repeal of CPP also would effectively end U.S. participation in the Paris Agreement, an accord signed by 168 countries in 2015. The goal of the Paris Agreement is to reduce global greenhouse emissions starting in 2020.

EPA rollback: It’s not a done deal yet

The EPA proposal to do away with the CPP must first go through a public comment period that could last for months, and requires the EPA to come up with a formal replacement plan. Legal challenges could arise, as the EPA is specifically charged with regulating carbon emissions from power plants, per a decision by the U.S. Supreme Court in 2011.

It’s interesting to note that about 25 states are reportedly on track to meet CPP requirements.

More than half of people in the U.S., regardless of political party, are concerned about global warming, and an equal number say they think that human activities such as industrial emission of greenhouse gases, are a the prime contributing factor, according to recent research from Yale Program on Climate Change Communication.

Quick summary: 

Earlier this week, the head of the Environmental Protection Agency said his agency would repeal an Obama-era program called the Clean Power Plan (CPP), which called on state energy producers to reduce their carbon emissions.

The repeal could boost the fortunes of coal miners, the coal industry, and other energy producers, but it likely comes with steep environmental costs.

It’s not a done deal: The EPA proposal to do away with the CPP must first go through a public comment period that could last for months, and requires the EPA to come up with a formal replacement plan.

The post What Would an EPA Rollback Mean for the Energy (and Green) Sector? appeared first on Stash Learn.

Tax reform was a signature plank of President Trump’s 2016 presidential campaign, and Republicans say it’s necessary to give a boost to the economy. Getting tax reform passed isn’t as easy as it sounds.

The last time our nation’s tax system was significantly overhauled was in 1986 under then President Ronald Reagan, when the top tax rate was reduced to 38.5% from 50%, and the number of tax brackets was consolidated. The overhaul also eliminated numerous tax loopholes and shelters. Passing it required enormous give and take from Republicans and Democrats alike.

Tax brackets have not received a major overhaul since the 1980s under President Reagan

In 2014, there was an attempt at bipartisan tax reform. But that effort was shelved by Congress because it lacked the necessary votes. Now that Republicans control Congress, experts are predicting that the odds may be stacked in favor of an overhaul.

Nevertheless, it will still take bipartisan cooperation to make President Trump’s tax plan a reality. Experts on both sides of the aisle have cautioned that the same divisions that derailed Republican plans to gut the Affordable Care Act (ACA) could play out with tax reform.

Here are highlights of the proposed changes to the tax code:

• For individuals, just three tax brackets instead of the current seven. The rates would be 12%, 25%, and 35%.
• The bottom tax rate of 10% would be eliminated, made up for by an increase in the standard deduction, which is the basic tax credit individuals and families receive if they don’t itemize their taxes.
• The standard deduction for an individual taxpayer would nearly double to $12,000, and $24,000 for families.
• Taxes would be eliminated for individuals making $12,000 a year or less, or families with income of $24,000 or less annually.
• The alternative minimum tax, an extra tax for high income earners to make sure they don’t abuse tax loopholes, would end.
• The corporate tax rate would be slashed to 20% from its current top rate around 35%. Many small businesses would see their top rate drop to 25%.
• Wealthy taxpayers would be eligible for a special break: the plan would eliminate the death tax for all estates. Currently there is a 40% federal tax on estates over $5.46 million.
• The plan would eliminate a state and local income tax deduction credit estimated to be worth $1.3 trillion over the next decade, which goes predominantly to residents of Democrat-leaning, high-tax states California, Connecticut, New York, and New Jersey.

Tax reform: A tough slog ahead

Details of this proposal for tax reform will need to be ironed out by both houses of Congress, with support from both Republicans and Democrats. This may not happen overnight. It took Reagan two years to get his tax reform through Congress in the 1980s. Expect current tax reform to take months, or longer, to hammer out.

Although Republicans say tax cuts will fuel economic growth, the plan would reportedly add more than $1 trillion to budget deficits over the next decade, according to reports.

Key takeaways

• The Trump Administration released its plan on Wednesday for a major tax overhaul.
• Among the proposals would be compressing tax brackets to three from the current seven.
• The standard deduction for an individual filer would double to $12,000, and for a family to $24,000. The tax rate would also be slashed to 20% for big corporations, and 25% for small businesses.
• Tax reform was a major election issue for Trump, as health care reform was. Health care reform ended in failure. Enacting tax reform will be a significant test of the Trump presidency.
• While most large corporations pay nowhere near the top tax rate, thanks to numerous loopholes, it is the highest in the developed world, and has led some of the biggest U.S. companies to set up headquarters overseas where taxes are lower.
• A lower corporate tax rate could mean more U.S. jobs, supporters of the tax cut say.
• Tax brackets have not received a major overhaul since the 1980s under President Reagan, when the top tax bracket was reduced to 38.5% from 50%, and many of the tax brackets were consolidated. The overhaul also eliminated numerous tax loopholes and shelters.

