President Barack Obama will nominate Janet Yellen on Wednesday as the first woman to head the powerful Federal Reserve. If confirmed she’d become the world’s most influential banker.
The vice chairman of the Federal Reserve since 2010, Yellen, 67, is a career economist who has served as the president of the Federal Reserve Bank of San Francisco, headed the White House Council of Economic Advisers under President Bill Clinton and taught at University of California, Berkeley.
Obama once was thought to have favored his confidante and former treasury secretary, Lawrence Summers, for the post. But Summers was controversial, opposed by liberal groups as too close to Wall Street and by women’s groups for remarks while president of Harvard University that questioned women’s intelligence. He withdrew from consideration.
Women’s groups Tuesday evening lauded the Yellen nomination
“I’m in a fabulously amazing good mood,” Terry O’Neill, head of the National Organization for Women, told McClatchy in an interview. “Janet Yellen is the right person for the job, male or female. She has the temperament, the knowledge and she has the amazing ability to dig into the facts and come to her colleagues with actual facts.”
At an April meeting of the Society of American Business Editors and Writers, Yellen hinted at the achievement her nomination now signals.
“At the highest levels of central banking there are very few women, but I am pleased that the representation of women is increasing a lot at other levels, at lower levels of central banking and financial markets and institutions more broadly,” she said, adding that “I really think this is something that is going to increase over time and it’s time for that to happen.”
Yellen is closely associated with the Fed’s controversial bond-buying program known as quantitative easing. Since December, the Fed has been purchasing $85 billion worth of government and mortgage bonds in an effort to force investors out of the safe haven of bonds and into risk taking that supports the economy.
Financial markets are fretting the end of that program, and the Fed is expected to begin tapering off its purchases later this year. After Bernanke’s term ends in January, it would fall on Yellen to communicate the Fed’s next steps to nervous investors and ensure that inflation doesn’t flare up as the Fed withdraws its unconventional support for the sluggish U.S. economy.
“It think it’s going to be a tough slog,” said Dean Croushore, a former Fed economist who co-wrote a text book with Bernanke and called Yellen’s nomination “the expected outcome and I think a very good choice.”
In April, Yellen, a Brooklyn native who speaks with a New York accent, suggested communication would be the biggest challenge for the next Fed chief.
“Better times and a transition away from unconventional policies may make monetary policy less reliant on communication,” she said. “But I hope and trust that the days of ‘never explain, never excuse’ are gone for good, and that the Federal Reserve continues to reap the benefits of clearly explaining its actions to the public.”
Republicans were tempered on the selection of Yellen, some concerned about the perception that she might be a so-called inflation dove willing to tolerate inflation as a tradeoff for more economic growth and employment.
“It’s worth watching. That’s been the reputation,” said Douglas Holtz-Eakin, a former director of the nonpartisan Congressional Budget Office and a former economic adviser to Republican presidential campaigns. He added that Obama “chose someone who is immensely qualified” to head the autonomous Fed.
Rep. Jeb Hensarling, R-Texas, the chairman of the House Financial Services Committee, called on her to pursue more transparency about the Fed’s decisions, and then criticized the current chairman, with whom Yellen has worked in lockstep.
“Rather than following a rules-based policy, the Fed has effectively conducted both monetary policy and fiscal policy with its unprecedented stimulus efforts. This has camouflaged the true cost of our deficit, encouraged more government spending, and endangered the central bank’s independence and credibility,” Hensarling said in a statement. “It has increased the risk of inflation in the future and in the present transferred wealth from middle income families who save and invest conservatively to the wealthy who can afford to make riskier, higher-yielding investments.”
At least one key Republican immediately came out opposed.
“I voted against Vice Chairman Yellen’s original nomination to the Fed in 2010 because of her dovish views on monetary policy,” Sen. Bob Corker, R-Tenn., said in a statement. “We will closely examine her record since that time, but I am not aware of anything that demonstrates her views have changed.”
Democrats were more supportive.
“I commend President Obama on his selection of Dr. Yellen to be the first woman to serve as Federal Reserve Chairman,” said Senate Banking Committee Chairman Tim Johnson, D-S.D., in a statement that promised to consider her nomination quickly. “She has a depth of experience that is second to none, and I have no doubt she will be an excellent Federal Reserve Chairman.”
Added Sen. Charles Schumer, D-N.Y., “She’s an excellent choice and I believe she’ll be confirmed by a wide margin.”