The post The Trump Tax Plan: What’s In It and How It May Affect You appeared first on Stash Learn.

What is DACA?

The DACA program was created by an executive order in 2012 by President Obama. It gave the children of undocumented immigrants–people who moved to the U.S. without immigration paperwork–protection against deportation, allowing them to work and attend school. (They are often called DREAMers, short for the Development, Relief, and Education for Alien Minors Act–a bill that has been introduced, but not passed in Congress.)

Immigration is an emotional issue for many in the U.S., who worry about the impact of undocumented workers on domestic jobs.

Emotions aside, there’s general agreement between economists, immigration experts, and politicians of both parties that winding down the program will have a negative impact on the economy, not to mention the lives of the nearly 1 million young people enrolled in the program. Most of the DREAMers were brought to the U.S. when they were still children, and have not returned to their countries of birth since then.

Here’s a quick look at what’s at stake.

Who are DACA recipients?

• 800,000 teenagers and children of undocumented immigrants are protected by the program.
• The average age of DREAMers is 25; most arrived at the age of 10 or younger and have little or no connection to the countries from which they’ve immigrated.
• The majority come from Mexico, El Salvador, Honduras, and Guatemala, according to U.S. Citizenship and Immigration Services. Significant numbers also come from South Korea, and other Asian countries.
• They live in all 50 states.
• 45% are in school, and three quarters of those getting an education are pursuing a bachelor’s degrees or higher, according to a study.

What’s being proposed?

DACA gives recipients protection against deportation and the right to work and pursue an education, in two-year increments. Starting September 5, DACA will no longer accept new applicants to the program. Those whose status expires in March, 2018 must apply for a two-year extension by October 5.  

Conservatives argue Congress is the appropriate rule-making body for any such legislation. Congress will have the opportunity to revisit and create legislation around DACA, also in March.

But with no renewals possible after that point, current recipients will exit the program at a rate of 32,000 per month, according to estimates.

What’s the impact on the economy?

Calculations of the economic damage caused by ending DACA vary. But both conservatives and progressives agree that ending DACA is likely to have a negative impact on the economy.

The Cato Institute, a Libertarian think tank, estimates $280 billion would be taken out of the economy over the next ten years.

“The repeal or rollback of the DACA program would have a significant and negative fiscal and economic impact on the country, and disproportionately affect the various states in which DACA recipients are most prevalent,” Ike Brannon, a visiting fellow for Cato, wrote in a blog post in August.

On the other side of the aisle, the progressive Center for American Progress suggests that figure could be closer to $460 billion over the next decade.

Here are some reasons why:

• 91% of DACA recipients work and pay taxes.
• 5% have started their own businesses.
• Their average earnings are $36,232
• 16% have purchased a first home since receiving DACA, and nearly two thirds have purchased a first car.
• Nearly three quarters of the largest Fortune 500 companies employ DACA workers.

“The data illustrate that DACA recipients continue to make positive and significant contributions to the economy, including earning higher wages, which translates into higher tax revenue and economic growth that benefits all Americans,” the Center for American Progress wrote in a recent blog post.

Key Takeaways:

Without DACA, nearly 1 million children of undocumented immigrants will lack protection against deportation, and will lose their legal work status. DACA recipients make important contributions to the U.S. economy, worth as much as $460 billion, from taxes, home and car ownership, and starting their own businesses.

Keep reading: Hurricane Harvey: How the Storm Affects the Economy

The post What is DACA? The Effect of Dreamers on the U.S. Economy appeared first on Stash Learn.

If that debt limit isn’t increased, the federal government won’t have enough money to pay creditors for what it’s borrowed. As a result, it will also have trouble funding many of the services we all rely on every day–from health services, to the national parks we hike in. Social security payments could also be delayed, as too could payments to troops, and government workers.

And that inability to pay would also create a lot of uncertainty in the economy.

So what is the debt ceiling?

The debt ceiling is a borrowing limit set by Congress. (The last limit was $18 trillion dollars in 2015, when Congress temporarily agreed to lift the debt cap until this year). You can think of it almost like a credit line on a credit card. Once we’ve spent to the limit without paying off the balance, the nation can’t spend any more.

The debt limit is important because, to keep functioning, the federal government has only two sources of income to fund operations: from income taxes and from selling bonds, known as U.S. Treasuries. Unfortunately, there’s always a shortfall between how much money the U.S. takes in from taxes, and how much it spends to keep running. The shortfall is known as the country’s deficit, which adds each year to our national debt, which is just shy of $20 trillion.

To make up for the shortfall, the U.S. borrows, in part by issuing Treasuries, and this borrowed money is used to keep the lights on.

(You can find out more about the biggest buyers of U.S. Treasuries here.)

Default and Other Consequences

Failing to raise the debt limit will have some pretty dramatic consequences, according to various experts–and the federal government itself.

“It would cause the government to default on its legal obligations – an unprecedented event in American history,” the U.S. Department of Treasury writes on its website, adding that default  could create another financial crisis that could put the U.S. “right back in a deep economic hole, just as the country is recovering from the recent recession.”

One immediate effect of a default would be a change in the credit rating of the U.S. Nations get credit ratings, much the way people get credit scores, for the way they handle debt.

That’s what happened in 2011, when Congress last battled over increasing the debt limit. The U.S. had its rating downgraded by one of the three companies that score bond debt, which rattled U.S. markets.

Further downgrades could make future borrowing for the U.S. more expensive, which in turn could drive up people’s taxes, and increase interest rates in the U.S., according to financial analysts.

Congress Must Decide

Unfortunately, increasing the debt limit isn’t a simple matter. It’s actually the subject of a big political struggle in Congress, with a bloc of legislators opposed to an increase without significant spending or regulatory cutbacks and concessions.

Nevertheless, Secretary of Treasury Steven Mnuchin has said he thinks the debt ceiling will be increased.

“I have had discussions with the leaders in both parties in the House and Senate and we are all on the same page,” Mnuchin told Reuters recently. “The government intends to pay its debts and the debt ceiling will be raised.”

Credit rating agencies and the markets will be watching closely.

The post The Debt Ceiling: What It is and Why It Matters appeared first on Stash Learn.

With the uncertainty around the Trump administration and fiduciary rule, this is a good time to understand what the term means.

Primary Components of a Fiduciary Relationship

• Provide good service
• Act in the best interest of the client.
• Avoid conflicts of interest

Brooke Harrington, the author of the book “Capital Without Borders,” describes fiduciaries’ obligation to behave with “loyalty, honesty, integrity, good faith, and transparency, and to put the interests of principals above their own, avoiding self dealing.”

Fiduciaries (like Stash) are required to act in their clients’ best interests.

These components are each important in their own right, and overlap in how they influence the nuances of fiduciary responsibility. The idea of good service is based on what a reasonable (or prudent) human would do.

This doesn’t mean that fiduciaries are held to the standard of perfection, but instead that their services and advice must aim at being reasonably good.

Fiduciaries need to be able to show that they did their due diligence; translation: They need to show that they’re satisfying what is required of them legally.

Fiduciary in celebrity news

Even if you’ve never heard the word before, the concept is all around us. Recently, hip-hop juggernaut Kendrick Lamar referenced the fiduciary relationship on his latest album.

On his most recent album, the rapper calls out singer Rihanna’s former accountant, whom she famously sued for mismanaging her finances.

A lot of people with money don’t understand the obligation of those who are handling their money.

Rihanna isn’t the only celebrity to found out about fiduciary responsibility the hard way. 

The actor Johnny Depp’s reported financial struggles sparked the New York Times to ask “Who Should Keep Tabs on the Money?” in a January 2017 article.

According to an April 2017 survey conducted by Financial Engines, only 21% of respondents understood the difference between a financial advisor who was or wasn’t a fiduciary.

That means that a lot of people with money don’t understand the obligation of those who are handling their money.

So what does fiduciary responsibility look like?

The Investment Advisers Act of 1940 was a piece of legislation that was created to regulate investment advisors (go figure!), and is still the guiding piece of legislation on this topic.

Sparked by the stock market crash and following depression, the SEC (Securities and Exchange Commission) prepared a report that eventually led to the act, in the hopes of preventing future mismanagement.

There’s also ERISA (the Employee Retirement Income Security Act), which is a federal law that “sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.”

This was a response to public concern about mismanagement and abuse of private pension plans, and applies to fiduciaries that provide services to retirement and pension plans.

Stash and fiduciary responsibility

Stash is an SEC registered investment adviser, which means we are subject to the Investment Advisers Act. We believe in a transparent relationship with our customers. We take our fiduciary responsibility seriously.

We also believe that as financially literate, empowered investors, fiduciary responsibility should be on your radar as well.

Knowledge is power. And now you know.

The post Fiduciary 101: Why It’s Our Job to Be Your Advocate appeared first on Stash Learn.